Rio de Janeiro hosts 2023 Web Summit as part of push for investments in local tech sector

Held every year since 2009, the Web Summit is a technology and innovation conference that attracts a wide variety of companies and actors from around the globe.

This year, the summit was held from May 1 to May 4 in Rio de Janeiro, the first non-European city to host the event. The city’s move to host the event was in line with the municipal government’s plans to turn Rio de Janeiro into a leading technology and innovation hub.

As part of a joint initiative with the city’s investment promotion agency – Invest.Rio – we highlight the main tax incentives currently in effect in the city of Rio de Janeiro, as well as those being debated. See below:

ISS Tech

Municipal Law No. 7,000/2021 sets a reduced Service Tax (ISS) rate for companies based in two strategic regions within the municipality of Rio de Janeiro – the so-called Consortion Urban Operation Area within the Port of Rio de Janeiro (except for Rio Branco Avenue and Presidente Vargas Avenue), and the Rio Technology Park (located on Fundão Island). In practice, the ISS rate in these areas has been reduced from 5% to 2%.

As well as the requirement to be based in one of these two areas, companies looking to take advantage of the reduced rate must carry out one of the following business activities:

• Intermediation services for service contracts between individuals conducted exclusively via the internet;
• Services provided for in Article 8, item I of Law No. 691/1984:
  1 – Computer services (and the like);
  01 – Systems development and analysis;
  1.02 – Programming;
  1.03 – The processing, hosting, or storage of data, text, images, videos, webpages, online applications, and information systems, among other similar formats (wording amended by Law No. 6,263/2017);
  1.04 – The development of computer programs – including electronic games – regardless of the type of machine the program is installed on, including tablets, smartphones and the like (wording amended by Law        No. 6,263/2017);
  1.05 – Licensing or assignment of rights for using computer programs;
  1.06 – Computer-related consulting or advice;
  1.07 – Technical IT support, including the installation, configuration and maintenance of computer programs and databases;
  1.08 – Webpage design, production, maintenance and updates;
  1.09 – Provision (without definitive assignment) of online audio, video, image and text-based content. This does not include books, newspapers or periodicals, nor content distributed by Conditional Access Service providers – referred to in Law No. 12,845/2011 (Added by Law No. 6,263/2017).
• Research and development services (excluding market research); and
• Biology, biotechnology and chemistry-related services.

Franchising

Municipal Law No. 7,706/2022 has reduced the ISS rate (again, from 5% to 2%) on services linked to franchises. However, this reduction is conditional on the growth of the ISS calculation base for franchise services in the sector as a whole – it must be at least 10% during each 5-year period in the 20-year period following the law’s date of publication.

If this condition does not eventuate, the rate will be reestablished at 5% from January 1 of the following year.

Gaming and gambling

The city of Rio de Janeiro’s executive branch recently submitted Bill No. 1,822/2023 to City Hall. The bill would reduce the ISS rate to 2% (from 5%) for distribution and sale services regarding betting slips/tickets, as well as other products linked to lotteries, bingo games, card games, raffles, prizes, including those derived from capitalization bonds and the like.

This move follows in the footsteps of other large Brazilian cities, such as São Paulo, as it seeks to attract sports betting companies to Rio de Janeiro via tax benefits.

ISS Neutro Program

Municipal Law No. 7,907/2023 has established a program called ISS Neutro. This program provides tax incentives to participants in the carbon market in an effort to encourage reductions in greenhouse gas emissions.

The program has established a reduced ISS rate (from 5% to 2%) for the following services:

• Carbon credit project development and auditing services;
• Carbon credit registration and certification services;
• Services for the provision of carbon credit transaction platforms (Bolsa Verde); and
• Inventory and auditing services for greenhouse gas emissions.

The ISS Neutro Program aims to encourage the purchase of carbon credits by Rio de Janeiro-based ISS taxpayers, in the form of credits assigned in the NFS-e – Nota Carioca system – for the purpose of amortization of their own tax dues via a procedure to be determined through regulations.

IPTU Cripto initiative

Last year, the City of Rio de Janeiro recently enacted Decree No. 51,498/2022, allowing for property tax (IPTU) to be paid via cryptocurrency.

Such payments are intermediated by Virtual Asset Service Providers (VASPs) and Crypto exchanges, which must be accredited with the Rio de Janeiro City Hall to perform this service.

These entities will convert any cryptocurrency payments into Brazilian Reais (BRL). Payments via cryptocurrency ensure the city will receive 100% of the payment value in Reais, with no additional cost to public coffers.

In order to take advantage of these transactions, companies must be accredited with the municipality, possess a corporate taxpayer registration (CNPJ) number, ensure their client records remain updated in line with the Brazilian Central Bank’s requirements for financial institutions, and have entered into a service contract with one of the municipality’s collection banks (bancos arrecadodores).

This development is part of a broader project that emerged from a working group established by Decree No. 50,145/2022. The decree aims to boost the digital currency and blockchain market, integrating these technologies into Rio de Janeiro’s local economy via specific studies and projects.

For further information about tax incentives and benefits in the city of Rio de Janeiro and Brazil, please contact Mattos Filho’s Tax practice area.

For more information on investment initiatives in the municipality of Rio de Janeiro, please consult the Invest.Rio website.

* This content was created in partnership with Invest.Rio, the City of Rio de Janeiro’s investment promotion and attraction agency.