Paying services and royalties abroad from Brazil: IRRF, CIDE, PIS/Cofins-Import, ISS and IOF

Few things surprise a foreign headquarters more than the cost of charging its Brazilian subsidiary. An invoice for management fees, software or a trademark license that would cross most borders with a single withholding tax can, in Brazil, trigger up to five different taxes, some paid by the beneficiary abroad and some by the Brazilian payer. This guide explains which taxes apply to services, technical assistance and royalties paid abroad, how the type of payment changes the bill, and how the consumption tax reform will change the picture from 2027.

The taxes on a cross-border payment, in one table

Not every tax applies to every payment. The combination depends on how the payment is classified, and that classification is where most of the planning, and most of the disputes, happen.

Withholding income tax: 15% or 25%

As a general rule, income from services paid to residents abroad is subject to withholding income tax at 25% (Law 9,779/1999, article 7). For technical services, technical assistance and royalties of any kind, the rate is reduced to 15% (Provisional Measure 2,159-70/2001, article 3). That reduction came together with the creation of the CIDE, which is why the two taxes usually travel together.

Payments to residents of countries that do not tax income, or tax it at a low maximum rate as defined in Brazilian law, are subject to withholding at 25% (Law 9,779/1999, article 8). The Federal Revenue keeps the list of these jurisdictions.

The withholding is legally a tax on the beneficiary’s income. In practice, many intercompany contracts state that the Brazilian company will pay the amount net of taxes. In that case the base is grossed up and the Brazilian company effectively bears the tax, which increases its cost.

Tax treaties

Brazil has income tax treaties with many countries, and they can limit the withholding rate on royalties and services or change how some payments are classified. The treaty network has gaps that matter to foreign groups. For example, Brazil has no comprehensive income tax treaty with the United States. The treaty, if one exists, should be checked before the contract is signed, not when the invoice arrives.

CIDE: 10% on royalties and technical services

The CIDE (contribution for intervention in the economic domain) is due by the Brazilian company that pays, credits or remits abroad amounts for licenses and technology transfer, for technical services and technical and administrative assistance, and for royalties of any kind. The rate is 10% (Law 10,168/2000, article 2, as amended by Law 10,332/2001). Unlike the IRRF, it is a cost of the payer, not of the beneficiary.

There is one exception of special interest to technology groups. The CIDE does not apply to remuneration for the license to use, or to market or distribute, software, unless the contract involves transferring the related technology (article 2, paragraph 1-A, added by Law 11,452/2007).

PIS-Import, Cofins-Import and ISS on imported services

Services provided from abroad and consumed in Brazil are treated as imports. The Brazilian company pays:

• PIS-Import at 1.65% and Cofins-Import at 7.6%, 9.25% in total (Law 10,865/2004, article 8, item II). Companies in the non-cumulative regime, usually those taxed under Lucro Real, can generally take credits for these contributions.
• ISS, the municipal services tax, which also applies to services from abroad (Complementary Law 116/2003, article 1, paragraph 1). The rate is set by each city, with a minimum of 2% (article 8-A) and a maximum of 5%.

IOF on the foreign exchange transaction

Sending money abroad requires a foreign exchange transaction, which is subject to IOF. Since 2025, the general rate for outflows not covered by a specific rule has been 3.5% (Decree 6,306/2007, article 15-B, item XXIV, as amended by Decree 12,499/2025). The decree was disputed between Congress and the Executive, and its effects were restored by the Federal Supreme Court in ADC 96. The bank applies the rate according to how the transaction is classified, so the classification should be agreed with the bank before the payment.

How the type of payment changes the bill

Management fees and shared services

Charges for group management, shared service centers and support functions are among the most common intercompany payments, and among the most scrutinized. If they qualify as technical or administrative assistance, the IRRF is 15% but the CIDE applies. They are also imported services for PIS-Import, Cofins-Import and ISS. On top of the taxes, the Brazilian company has to prove that the services were actually provided and benefited it, and the charge must follow the arm’s length principle of the transfer pricing law (Law 14,596/2023).

Royalties for trademarks and patents

Royalties carry IRRF at 15% and CIDE at 10%. Contracts involving technology transfer and the license of trademarks and patents are subject to registration with Brazil’s National Institute of Industrial Property, INPI (Law 9,279/1996, articles 140 and 211). Registration is relevant for sending the payments abroad and for the contract to have effect against third parties. The old limits on deducting royalties paid to related parties were revoked from 2024, and the deduction now depends on the transfer pricing rules and on the anti-hybrid rule of Law 14,596/2023, article 44.

Software

Software is the area that changed most in recent years. In 2021 the Federal Supreme Court ruled that software licensing is subject to the municipal ISS, not to the state ICMS (ADIs 1,945 and 5,659). For payments abroad, the Federal Revenue treats software license fees as royalties, with withholding income tax at 15%, and the type of license changes the rest of the bill:

• License to use, paid by the end user. No CIDE, as long as there is no transfer of the technology (source code), but PIS-Import and Cofins-Import apply, according to Ruling COSIT 107/2023. Maintenance that updates the software without a new license is treated as a technical service, with CIDE.
• License to market or distribute, paid by a reseller. No CIDE and no PIS-Import or Cofins-Import, provided the license amounts are separated in the contract from any related services, according to Ruling COSIT 177/2024.

SaaS, implementation, support and training bundled into the same contract may be classified differently. The contract should separate each component. Rulings bind only the taxpayer that requested them, but they show the Federal Revenue’s position.

What changes with the tax reform

The consumption tax reform replaces PIS, Cofins and ISS with the CBS and the IBS. From 2027, the CBS replaces PIS-Import and Cofins-Import, and between 2029 and 2033 the IBS gradually replaces the ISS. Complementary Law 214/2025 expressly makes imports of services and intangibles, including rights, subject to the CBS and the IBS (articles 63 and 64). A company under the regular regime will generally be able to take credits on these imports, provided the documentation supports them. The IRRF, the CIDE and the IOF are outside the reform and continue to apply. See our guide on Brazil’s tax reform.

A checklist before you charge Brazil

1. Classify each payment: technical service, administrative assistance, royalty, software license, cost reimbursement. The classification decides the IRRF rate and whether the CIDE applies.
2. Check the tax treaty between Brazil and the beneficiary’s country, if any, and the documentation the treaty requires.
3. Decide who bears the taxes and write it in the contract. A net-of-tax clause turns the IRRF into a cost for Brazil.
4. Separate components in mixed contracts, such as license, implementation, support and training.
5. Register with INPI where the contract involves trademarks, patents or technology transfer.
6. Support the charge with evidence of the service and a transfer pricing analysis.
7. Plan the cash: withholding, CIDE, PIS-Import, Cofins-Import, ISS and IOF are due around the date of payment, not at the end of the year.
8. Prepare for 2027, when CBS replaces PIS-Import and Cofins-Import on the same payments.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil. Our consultants review intercompany contracts and payment flows, classify each charge, calculate and pay the withholding and import taxes on time, and keep the documentation that supports deductions and credits, in coordination with headquarters and the group’s transfer pricing policy. Talk to our consultants.