Taxation of ISPs in Brazil by ICMS and ISS
Denis Borges
Barbosa April 14, 1999.
a)
On the taxation
of ISP services by the Brazilian State tax ICMS
b)
On the prognosis
of a retroactive assessment of ICMS on
ISPs
c)
On the taxation
of ISPs by ISS City tax
2)
My conclusions – For the
reasons below indicated, my conclusions are:
a)
ICMS is not due on ISP activities, but is
likely that the State authorities would be requesting for its payment from June
1998 on;
b)
ISS is due on designated ISP activities.
3)
On the facts of the case - ISP activities comprise a number of different services, among which the following must
be mentioned:
a)
Internet
Connection Services rendered to all users,
as defined in Ministry of Communications Norm 4/95, item 4.1[i], to wit:
i)
Use of the
equipment needed to implement the routing, storing and directing of
information, and of the further software and hardware required for the ISP to
implement the Internet protocols and manage the service;
ii)
The employment of
routines for connection (passwords, addresses and domains)
iii)
Use of software
by ISP, as e-mail, remote contact, FTP, access to data banks, etc.
iv)
Use of data and information by ISP;
v)
Use of other hardware by ISP
b)
Special services
related to dedicated services;
c)
Web hosting and
other domain services;
d)
Technical
support and assistance, including
on-site installation services;
e)
Site design and
related services;
f)
Advertising
services rendered on behalf of third
parties as displaying of banners, etc.
g)
Other assorted
services.
4)
As far as we are
aware:
a)
No ICMS taxation
is being imposed on ISP activity [ii].
b)
Many providers
are paying ISS to the various Cities, but some have been refusing to do so.
c)
We are not aware
of any court cases concerning the issue.
5)
General Considerations - Business activities in Brazil are subject to a three
tiered tax incidence, including the Federal, State and City levels. The
relevant taxes for our analysis are the following:
a)
ICMS or State
Value added tax on merchandises, Electricity, Telecommunication and Transport
services [iii].
b)
ISS - Service Tax,
due on the services listed in Federal Law and City Law, specifically excluding
Electricity, Telecommunication and Transport services [iv].
2)
The whole tax
system is designed in the Federal Constitution. A specific National Law must
also be in force to fix the tax basis and the tax payer of each abstract tax,
or non retributive charge (imposto), as
well as to precise the competing tax jurisdictions among the Union, States and
Municipalities,
3)
The General
National Tax Law is the National Tax Code. However, other laws do act as
National Laws as for instance, the National ISS Law [v] and the National ICMS Law [vi].
4)
The basic fact under analysis - The basic fact concerning the issue under analysis is
that ISP activity is a service, and both taxes concern to services. Therefore, our main task is to clarify
whether any of those taxes is to be imposed on ISP services, and if so, which
one.
5)
ICMS is
restricted to just some services[vii], including communication
services; the Constitution says that the only
tax that may be imposed on domestic operations concerning telecommunications is
ICMS.
6)
Therefore, if
ICMS is actually to be imposed on ICPs, it is because it is a telecommunication
service; and then, ISS can not be also imposed.
7)
The ICMS tax - State VAT is imposed on various taxable events; this
tax is basically imposed on physical merchandise, but also on the like taxable
events related to Transport, Telecommunication and Electricity services.
8)
ICMS is provided
for in the Federal Constitution and in the specific National Law. However, many of its provisions, especially
those of a procedural or exceptive nature, are provided by Interstate Tax
Conventions [viii]. The Joint State Authorities meeting under the
Federal coordination in the CONFAZ committee agree on such Conventions [ix]. In addition to that, each State has its own body of
law, which is supposed to conform to the National Standards and Interstate
Conventions.
9)
As a value added
tax, it is calculated in each operation taking into account the like tax
already paid in regard to the same service or its inputs as result of prior
operations of like nature. Therefore, the value of the tax previously paid in
the various phases of the circulation of the service is offset to the value
newly due, and just the difference is actually brought to the Government’s
vaults.
10) Tax rates related to Telecommunication services do
vary extensively from state to state.
Minas Gerais current rate is 25%, whereas Rio de Janeiro current rate is
35% (up to June 30, 1999) [x].
11) The
Telecommunication services -
The 1988 Constitution itself does not clarify what are the telecommunication
services upon which the ICMS is due [xi].
12) The National ICMS Law defines communication services
as:
“the generation, the sending, the reception, the
transmittal, the retransmittal, the repetition and the amplification of
communication of any kind “ [xii].
13) I understand that this statutory definition is not
clear enough to effectively bring ISP services within the scope of ICMS. The wording seems to indicate that the
taxable service is actually the conventional telecommunication services, and
not the value added ones [xiii]. Some authors precise, however that the National ICMS
Law means that it is not only the communication itself but on the provision of
“conditions under which the communication may occur”[xiv].
14) However, on June 1998, the Joint State Tax Authorities
(CONFAZ) apparently decided to clarify such provision. Interstate ICMS
Convention 69/98 included as within the taxable events of such tax (among other events),
"the use of supplementary services and additional
facilities that optimize or render easier the communication process, whatever
the denomination they may take" [xv]
15) However the obvious target of that Convention was the
newly privatized Telecommunication Companies, the quoted clause encompasses a
much broader range of activities as compared to the standard of the National
Law. If this provision were held to be valid, I understand that there would be
a clear risk that ISP activities would be included within ICMS taxable events [xvi].
