An Apple developer blog has revealed changes to tax legislation that will have an impact for foreign developers currently making big profits from Brazil’s booming app market.
The blog spells out changes to multiple country’s tax laws with Brazil being the jump-out example. Changes to tax payments in accordance with new Brazilian legislation will see the company withhold taxes from in-app purchases and other payments proceeds paid to developers outside of the country, effectively being a 15-25% tax on app store spending, including in-app purchases, made to foreign companies.
This new ruling only affects developers outside of Brazil and appears to be part of a previously floated set of tax changes announced in April this year. In the same blog we see Ghana similarly getting an increase while Lithuania and Moldova have seen a reduction. Spain has also introduced a digital services tax of 3%.
In Brazil however, rather than collecting tax on invoices, Apple is now deducting these taxes from payments directly. This means that, theoretically, foreign companies will now be charged more to operate in Brazil, helping local developers and publishers remain competitive. It’s not clear how this will affect local offices, although in one example, e-commerce giant Shein relocated domestically to circumvent these taxes.
Big trouble for Chinese companies?
Whether the changes will be beneficial to developers depends entirely on your perspective but Apple holding back cash that had previously flowed on will present a significant hit to revenue for foreign companies currently flying high in Brazil.
Notable examples would be Chinese companies that have begun expanding into the region, such as Tencent, who’ve used the region as the premier location to launch products beyond their native homeland. The new legislation and its enforcement by Apple represents a new stumbling block that Chinese companies will have to contend with as they seek to escape legislation at home.
Although Tencent is looking to avoid trouble in China with a more stable stream of revenue from abroad, these tax changes are a reminder that when a new market springs up, governments are only ever one law away from ensuring that they get their share.
