The Brazilian Federal Revenue Service, through the Cosit Consultation Solution No. 64/2021, decided that the payments made for the commercial exploitation of copyrights can be fully deducted as an operating expense for Income Tax purposes.
According to the understanding of the tax authorities, the limit of up to 5% of net revenue for IRPJ deduction purposes applies only to payments made for the exploitation of invention patents or for the use of industrial or commercial trademarks, in addition to the amounts paid for technical, scientific or administrative assistance, as provided in article 365, of Decree No. 9,580/2018 (“RIR/2018”).
That is, expenses with commercial exploitation of copyrights are not subject to the deductibility limit of 5% of gross revenue, but rather to the general deductibility rule provided by article 311 of RIR/2018.
This Query Solution is important, because the Federal Revenue Service had been understanding that the payment for the licensing/exploitation of copyrights fit into the general concept of royalties, whose deduction from the IRPJ is limited to 5% of net revenue from products sold.
Nevertheless, due to the new understanding of the Federal Revenue Service, the understanding that although the commercial exploitation of copyrights is classified as a royalty, the payment of such expenses can be fully deducted for IRPJ purposes has become well-established, so that the deduction limit of up to 5% of net revenue does not apply.