16) It must be noted that the ensuing Interstate
Convention no. 74/98 decided that Convention 69/98 would only be applicable to
events following the latter's inception. This new Convention was however
rejected by the State of Pernambuco, and therefore rendered inapplicable [xvii]. Convention 69/98 was therefore, at least in theory,
applicable on a retroactive basis.
17) My understanding, however, is that
a)
Convention 68/98
is not constitutional;
b)
If Convention
69/98 were constitutional, it could only be applicable on a prospective basis,
even though considering the rejection of Convention 74/98; and specifically
c)
Convention 68/98
(and, furthermore, art. 2, III of the ICMS National Law) can not be applicable
to any ISP services and, particularly, to those services classified as Internet
Connection Services by Ministry of Communications Norm 4/95.
18) My contention as to the constitutional grounds is
based on the following: or
Convention 69/98 creates a new taxable event beyond the one specified in ICMS
National Law, art. 1st; or
it just interpret or clarify such provision of the National Law.
19) Convention 69/98 could not create a new taxable event,
as only National Laws could do so [xviii]. Under the 1988 Constitution, Interstate Conventions
could only act in lieu of National Laws before a formal National Law was issued
[xix]. The courts have been indeed stating - for the time
being - that the Convention is unconstitutional on such grounds [xx].
20) On one hand, even if it were possible to create a new taxable event by a Convention, however,
this creation could be only applicable to future events [xxi].
21) I understand that there is significant arguments to
the sense that Convention 69/98 could not
be applicable on a retroactive basis:
a)
On one hand, even
if Convention 69/98 was just clarifying the scope of the ICMS National Law, it
could only be applicable on a prospective basis. [xxii] National Tax
Code states that a change in the understanding of the Tax Administration (once
a understanding has effectively been stated on a decision or the answer to a consultation) can only be
applicable on future events [xxiii].
b)
I think that it
must be arguable that, by not previously stating in a Interstate Convention
that “supplementary services and
additional facilities” are included in the definition of “telecommunication
services”, the Tax Administration had a understanding that they were not so.
This understanding may be however subject to diverging views in the judiciary.
c)
Thus, the
rejection of Convention 74/98 would have not necessarily as effect the
retroactivity of Convention 69/98.
22) The same considerations would be extended to any other
eventual provision of law or other legislation specifically intended to submit
to ICMS taxation the ISP activities. Retroactivity is not to be expected either
as a new provision or as a new standard of application of an existing
provision.
23) However, as I stated, I understand that Convention
68/98 (and, furthermore, art. 2nd, III of the ICMS National Law) can
not be applicable to ISP services. My understanding is that ISP is not a telecommunication service. This
belief is supported by the specific legislation that in Brazil governs Internet
Telecommunication Services [xxiv].
24) The applicable Internet Telecommunication rule is
Ministry of Communications Norm 4/95[xxv]. It states
that :
a)
"Internet
Connection Service" (SCI) is a
generic name that designates an Additional Value service that allows Users and
Information Service Providers to have Internet Access.
b)
"Internet
Service Connection Provider " (PSCI): entity that renders the Internet
Connection Service.
25) The most relevant aspect of this Norm is that it
defines the ISP activity as a " Additional Value service". The
importance of this definition is that the General Telecommunication Law[xxvi] so states:
Article 61. Value added service is the activity that
adds to the distinct and separate telecommunications service that supports it,
new features related to the access, storage, presentation, handling or recovery
of information.
Paragraph one. Value
added service is not a telecommunications service, and the provider thereof
is classified as user of the telecommunication service providing support
thereto, with the rights and obligations inherent to this condition[xxvii].
Paragraph two. Access to the utilization of
telecommunications service networks for rendering value added services is
assured to interested parties, for which the Agency shall regulate the
conditions as well as organize the relationship between same and the
telecommunications service providers[xxviii].
26) Does that statement of the General Telecommunication
Law governs the tax consequences of the classification of a service as a
telecommunication service? The question
is very relevant because the National Tax Code states in art. 109 that the general principles of private
law do not dictate the tax consequences issuing therefrom[xxix].
27) However, the Code itself states also that once a definition from a non-tax law is
adopted by the Constitution to define or circumscribe tax jurisdiction [xxx], this definition can not be changed by the tax
laws. The definition of communication or telecommunication is utilized by the Constitution to design the
jurisdiction of the States as to the taxation of services and therefore can not
be changed in its nature by the tax laws.
28) Furthermore, Telecommunication services are regulated
services, to be granted exclusively by Federal concession under art. 21, XI of
the Constitution [xxxi]. Internet
services are not regulated services as they are not deemed telecommunication services [xxxii].
Incidentally, the Supreme Court has decided that the former Federal
Monopoly of telecommunication [xxxiii] was restricted only to transmittal of
telecommunication signals [xxxiv].
