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) a)
Internet Connection Services rendered to all users, as defined in Ministry
of Communications Norm 4/95, item 4.1i[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[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
Telecommunication and Transport services iii[iii].
merchandises,
Electricity,
b) b ISS - Service Tax, due on the services listed in Federal Law and City Law,
specifically excluding Electricity, Telecommunication and Transport services
iv[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[v] and the National
ICMS Law vi[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 servicesvii[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[viii]. The Joint State
Authorities meeting under the Federal coordination in the CONFAZ committee
agree on such Conventions ix[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[x].
11) The Telecommunication services - The 1988 Constitution itself does not clarify
what are the telecommunication services upon which the ICMS is due xi[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[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[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[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[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[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[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[xviii]. Under the 1988 Constitution, Interstate Conventions could only
act in lieu of National Laws before a formal National Law was issued xix[xix]. The
courts have been indeed stating - for the time being - that the Convention is
unconstitutional on such grounds xx[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[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[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[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
Telecommunication Services xxiv[xxiv].
that
in
Brazil
governs
Internet
24) The applicable Internet Telecommunication rule is Ministry of Communications
Norm 4/95xxv[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 Lawxxvi[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
conditionxxvii[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 providersxxviii[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
therefromxxix[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[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[xxxi].
Internet services are not
regulated services as they are not deemed
xxxii[xxxii]
telecommunication services
. Incidentally, the Supreme Court has decided
that the former Federal Monopoly of telecommunication
only to transmittal of telecommunication signals xxxiv[xxxiv].
xxxiii[xxxiii]
was restricted
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[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[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[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[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[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[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[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:
a. às Entidades Exploradoras de Serviços Públicos de Telecomunicações (EESPT)
no provimento de meios da Rede Pública de Telecomunicações a Provedores e
Usuários de Serviços de Conexão à Internet;
b. aos Provedores e Usuários de Serviços de Conexão à Internet na utilização dos
meios da Rede Pública de Telecomunicações
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[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[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[iii]
Provided for art. 155, I, b, of the Federal Constitution of October 4, 1988 (CF/88).
iv[iv]
Provided for art. 156, III, of CF/88
v[v]
Decreto – Lei 406/68, as modified by Lei Complementar n. 56/87.
vi[vi]
Lei Complementar 87/96.
vii[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[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[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[x]
State Law 3.082/98
xi[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 nontax legislation, specially the laws pertaining to the telecommunication sector, for instance the General
Telecommunication Law.
xii[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[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[xiv]
Roque Carazza, ICMS 1996, Malheiros, p. 70-71.
xv[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[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[xvii]
Ato Declaratório 51 COTEPE/ICMS, dated of August 10, 1998, published at August 12, 1998.
xviii[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[xix]
Constitution, Interim Section (ADCT) art. 34,III, § 8.
xx[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 12 th (Docket 1.527/98, writ of Mandamus) and 7 th
(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.
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;
xxi[xxi]
xxii[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[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[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[xxv]
Full text (in Portuguese) is attached. The definition of Additional Value Services was already
provided by Decree 177/91, art. 3rd, XXXIV.
xxvi[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.
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.
xxvii[xxvii]
xxviii[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[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[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[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;
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
xxxii[xxxii]
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[xxxiii]
After the decision, the eighth Amendment reduced Federal powers as to telecommunication
services only to be concession-granting authority.
xxxiv[xxxiv]
AGRSS 535-SP, Rel. Octavio Galloti decided on June 4, 1993.
xxxv[xxxv]
Some newspaper articles and notes from ABRANET have indicated that States would be
contemplating retroactive imposition since 1993.
xxxvi[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[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[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[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[xl]
See City of Rio de Janeiro Taxpayers’ Council Decision Ac. 2.945, decided on June 27, 1991.
xli[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.