By Patricia Vargas Fabris

On June 26, 2018, a decision by the Court of the State of São Paulo was made available, recognizing the exemption from ICMS in transactions involving software via electronic transfer. 

SEPROSP – Union of Data Processing and IT Services Companies of the State of São Paulo was the first to request the TJSP to suspend the collectibility of amounts related to ICMS levied on software transactions carried out by electronic data transfer, considering that when acquiring software by electronic transfer there is no physical support, since the software is not a tangible asset but the purchase of a usage license. 

The dispute arose after the publication of ICMS Agreement No. 106/17, which deals with the incidence of ICMS on transactions involving goods and merchandise traded through electronic data transfer, on the value of the transaction. This would represent tax illegality and double taxation. 

Tax illegality was violated given that the State of São Paulo Decree No. 63,099/17 established a new hypothesis for the incidence of ICMS, and only the Complementary Law is capable of creating the hypothesis for incidence, calculation basis, and taxable event. 

Double taxation occurs as software transactions, including via download/streaming, are taxed by the municipality through the ISS. 

Thus, the Court of Justice of the State of São Paulo ruled on 06/26/2018, in an appeal, and granted the suspension of the ICMS requirement regarding the incidence on software operations carried out through data transfers.