29) In summary as to the issue of taxation by ICMS of
telecommunication services:
a)
ICMS State tax is
only imposed on telecommunication services.
b)
The Constitution
and the National ICMS Law do not state clearly that Internet services are not
telecommunication services.
c)
Some States have
expressed their intention of taxing ISP services even though to our information
no ISP have been paying ICMS.
d)
Interstate
Convention 69/98, in force since June 29, 1998, broadened the National ICMS Law
definition to include "the use of supplementary services and additional
facilities that optimize or render easier the communication process, whatever
the denomination they may take".
This provision, if it were valid, could be held to include Internet
services and introduce a risk that
the States take it as applicable on a retroactive basis.
e)
My understanding
is that Convention 69/98 is not to
be deemed applicable on a retroactive basis:
i)
Under the
Constitution, the Convention can not
create a new tax event;
ii)
Under the
Constitution, new tax laws are not to
be retroactive;
iii)
Even if it were
to be deemed a simple clarification of the text of the National Law, (and
therefore not new) its effects under
National Tax Code art. 146 would be probably held to be prospective.
f)
The above
analysis is restricted to the legal issues at stake and just takes in to
consideration the most probable final result of the dispute with the States in
the court system.
g)
On a practical
stand, it must be then considered that:
i)
The States, by
August 1998, have decided not to
apply Convention 69/98 retroactively, and just Pernambuco backed off.
ii)
However, the
States are under very stringent financial conditions, and may be impelled to
resort to every means to obtain revenues.
iii)
If taxation were
to be eventually required on ISP activities, it would cover most probably the
period since June 1998, when the Convention 69/98 entered into force [xxxv].
h)
Furthermore, my understanding
is that ICMS is not to be applicable at
all to the designated ISP activities listed in Ministry of Communications Norm
4/95:
i)
The
Constitutional provision designing the scope of the ICMS on telecommunication
services is a jurisdictional standard as it indicates which services the
States may tax, not to be taxed by the Cities;
ii)
Jurisdictional
provisions of the Constitution may assimilate the definitions of the non-tax
laws, and such definitions must be followed by the tax laws;
iii)
The General Telecommunication
Law (as before its edition, the Minimum Telecommunication Law) says that
Additional Value Services are not
telecommunication services;
iv)
Uniform Federal
practice and the Ministry of Communications Norm 4/95 univocally state
that designated ISP services are
Additional Value Services;
v)
Telecommunication
services are under the Constitution regulated services, and the ISP designated
activities were never deemed to be regulated services.
30) Again, the tax authorities would most probably
disregard those legal considerations, although they are very relevant for a tax
dispute brought into the courts. If an imposition is asserted, my estimate is
that it would be (more probably than not) withheld by an injunction in a writ
of mandamus, on the grounds of the definition of Internet Services as a Valued
Added ones.
31) Therefore, my advice is that you should be prepared
for the States imposing ICMS tax on IPS activities. However, if it were to be
applicable on a retroactive basis, it would most probably be imposed from June
1998 on.
32) The
ISS Tax - The Service Tax is
imposed at the City Level. This tax is imposed on the gross values received as
result of services rendered. This is not a
value-added tax: except for very limited exceptions, there is no deduction from
the tax basis for prior services rendered for the Company by third parties or
for materials or other items used in the service.
33) When assessing the possibility to have a service taxed
by ISS, the first question to answer is: are the services of the Company included
in the taxable list?
34) The National ISS Law states the services listed, and
the City Law also lists such services. As a rule, all City Laws add to the
national list a general clause including "other services otherwise
unlisted". Nevertheless, the
courts have massively held that whenever the City list is not in conformity to
the National List, there is an unconstitutional excess of taxation [xxxvi].
35) Thus, it is possible, albeit not probable, that a
service, not taxable by ICMS, is also not taxable by ISS.
36) The tax rate may vary from service to service and from
City to City, but as a general standard municipalities limit most of the
services to a 5% level.
37) ISP
services - As I noticed at
the first page of this Memorandum, the ISP activities comprise a large scope of
different services, including the Additional Value Services indicated in Norm
4/95. Some of them may be eventually argued to be Telecommunication Services,
whereas other (as for instance, Web designing) most probably would not be so,
notwithstanding the very broad wording of Convention 69/98.
38) Therefore, even in case ICMS taxation is held to be
due on some ISP services, other would probably not be considered so. ISS
taxation of at least a portion of ISP activities is a very clear possibility [xxxvii].
39) The National List and possibly all local lists do not include ISP activities as taxable
events as such. As we stated, the local lists although used as a basis for
taxation by the Cities, are only considered constitutional if they are in
conformity with the National list; I shall return to this aspect below.
Therefore, our first task is to classify (if possible) the various individual
services within the National list.
