Telecom: DPC supports multinational by minimizing tax risks and avoiding relevant penalties

Multinational in the telecom area that provides fiber optic networks in 14 countries relied on DPC's support to achieve tax compliance and maintain competitiveness in a challenging business environment such as Brazil's.

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Learn more about another case in which DPC contributed to optimize the client's performance and support their business growth.


Telecom: DPC supports multinational by minimizing tax risks and avoiding relevant penalties


Gathering more than 30 years of experience in tax consultancy in the telecommunications area, DPC has operated in countless implementation and business development processes of the major players in this segment in Brazil.

Anatel recognizes that this market has particularities and has a high tax burden. “Once Brazil is analyzed in the international context, it is important to highlight the Brazilian specificity in the taxation of telecommunications services”, says the regulatory agency in a March 2020 publication.

See how a multinational in the telecom area that provides fiber optic networks in 14 countries relied on DPC's support to achieve tax compliance and maintain competitiveness in a challenging business environment such as Brazil's.




Context / Challenge

In the telecom market, for an efficient tax planning and in compliance with tax legislation, it is important to understand the service nature, involved rates, origin and destination, among other issues.

The purpose for assessing the service's location of origin and destination is to determine the ICMS payment location, a state tax that is the greatest burden in this type of operation. In fact, the rate may vary according to each agency of the federation. There is also the taxation of PIS/COFINS on a cumulative basis, in addition to sectoral contributions based on sales.

One of the particularities of this market is the way of charging for the provision of costly telecom services for the ICMS payment location purpose. Thus, for communication unmeasured services, which are those whose price is charged for fixed periods and when the provider and purchaser are in different Federation Units, the ICMS will be collected in equal parts for each taxing entity. When they are measured services, in most of cases, ICMS is due to the place where the service is charged. However, there are exceptions. When the service is provided by means of satellite, for example, ICMS is due to the purchaser's State or domicile.

Problem

Once assuming the fiscal advice of this company, DPC detected the non-compliance with the rules applicable to the market in previous periods, which until then the client was not aware, whether in relation to the main obligation of ICMS payment, or the filing of accessory obligations.

During the tax review to start the work, DPC identified that the payment was being made only in the State of origin for the unmetered telecom service. Therefore, the company was overpaying in one state and was underpaying in another.

DPC’s solutions

With this background and sector and market expertise, DPC's team analyzed the company's operation and processes, identifying practices that should be corrected to avoid tax risks.

Throughout this advisory and analytical work, which considered a whole spectrum of variables, strategies were outlined to eliminate risk factors. The client was advised as to the fulfillment of the specific requirements of the telecom market and received the support required to conduct the tax compliance process.

The tax implications of each ICMS payment model were also analyzed, whether shared or not, so that the client could make the best decision.

Results for the client

Based on DPC's tax guidelines, the client's performance towards the tax requirements entered in a regularity cycle to comply with all main and accessory obligations, specific of telecom.  In this case, the specialized support contributed to eliminate the risk of penalty of about BRL 1 million a year.

The client also made an assertive and safe choice as to the most adequate ICMS payment method for its business model.

The company, by guaranteeing the compliance with taxes, starts to have peace of mind to operate and participate in bidding processes, to request and obtain credit and to enjoy new growth opportunities.

How DPC may help your company?

Domingues e Pinho Contadores has specialized team ready to assist your company.
Contact us by the e-mail dpc@dpc.com.br

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