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Brazil: New Law Taxes Online Audio and Video Streaming Services

(Jan. 10, 2017) A complementary law enacted on December 29, 2016, by the Brazilian federal government amended the services tax law (Imposto sobre Serviços de Qualquer Natureza, ISS, Lei Complementar No. 116, de 31 de Julho de 2003, PLANALTO) to allow for the taxation of online audio and video streaming services at a minimum rate of 2%.  In addition, the new law prohibits municipalities from offering any tax exemption or benefit designed to lower the minimum tax rate for the purpose of attracting more companies.  (Temer Sanciona Lei que Taxa Serviços como o Netflix e Spotify [Temer Sanctions Law that Taxes Services Like Netflix and Spotify], O DIA (Dec. 31, 2016); Lei Complementar No. 157, de 29 de Dezembro de 2016, PLANALTO.)

Article 1 of the services tax law, whose implementation is under the jurisdiction of the municipalities and the Federal District, provides that the tax will be imposed on covered services even if these services do not constitute the preponderant activity of the provider.