40) The possible items that could relate to ISP activities
are:
a)
Data processing
(items 24 and 22) – this is a very generic item, where many services related to
computer activities may be included.
b)
Broadcasting of
texts, images and other publicity material, through any means whatsoever,
except by newspapers, periodicals, radio and television. (item 86)
c)
Lease of chattels
(item 79)
d)
Technical
assistance (item 21)
e)
Installation of
equipment when same is provided by the user of the services (item 74)
41) The reasons for my choice of such items in the list
are the following:
a)
Data processing
services is a very broad item, and its scope has been questioned before the
various administrations and the courts. My understanding is that is a
reasonable classification at least some for those Additional Value Services
mentioned in Ministry of Communications Norm 4/95. The ISPs themselves seem to
be in agreement with that idea as they describe their services as “timesharing
of machines, added to consulting and software usage”[xxxviii].
b)
If the service is
considered in its effects, and not in the means it provides to users, it seems
also reasonable to define it as “Broadcasting of texts, images and other
publicity material”. This is particularly relevant for two specific activities:
i)
Access to
Internet WWW or other image, sound and text-based facilities.
ii)
Actual display of
publicity by means of banners or other similar means. In this case, the user of the service is the advertised
entity [xxxix].
c)
Leasing of space
for web hosting seems to be an adequate classification under item 79 of the
list. The Administrative Case Law has already settled in some Cities that
licensing of Intellectual Property is leasing of chattels [xl], and therefore the idea that the paid use of
immaterial chattels may be taxed. If use of address space were also a separate
service, it would be possibly so classified.
d)
Both the on line
support and the eventual other service provided to the users could be
classified as technical assistance or, sometimes, consulting (in this case,
item 22).
e)
In case that
dedicated services or other clients require the actual installation of equipment
or software, this service, if specified and onerous, and effected in equipment
not supplied by the ISP is also to be classified as taxable under ISS.
42) Those considerations are intended to show why, to my
understanding, the City Tax Authorities have reasonable chances of effectively
classify some or most of the services as statutory tax events.
43) On the other hand, as already stated, some ISPs are
not paying ISS, and compliance with the pertinent City Laws may result in
significant competitive imbalance. Actually, the argument that the list does
not provide for a specific ISP item may be compelling and the decision of not
paying ISS is not entirely groundless.
44) However, to my understanding, the classification of
ISP activities as above indicated is not to be taken as creation of a new
taxable event by analogy [xli]. Much to the contrary, it follows adequately the
trend adopted by the courts to accept as reasonable inclusions within the list
of new services that are akin with the prior ones, without really exceeding the
restrictive nature of the statutory schedule.
45) My recommendation in this context therefore is:
a)
ISS is to be paid
on the designated services;
b)
In case
competitivity or other factors advise the non-payment, adequate court or
administrative procedures shall be followed to prevent tax auditors to impose
penalties and request forcible payment of such tax.
46) We call your attention that, on concluding that ISS
should be paid on ISP services, a series of other problems are raised, as for
instance:
a)
Taxation of
services at the location where POPs are situated; this specific problem shall
be analyzed in the context of each City Law, what may be specially complex in
cases where the ISP keep a number of different POPs, some of them licensed as
branches.
b)
In cases where
different tax rates are applicable to each specific service, which procedures
must be followed to obtain the most adequate tax savings?
c)
In cases where
targets have been refusing to pay ISS, which decision must be taken as to the
continuance of the respective court or administrative actions?
NORMA
004/95
USO DE MEIOS DA REDE PÚBLICA DE TELECOMUNICAÇÕES PARA ACESSO
À INTERNET
1. OBJETIVO
Esta Norma tem com objetivo regular o uso ode
meios da Rede Pública de Telecomunicações para o provimento e utilização de
Serviços de Conexão à Internet.
2. CAMPO DE APLICAÇÃO
Esta Norma se aplica:
3. DEFINIÇÕES
Para fins desta Norma são adotadas as definições
contidas no Regulamento Geral para execução da Lei no. 4.117, aprovado pelo
Decreto no. 52.026, de 20 de maio de 1963, alterado pelo Decreto no. 97.057, de
10 de novembro de 1988, e ainda as seguintes:
a. Internet:
nome genérico que designa o conjunto de redes, os meios de transmissão e
comutação, roteadores, equipamentos e protocolos necessários à comunicação
entre computadores, bem como o "software" e os dados contidos nestes
computadores;
b. Serviço
de Valor Adicionado: serviço que acrescenta a uma rede preexistente de um
serviço de telecomunicações, meios ou recursos que criam novas utilidades
específicas, ou novas atividades produtivas, relacionadas com o acesso,
armazenamento, movimentação e recuperação de informações;
c. Serviço
de Conexão à Internet (SCI): nome genérico que designa Serviço de Valor Adicionado
que possibilita o acesso à Internet a Usuários e Provedores de Serviços de
Informações;
d. Provedor
de Serviço de Conexão à Internet (PSCI): entidade que presta o Serviço de
Conexão à Internet;
e. Provedor
de Serviço de Informações: entidade que possui informações de interesse e as
dispõem na Internet, por intermédio do Serviço de Conexão à Internet;
f.
Usuário de Serviço de Informações: Usuário que
utiliza, por intermédio do Serviço de Conexão à Internet, as informações
dispostas pelos Provedores de Serviço de Informações;
g. Usuário
de Serviço de Conexão à Internet: nome genérico que designa Usuários e
Provedores de Serviços de Informações que utilizam o Serviço de Conexão à
Internet;
h. Ponto
de Conexão à Internet: ponto através do qual o SCI se conecta à Internet;
i.
