Did you pay royalties abroad? For tax reform purposes, this is considered an intangible imported asset. Understand why IBS and CBS apply to remittances, who collects them, and what changes in the company’s tax credit.
Credits: Political Crumbs
The question arises almost every month at tax meetings. A Brazilian company remits royalties to a parent company, franchisor, or licensor abroad, whether for the use of a trademark, patent, know-how, or software license. Does this payment fall under the IBS and CBS tax base? As a rule, yes. And understanding why helps to understand the entire logic of intangible assets that the Tax Reform brought to the Brazilian system.
The broad concept of property in LC 214/25
Brazilian Complementary Law 214/25, which regulates Constitutional Amendment 132/23, clearly defines, in its Article 3, an asset as anything movable or immovable, tangible or intangible, including rights. It defines supply, among other possibilities, as the establishment, transfer, assignment, concession, licensing, or making available of an intangible asset, including rights. A royalty for the use of a trademark, patent, or know-how fits perfectly within this framework. The royalty remunerates the granting of a right, not the sale of a commodity nor, in the traditional sense, the provision of a service. The law treated this as an asset from the outset.
Article 4 completes this logic by defining the general tax base. The IBS and CBS taxes apply to onerous transactions involving goods or services, in a deliberately broad concept. This design concludes a decades-long discussion about where merchandise ends and service begins, a discussion that is particularly relevant today for software and other digital goods.
The importation of intangible property, according to article 64
For remittances abroad, the central provision is Article 64. It considers the importation of services or intangible assets, including rights, to be the supply made by a resident or domiciled abroad whose consumption occurs in Brazil, even if the supply itself takes place outside the country. Paragraph 1 broadens the concept of consumption to include use, exploitation, benefit, enjoyment, or access. Technical commentaries published after the law already place copyrights and other intangible assets on the list of covered operations, alongside software, licenses, and consulting services.
It doesn’t matter where the licensor developed the trademark, registered the patent, or wrote the software. What matters is where the right is used, exploited, or accessed. If it’s in Brazil, it’s considered an import for IBS and CBS purposes.
Who collects it in practice?
Foreign suppliers are required to register as taxpayers or, failing that, assume the role of tax withholding agent for imports. The law provides a very concrete solution for when this registration does not occur, which is the rule, not the exception, in royalty remittances. If the foreign supplier is not registered, the IBS (Brazilian VAT) and CBS (Brazilian VAT) will be segregated and collected by the institution processing the foreign exchange transaction at the time of remittance, at the reference rates. Since all international royalty remittances go through a foreign exchange contract, this practically guarantees that the collection will happen upfront, without depending on subsequent audits.
A controversy that the law closes.
In the current system, still in effect in parallel during the transition, there has always been discussion about whether pure royalty, without associated service provision, would be subject to PIS/COFINS-Importation. In 2023, the Federal Revenue Service had already changed its position to require the contribution on software licensing, treating the payment as a taxable royalty. The new law leaves no room for this type of debate. Intangible assets and rights have been explicitly included in the basis since the text of LC 214/25, which removes the issue from the realm of administrative interpretation and places it within the letter of the complementary law.
Credit changes the economic weight.
Here’s the difference that matters most to the company’s cash flow. If the licensee is a taxpayer under the regular tax regime and uses the right in its economic activity, the tendency, due to the broad non-cumulative nature that structures the entire new system, is to be able to claim credits for the IBS and CBS taxes paid on imports. This changes the practical effect of the tax. It ceases to be a definitive cost and becomes, in most cases, a cash flow and compliance issue, not a margin issue.
Royalty doesn’t travel alone.
IBS and CBS arrive as a new layer, not as a replacement. They remain in effect, without any changes brought about by the consumer reform.
15% Withholding Income Tax (IRRF) on remitted royalties, rising to 25% when the beneficiary is located in a jurisdiction with favorable tax treatment; 10% CIDE-Royalties contribution, provided for in Law No. 10.168/2000, payable by the remitter regardless of the specific type of royalty; And now, IBS and CBS on the importation of the intangible asset.
The difference is that IRRF (Withholding Income Tax) and CIDE (Contribution for Intervention in the Economic Domain) are definitive costs, without the right to credit. IBS (Brazilian VAT) and CBS (Contribution on Goods and Services), in most corporate cases, tend to be recoverable. It’s worth simulating all three together before closing any international licensing agreement.
What is still settling in
Since January 2026, symbolic test rates of 0.9% for CBS and 0.1% for IBS have been in effect, which do not represent the actual tax burden. CBS will more effectively replace PIS and COFINS starting in 2027. IBS will gradually replace ICMS and ISS until 2033. The law provides for a reference ceiling of 26.5% for the sum of the two rates after the transition, but the IBS Management Committee itself published, in July of this year (2026), an estimate of 27.91% for budgetary purposes. This number is still subject to adjustment and is not the final rate, which is up to the Federal Senate to set.
For those advising companies with licensing, franchising, or technology transfer agreements with foreign entities, the current situation calls for a review of gross-up clauses, verification of the foreign licensor’s registration status, and direct monitoring of upcoming resolutions from the Management Committee and the Federal Revenue Service. The regulations haven’t yet finalized all operational details, but the benchmark has already been set: royalties paid abroad are considered intangible assets, and imported intangible assets are subject to IBS and CBS taxes.
Moises Rodrigues Coimbra,
Tax Attorney and Accountant. LL.M in Tax Law (PUCRS) and in Tax Advocacy (EPD), MBA in Direct Taxes. Specialist in Tax Reform.