Setting up a technology or SaaS company in Brazil: tax and compliance guide

Brazil is one of the largest software and digital services markets in the world, and many technology groups enter it in one of two ways: selling to Brazilian customers from abroad, or opening a local company that sells, supports or develops products. Each route has its own tax treatment, and software is an area where Brazilian rules changed significantly in recent years. This guide covers what a foreign technology or SaaS company should know before structuring its Brazilian operation: how software and SaaS are taxed, what happens to payments to the parent, the incentives available for research and development, and the reform that will change the taxation of digital services from 2027.

Two ways to serve the Brazilian market

Selling from abroad, without a local entity

A foreign company can sell licenses or SaaS subscriptions to Brazilian businesses directly. In that case, the taxes fall mainly on the Brazilian customer, who pays for an imported license or service. As a rule, the customer withholds income tax and pays import-related taxes on the payment. Brazilian buyers usually look at the total cost, including those taxes, so foreign vendors often end up negotiating gross-up clauses or price adjustments. As the business grows, local invoicing, support, data residency requirements and sales teams usually make a local company worthwhile.

Operating through a Brazilian company

With a local subsidiary, the Brazilian company invoices customers in reais, pays municipal and federal taxes on its revenue, and pays the parent for the right to distribute the product or for group services. Our guide on how to set up a subsidiary in Brazil covers the corporate steps. The rest of this article focuses on the tax points that are specific to technology companies.

How software and SaaS are taxed in Brazil

ISS, not ICMS

For years, cities and states disputed whether software was a service, subject to the municipal ISS, or a good, subject to the state ICMS. In 2021 the Federal Supreme Court settled the question: software licensing, including standard off-the-shelf software and software made available by download or in the cloud, is subject to ISS (ADIs 1,945 and 5,659).

The list of services in Complementary Law 116/2003 includes, among others, item 1.03 (processing, storage or hosting of data, applications and information systems), item 1.04 (software development), item 1.05 (licensing or assignment of the right to use software) and item 1.07 (technical support). The rate is set by each city, between 2% and 5%. The correct item matters, because some cities apply different rates to different items, and the item defines where the tax is due in specific cases.

Federal taxes on revenue and profit

The Brazilian company also pays PIS and Cofins on revenue and corporate income tax and CSLL on profit. Under Lucro Presumido, profit for income tax purposes is presumed at 32% of revenue for services in general (Law 9,249/1995, article 15). Since 2026, that percentage is 10% higher on the portion of annual revenue above R$5 million (Complementary Law 224/2025, article 4). For a software company with high margins, Lucro Presumido can still be attractive. For a company in an investment phase, with losses or heavy R&D, Lucro Real usually fits better and is required to use the R&D incentives described below.

Payroll

Technology companies are usually people-intensive, so payroll is often the largest cost. Some IT activities were allowed to pay social security on revenue instead of payroll, a relief that is being phased out until 2028. See our guide on the real cost of an employee in Brazil. Hiring developers as independent contractors through their own companies is common in the market, but if the relationship looks like employment, labor courts can reclassify it.

Paying the parent for licenses and services

A Brazilian subsidiary that distributes the group’s software pays the parent for the right to do so. The Federal Revenue treats these payments as royalties, with withholding income tax at 15%, and its recent rulings distinguish two situations:

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

Rulings bind only the taxpayer that requested them, but they show the Federal Revenue’s position. Management fees, cloud infrastructure recharges and shared engineering services follow other rules. Our guide on paying services and royalties abroad from Brazil covers them, together with IOF on foreign exchange. All of these intercompany charges must also follow the arm’s length principle of the transfer pricing law (Law 14,596/2023).

Exporting services from Brazil

Many groups use Brazil as a development or support hub that serves customers or group companies abroad. Exports of services get favorable treatment:

• ISS does not apply to exports of services (Complementary Law 116/2003, article 2, item I). This does not cover services developed in Brazil whose result takes place in Brazil, even if the payment comes from abroad (sole paragraph). Whether the result takes place abroad is a frequent point of dispute with cities.
• PIS and Cofins do not apply to revenue from services provided to residents abroad when the payment represents an inflow of foreign currency (Law 10,833/2003, article 6, item II, and Law 10,637/2002, article 5, item II).

A development center that charges the parent on a cost-plus basis needs transfer pricing support for the margin and documentation that the service was exported.

Incentives for research and development

Brazil’s main R&D incentive for companies in general is the “Lei do Bem” (Law 11,196/2005). Companies taxed under Lucro Real can exclude from taxable profit, for IRPJ and CSLL, an additional amount of up to 60% of their spending on technological research and innovation, rising to up to 80% depending on the number of researchers the company hires (article 19). The incentive requires technical projects, documentation and annual reporting to the Ministry of Science, Technology and Innovation. Complementary Law 224/2025 reduced many federal tax incentives by 10% from 2026, but the Federal Revenue lists the technological innovation incentive of article 19 among the benefits that were not cut (Normative Instruction RFB 2,307/2026, annex).

Data protection: LGPD

Brazil’s General Data Protection Law (LGPD, Law 13,709/2018) applies to the processing of personal data in Brazil or of people in Brazil, and is enforced by the National Data Protection Authority (ANPD). Among other duties, the controller must appoint a data protection officer (encarregado) and publish their contact details (article 41). For SaaS companies, data processing agreements with Brazilian customers and international data transfer rules are part of the commercial process.

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 and Cofins, including on imports, and between 2029 and 2033 the IBS gradually replaces the ISS. For technology companies, three points stand out:

• imports of services and intangibles, including rights, are expressly within the scope of the CBS and the IBS (Complementary Law 214/2025, articles 63 and 64), which covers licenses and SaaS paid abroad;
• exports of services remain immune, with the right to use credits on purchases (article 79);
• the end of the ISS also ends the disputes between cities over where software services are taxed.

See our guide on Brazil’s tax reform for the full timeline.

Checklist for a technology company in Brazil

1. Decide when selling from abroad stops making sense and a local company is needed.
2. Define the ISS items and the city of establishment before invoicing.
3. Choose between Lucro Presumido and Lucro Real, taking R&D plans into account.
4. Structure intercompany agreements, separating distribution licenses, use licenses and services.
5. Document exported services and the transfer pricing margin of any development hub.
6. Map R&D projects that may qualify for the Lei do Bem.
7. Set up LGPD compliance and appoint a data protection officer.
8. Prepare billing systems and contracts for the CBS in 2027.

How Solidy can help

Technology is one of the sectors Solidy serves, and we already serve subsidiaries of multinational companies in Brazil. Our consultants help technology groups structure their Brazilian operation, classify revenue and intercompany payments, run accounting and tax compliance, and report to headquarters. Talk to our consultants.