Coordenador Internet: nome genérico que designa
os órgãos responsáveis pela padronização, normatização, administração,
controle, atribuição de endereços, gerência de domínios e outras atividades
correlatas, no tocante à Internet;
4. SERVIÇO DE CONEXÃO À INTERNET
4.1. Para efeito desta Norma, considera-se que o
Serviço de Conexão à Internet constitui-se:
a. dos
equipamentos necessários aos processos de roteamento, armazenamento e
encaminhamento de informações, e dos "software" e
"hardware" necessários para o provedor implementar os protocolos da
Internet e gerenciar e administrar o serviço;
b. das
rotinas para administração de conexões à Internet (senhas, endereços e domínios
Internet);
c. dos
"softwares" dispostos pelo PSCI: aplicativos tais como - correio
eletrônico, acesso a computadores remotos, transferência de arquivos, acesso a
banco de dados, acesso a diretórios, e outros correlatos -, mecanismos de
controle e segurança, e outros;
d. dos
arquivos de dados, cadastros e outras informações dispostas pelo PSCI;
e. do
"hardware" necessário para o provedor ofertar, manter, gerenciar e
administrar os "softwares" e os arquivos especificados nas letras
"b","c" e "d" deste subitem;
f.
outros "hardwares" e
"softwares" específicos, utilizados pelo PSCI.
5. USO DE MEIOS DA REDE PÚBLICA DE
TELECOMUNICAÇÕES POR PROVEDORES E USUÁRIOS DE SERVIÇOS DE CONEXÃO À INTERNET
5.1. O uso de meios da Rede Pública de
Telecomunicações, para o provimento e utilização de Serviços de Conexão à
Internet, far-se-á por intermédio dos Serviços de Telecomunicações prestados
pelas Entidades Exploradoras de Serviços Públicos de Telecomunicações.
5.2. O Provedor de Serviço de Conexão à Internet
pode, para constituir o seu serviço, utilizar a seu critério e escolha,
quaisquer dos Serviços de Telecomunicações prestados pelas EESPT.
5.3. Os meios da Rede Pública de
Telecomunicações serão providos a todos os PSCIs que os solicitarem, sem
exclusividade, em qualquer ponto do território nacional, observadas as
condições técnicas e operacionais pertinentes e, também, poderão ser utilizados
para:
a. conectar SCIs à Internet, no exterior;
b. interconectar SCIs de diferentes provedores.
5.4. As Entidades Exploradoras de Serviços
Públicos de Telecomunicações não discriminarão os diversos PSCIs quando do
provimento de meios da Rede Pública de Telecomunicações para a prestação dos
Serviços de Conexão à Internet. Os prazos, padrões de qualidade e atendimento
e, os valores praticados serão os regularmente fixados na prestação do Serviço
de Telecomunicações utilizado.
5.5. É facultado ao Usuário de Serviço de
Conexão à Internet o acesso ao SCI por quaisquer meios da Rede Pública de
Telecomunicações à sua disposição.
6. RELACIONAMENTO ENTRE AS ENTIDADES
EXPLORADORAS DE SERVIÇOS PÚBLICOS DE TELECOMUNICAÇÕES E OS PSCIs
6.1. No relacionamento entre as Entidades
Exploradoras de Serviços Públicos de Telecomunicações e os Provedores de
Serviços de Conexão à Internet, não se constituem responsabilidades das EESPT:
a. definir
a abrangência, a disposição geográfica e física, o dimensionamento e demais
características técnicas e funcionais do Serviço de Conexão à Internet a ser
provido;
b. especificar
e compor os itens de "hardware" e "software" a serem
utilizados pelos PSCIs na prestação do Serviço de Conexão à Internet;
c. definir
as facilidades e as características do Serviço de Conexão à Internet a serem
ofertadas pelos PSCIs;
d. providenciar
junto aos Coordenadores Internet a regularização dos assuntos referentes ao
provimento de Serviços de Conexão à Internet;
e. definir
os Pontos de Conexão entre os PSCIs, no Brasil ou no exterior, bem como as
características funcionais de tais conexões.
7. ENTIDADE EXPLORADORA DE SERVIÇOS PÚBLICOS DE
TELECOMUNICAÇÕES COMO PROVEDORA DE SERVIÇO DE CONEXÃO À INTERNET
7.1. A EESPT, ao fixar os valores a serem
praticados para o seu SCI, deve considerar na composição dos custos de
prestação do serviço, relativamente ao uso dos meios da Rede Pública de
Telecomunicações, os mesmos valores por ela praticados no provimento de meios a
outros PSCIs.
[i]. This
Norm remains applicable to the Internet Service, as it can be seen from item
3.2.b of Norm 4/97, which provides for other Additional Value Services.
[ii] José
Wilson Ferreira Sobrinho, at www.seprorj.org.br/legis1.htm,
informs that the State of Paraná has issued a tax ruling (Consulta 168/96) on
request of a taxpayer, stating that ICMS is
due on ISP activities. The Newsletter Rio Informática, year IV, July 1997,
p 5 also informs that the Employers' Union of the Data Processing Companies of
the State of Rio de Janeiro filed a consultation with the tax authorities of
that state on the ICMS taxation of ISP services. As far as we were informed,
this consultation was not answered to this date. According to the legal opinion by Evandro Raul dos Santos in www.internetsul.com.br/comunicados/parecer,
the State of Rio Grande do Sul stated that Internet Services are to be taxable
by ICMS under art. 3rd of the State Law 8.820/89, as modified by Law
10.908/96. On telephone contacts with the Brazilian Association of Internet
Providers (ABRANET, www.abranet.org.br,
that is a different association than the National Association of Internet
Providers, ANPI, www.anpi.org.br), Price Waterhouse Coopers was informed that
no associate company is paying ICMS for their services. However, this
Association is very worried about the possibility of ICMS taxation of ISP
services. See http://www.cg.org.br/reunioes/atas/1996/a10-12-96.html.
[iii]
Provided for art. 155, I, b, of the Federal Constitution of October 4, 1988 (CF/88).
[iv]
Provided for art. 156, III, of CF/88
[v] Decreto – Lei 406/68, as modified by Lei
Complementar n. 56/87.
[vi] Lei Complementar 87/96.
[vii] Constitution: Art. 155 - Compete aos
Estados e ao Distrito Federal instituir impostos sobre (...): II - sobre prestações de serviços (...) de
comunicação, ainda que as operações e as prestações se iniciem no exterior;
(..)§ 3º - À exceção dos impostos de que tratam o inciso II, do caput deste
artigo e o art. 153, I e II, nenhum outro tributo poderá incidir sobre
operações relativas a (..) serviços de
telecomunicações(...).
[viii] For
many years, the system lacked a National Law; its basic provisions were
supplied by a special Interstate Convention, nr. 66/88, under a Temporary
Provision of the 1988 Constitution. Convention 66/88 was revoked by
Complementary Law 87/96, which is the ICMS National Law.
[ix]
CONFAZ was created by Complementary Law nr. 24/75 to allow the Union to manage
the ICMS taxation jointly with the various State tax authorities.
[x] State
Law 3.082/98
[xi] The
Constitution does not define what is a communication service for the purposes
of art. 155 (ICMS) but by reference the § 3rd of the same article
equates “communication” and “ telecommunication” services. Telecommunication is
also mentioned in Constitution art. 5th, XII, art. 21, X and XI,
art. 22, IV and V, and art. 48, XII. According to Hugo de Brito Machado,
Aspectos Fundamentais do ICMS, Ed. Malheiros,
p. 37, those provisions from the Constitution itself are the basic tools for
establishing what telecommunication is. They may be used to find that under the
Constitution, telecommunication and radio broadcasting or postal services are
distinct services. However, as we shall see, a more precise concept of
telecommunication is necessary to distinguish between the pertinent services
and the other services under the taxing jurisdiction of Municipalities. This more refined concept must be given
primarily by the non-tax legislation, specially the laws pertaining to the
telecommunication sector, for instance the General Telecommunication Law.
[xii]
Lei Complementar 87/96, ART.2 - O imposto incide sobre: (...) III -
prestações onerosas de serviços de comunicação, por qualquer meio, inclusive a
geração, a emissão, a recepção, a transmissão, a retransmissão, a repetição e a
ampliação de comunicação de qualquer natureza;
[xiii] The General Law on Telecommunication,
which is a subsequent law as to the National ICMS Law, provides for a like
definition: Telecommunication services is the ensemble of activities that
allows for the offer of telecommunication. Telecommunication is the
transmittal, the sending or the reception by cable, radio electricity, optical
means or any other electro-magnectic process of signs, characters, signals,
writings, images, sounds or information of any kind. The original is so worded:
Art. 60. Serviço de telecomunicações é o conjunto de atividades que possibilita
a oferta de telecomunicação. § 1° Telecomunicação é a transmissão, emissão ou
recepção, por fio, radioeletricidade, meios ópticos ou qualquer outro processo
eletromagnético, de símbolos, caracteres, sinais, escritos, imagens, sons ou
informações de qualquer natureza.
[xiv] Roque Carazza, ICMS 1996, Malheiros, p.
70-71.
[xv] Before that, Convention
2/96 also listed some specific telecommunication-related services and taxable
events under ICMS, but did not refer to additional facilities or supplementary
services in general The full text in Portuguese of the Convention 69/98 is the
following: O
MINISTRO DE ESTADO DA FAZENDA E OS SECRETÁRIOS DE FAZENDA, FINANÇAS OU
TRIBUTAÇÃO DOS ESTADOS E DO DISTRITO FEDERAL, na 90ª reunião ordinária do Conselho Nacional de Política Fazendária,
realizada em Campos de Jordão, SP, no dia 19 de junho de 1998, tendo em vista o
disposto no artigo 199 do Código tributário Nacional (lei 5172, de 25-10-1966),
e no artigo 13, § 1º, inciso II, alínea “a”, da lei complementar 87 de 13 de
setembro de 1996; Considerando a necessidade de uniformizar os procedimentos
tributários nas prestações de serviços de comunicação e de esclarecer o
contribuinte, para que corretamente possa cumprir suas obrigações tributárias,
resolvem celebrar o seguinte CONVÊNIO: Cláusula primeira – Os signatários
firmam entendimento no sentido que se incluam na base de cálculo de ICMS incidente
sobre prestações de serviços de comunicação os valores cobrados a título de
acesso, adesão, ativação, habilitação, disponibilidade, assinatura e utilização
dos serviços suplementares e facilidades adicionais que otimizem ou agilizem o
processo de comunicação, independentemente da denominação que lhes seja dada.
(...)..
[xvi] This
understanding is shared by significant industry associations, as the
INTERNETSUL, the Internet Providers Association of the State o Rio Grande do
Sul, according to legal opinion by Evandro Raul dos Santos in www.internetsul.com.br/comunicados/parecer.
See also legal opinion in www.tdkom.com.br/allaymer/icms.htm
by Allaymer Bonesso.
[xvii] Ato
Declaratório 51 COTEPE/ICMS, dated of August 10, 1998, published at August 12,
1998.
[xviii] Even
so, under the Constitutional tax design. The taxable event and the definition
of taxpayer stated in the national law must have been also enforced in the
specific federal, State or Municipal Law.
[xix]
Constitution, Interim Section (ADCT)
art. 34,III, § 8.
[xx] See
the decision of the 11th Court of Government Cases of the District
of the City of São Paulo, published at IOB1/99 p. 18. Decisions from the 12th
(Docket 1.527/98, writ of Mandamus) and 7th (Docket nr.
1450/98, writ of Mandamus) Courts of the same District also found
unconstitutional the Convention for the reasons stated. I did not find any
appellate court decision on the matter.
[xxi] According to the Constitution, tax laws
are necessarily prospective: “Art. 150 - Sem prejuízo de outras garantias
asseguradas ao contribuinte, é vedado à União, aos Estados, ao Distrito Federal
e aos Municípios (...) III - cobrar tributos: a) em relação a fatos geradores
ocorridos antes do início da vigência da lei que os houver instituído ou
aumentado;
[xxii] As
CONFAZ and the State tax authorities are well aware that a Convention can not
create a new taxable event, they had to assume that the 69/98 Convention was
only clarifying, thus only declaring, the prior laws. Under the general
principles of the Brazilian Law, a declaration may have retroactive
effect. However, article 146 of the
National Tax Code, which shall be analyzed below, stands as a very special
provision, in face of the general principles of law applicable to the
declaratory effect: it was designed to protect tax payers from changes, however
warranted by the prior law, in the tax authority procedures or understandings.
[xxiii] ART.146 - A modificação introduzida, de
ofício ou em conseqüência de decisão administrativa ou judicial, nos critérios
jurídicos adotados pela autoridade administrativa no exercício do lançamento
somente pode ser efetivada, em relação a um mesmo sujeito passivo, quanto a fato
gerador ocorrido posteriormente à sua introdução. See Rubens Gomes de
Souza, Compêndio de Legislação Tributária, Edições Financeiras, 4a,
Ed, 1964, p. 83 and Aliomar Baleeiro, Direito Tributário Brasileiro, Forense, 2a.
Ed., p. 451. The Supreme Court has decided on such basis on the RE nr.
96.671-SP and RE 100.481-O, this last
decision specifically on ICMS.
[xxiv] This
understanding is supported also by Edgar Pitta de Almeida, A Tributação dos
Serviços de Acesso à Internet, Dialética 14, p. 7, as well as by Evandro Raul
dos Santos, and Allaymer Bonesso (see above).
[xxv] Full
text (in Portuguese) is attached. The definition of Additional Value Services
was already provided by Decree 177/91, art. 3rd, XXXIV.
[xxvi] Law
nr. 9.472/97. Law 9.295/96, the
so-called Minimum Telecommunication Law, also states the same in its art. 10,
sole paragraph. Therefore, it is clear
since 1996 that Internet is not a
telecommunication service. However, it must be brought into mind that since
1989 the providers of Electronic Data Interchange (EDI) are being treated as
non regulated providers.
[xxvii] In
the “Exposição de Motivos” , or ministerial explanation of the Bill that
eventually was transformed in the General Telecommunication Law, it can be read
the following: “Não convém que a lei estabeleça definições. Isso cabe à doutrina. Mas, às vezes, a
lei deve fazê-lo. É o que ocorre no caso. O Projeto de Lei em pauta inicia o
Livro III definindo serviço de telecomunicações, telecomunicação e estação de
telecomunicações (art. 57). Propicia, por um lado, excluir de sua regulação
serviços que não estejam tipificados como tal, como ocorre com serviços de
valor adicionado (art. 58) - mantendo conceito estabelecido pela Lei n.°
9.295/96 - e, por outro, restringe o alcance de suas normas às atividades que
não estejam confinadas aos limites de uma mesma edificação, propriedade móvel
ou imóvel. É importante ressaltar o conceito de serviço de telecomunicações,
não explícito na legislação até o momento, que, de certa forma, vincula sua
definição à existência do seu consumidor, ao determinar, no art. 57, que
"serviço de telecomunicações é o conjunto de atividades que possibilita a
oferta de telecomunicação". Isso porque só faz sentido haver oferta de um
serviço se houver quem o consuma, isto é, alguém para quem o conjunto das
atividades oferecidas (no caso, um serviço) adiciona valor a algo.
[xxviii] Art. 61. Serviço de valor adicionado é a
atividade que acrescenta, a um serviço de telecomunicações que lhe dá suporte e
com o qual não se confunde, novas utilidades relacionadas ao acesso,
armazenamento, apresentação, movimentação ou recuperação de informações. § 1º
Serviço de valor adicionado não constitui serviço de telecomunicações,
classificando-se seu provedor como usuário do serviço de telecomunicações que
lhe dá suporte, com os direitos e deveres inerentes a essa condição. § 2° É
assegurado aos interessados o uso das redes de serviços de telecomunicações
para prestação de serviços de valor adicionado, cabendo à Agência, para
assegurar esse direito, regular os condicionamentos, assim como o
relacionamento entre aqueles e as prestadoras de serviço de telecomunicações..
[xxix] ART.109 - Os princípios gerais de
direito privado utilizam-se para pesquisa da definição, do conteúdo e do
alcance de seus institutos, conceitos e formas, mas não para definição dos
respectivos efeitos tributários.
[xxx] ART.110 - A lei tributária não pode
alterar a definição, o conteúdo e o alcance de institutos, conceitos e formas
de direito privado, utilizados, expressa ou implicitamente, pela Constituição
Federal, pelas Constituições dos Estados, ou pelas Leis Orgânicas do Distrito
Federal ou dos Municípios, para definir ou limitar competências tributárias. See RTJ 156/666-694 for a Supreme Court decision
on such issue.
[xxxi] As
modified by the eighth Amendment: Art. 21 - Compete à União: (...) XI - explorar, diretamente ou mediante
autorização, concessão ou permissão, os
serviços de telecomunicações, nos termos da lei, que disporá sobre a organização dos serviços, a criação de um órgão
regulador e outros aspectos institucionais;
[xxxii] In
the official site of the Ministry of Communications, it can be read the
following: “Existe alguma norma específica do MC que regule a atuação
provedores de acesso a Internet? Se positivo como posso obtê-la? O Serviço de
Acesso à INTERNET é considerado no Brasil Serviço de Valor Adicionado e
portanto não é regulado pelo Ministério
das Comunicações. Não é necessária nenhuma outorga para presta-lo. Documentos
sobre o assunto podem ser obtidos no
site do Comitê Gestor da INTERNET no Brasil em http://www.cg.org.br”
[xxxiii] After
the decision, the eighth Amendment reduced Federal powers as to
telecommunication services only to be concession-granting authority.
[xxxiv] AGRSS
535-SP, Rel. Octavio Galloti decided on June 4, 1993.
[xxxv] Some
newspaper articles and notes from ABRANET have indicated that States would be
contemplating retroactive imposition since 1993.
[xxxvi] The
leading case is the Supreme Court case of RE 87.628-RS, decided on Oct. 11,
1977, rel. Cunha Peixoto; “The list of the aforesaid law is restrictive, and in
order that the tax is due, it is required that the activity is expressly
included in the list. However, in many items the list itself states that the
services mentioned are only example. Furthermore, in some State court
decisions, it can be found a slightly more flexible approach as for instance
the decision of the Rio de Janeiro Court of Appeals in Ap.Civ. 6..7/90, decided
in June 6, 1990: Although it is restrictive, in the list of services (...) each
one of its items allows for interpretation extensive or by analogy for the
various activities that it includes, what is not to be confounded with
analogy”: The last remark is due to the fact that under art. 108 of the
National Tax Code, analogy can not be used to create new taxes. This understanding is backed by the case law
of the Superior Court of Justice, see RESP 6705/SP ; (90/0010866-7): DJ
25/02/1991 PG:01463.
[xxxvii] A
very important issue at this point is the possible taxation of ISP activities
by both States and Cities. The issue should be then settled on court, possibly
by the deposit of the higher amount to be consigned to the winning party, if
any (or only the due balance, in case o ISS).
[xxxviii]
Official note by the Employers' Union of the Data Processing Companies
of the State of Rio de Janeiro on http://www.seprorj.org.br/icm.htm: “O provedor de acesso faz apenas
"timesharing", blocagem de hora-máquina particionada entre vários
usuários, acompanhados de software e consultoria técnica, um serviço de valor
agregado, trafegando sobre o sistema de comunicação monopolizado e alcançado na
tributação em todas as suas etapas.
[xxxix] Tax
authorities are particularly interested in the new advertising market for ISP,
and have been moving into the direction of actually impose taxation on this
specific service.
[xl] See
City of Rio de Janeiro Taxpayers’ Council Decision Ac. 2.945, decided on June
27, 1991.
[xli] ART.108 - Na ausência de disposição
expressa, a autoridade competente para aplicar a legislação tributária
utilizará sucessivamente, na ordem indicada (...) § 1º O emprego da analogia não poderá resultar na exigência de
tributo não previsto em lei.