Tax audit for ISP: learn how to choose and leverage SVA

November 9, 2021

6 minutes of reading

The management of internet providers (ISPs) can certainly obtain great benefits from hiring a tax audit for an ISP .

Mainly, when the objective is to maximize the benefits of Value Added Services (VAS) to provide tax savings .

In other words, the idea is to pay less tax through the strategic management of SVA solutions for internet .

A tax audit for ISP, as a result, should enhance the business model and optimize the administration and management of internet providers.

Why choose an ISP tax audit?

In principle, because a tax audit for an ISP leaves owners and managers of internet providers with better and more assertive information about the fiscal and tax issues of their business.

Above all, because a tax audit for ISP allows for effectiveness in strategic decision-making and tax management of SVA solutions for ISP .

Indeed, effectiveness is a concept that encompasses three dimensions that are of great interest to the administration and management of internet providers' business and, in fact, to any company: COSTS , RESULTS and IMPACTS .

In this sense, the contribution of a tax audit to the management of ISPs begins to become clear. In short, it helps and makes life easier for managers when it comes to enhancing the benefits of SVA solutions for internet providers .

Because an SVA for ISP must always be a useful, profitable and profitable solution for internet providers of all sizes (small, medium and large).

After all, unlike SCM (Multimedia Communication Service), SVA solutions for ISPs have a reduced tax burden . Not paying ICMS means a huge tax reduction.

Afterwards, the other reasons for choosing a tax audit for an ISP have already been delved into in our previous articles on SVA for internet providers .

Find out more on the Lumiun Blog :

Tax audit for ISP: more SVA, less tax

Taxes are responsible for a large part of the costs of Brazilian companies.

In fact, when it comes to the tax burden on telecommunications, Brazil is among the countries that charge the most taxes on the activity. Especially, about Multimedia Communication Services (SCM) .

That is why SVA solutions for ISPs are crucial for the growth, transformation and evolution of the internet providers' business model.

In this sense, a tax audit for an ISP is relevant for the management of the internet access provision business .

In fact, it is the great benefits of an SVA solution for ISP that explain why ISPs seek out SVAs . Especially because they allow tax reduction.

The Brazilian tax burden on telecommunications

At the end of the first quarter of 2021, the National Telecommunications Agency (Anatel) released the international comparative study Tax Burden Level and Service Basket Cost Report .

According to the Anatel document (on pages 7, 17 and 18, reproduced here), we can see the tax voracity of the Brazilian State. Between 2018 and 2020, an increase of 0.4% in the ICMS tax burden . This increased the average rate for telecommunications services to 43.6%.

REPORT HIGHLIGHTS (page 7)

Brazil relatively improved its position in the ranking of the telecommunications services basket. In mobile telephony, Brazil was in 83rd position and rose to 63rd. In fixed broadband, Brazil evolved from 75th to 45th position.
Brazil continues to have a high relative tax burden on telecommunications, compared to other countries. In mobile telephony, Brazil is in the group of 5% of countries with the highest tax burden, and in fixed broadband, Brazil has the highest tariffs in the ITU ranking.
Brazil is the 6th largest mobile telephony market in the world and the 5th largest national market in fixed broadband . Highlight is China, which already has 39% of the global fixed broadband market.
From 2019 to 2020, in the analysis carried out by the ITU, there was a dynamic of greater concentration of countries with lower tax burdens. Specifically with an increase in the percentage of countries with a tax burden of 0% to 10% and a reduction in the percentage of countries with a tax burden of 10% to 20%. This migration of tax burden bands occurred in both services: mobile telephony and fixed broadband.
From 2019 to 2020, the average tax burden in Brazil increased by 0.4%. This is due to two factors: i) increase in the national average ICMS by 0.22% due to an increase in a state's rate, ii) new weighting of states due to changes in the number of accesses. The average ad valorem tax burden on telecommunications for Brazilian consumers is around 43.6%.
São Paulo has 31.26% of the national telecommunications market and Minas Gerais has 9.62% of the market. The other states account for around 60% of the national market.
The costs of service baskets , both in mobile telephony and fixed broadband, practically did not change , considering data from 2018 and 2019.
There is a consistent drop in the prices of service baskets measured by the ITU, both by GDP per capita and by US$ in purchasing power parity (PPP). This trend remains for 2019 data, even with some changes in the ITU service baskets. The current service baskets present services that better reflect the recent reality of users with an increase in usage capacity.

tax audit for ISP

Complexity of the tax burden for internet providers

In order to facilitate understanding of the complexity of the tax burden on ISPs and SVA solutions for internet providers, we suggest watching the short videos that accountant Stanley Souza makes available on YouTube .

Just to illustrate our topic, here we provide video 06 – What taxes should my provider pay .

SVA solutions for internet providers to optimize tax burden

As we have already seen, SVA (value added service) is taxed less than SCM (multimedia communication service). Also, the Brazilian tax burden on telecommunications is one of the highest in the world .

Just to give an example, imagine that a provider sells its internet service for R$100.00 . As a result, you pay state and federal taxes on this entire amount.

Now, watch the “magic” happen.

By adding an SVA benefit to the customer in the amount of R$20.00 , and maintaining the R$100.00 price for the subscriber, the provider will pay federal taxes on both services. However, at the state level (ICMS), it will only apply to R$80.00 .

In this way, it is possible to reduce the amount of state tax by offering an SVA solution for ISP to the internet provider's plans.

But, be very careful. Consult your accountant or legal advisor to check the rules and limits of amounts that are allowed to avoid tax problems.

SVA + tax audit for ISP = effective tax planning

Above all, the main advantage of a tax audit for an ISP is to enhance the tax savings of SVA solutions for internet providers.

And also contribute to effective tax planning . Which will undoubtedly make it possible to pay less taxes, increase business profitability and improve profitability.

That is why the SVA combo for internet providers + tax audit for ISP + tax planning is indispensable and so effective – efficiency and effectiveness at the same time – for the ISP business model.

How to choose a tax audit for ISP?

Certainly, after so many arguments and information about the value and relevance of a tax audit for an ISP , it is easy to answer this question.

To choose a tax audit for an ISP, internet provider managers must prioritize qualified companies and trained professionals when hiring the service.

The concern must be investing in quality and effectiveness. Undeniably, the right path to greater impacts, better results and lower costs when leveraging the benefits of SVA solutions for ISPs and increasing the profitability of internet providers .

A good SVA solution for ISP

Lumiun ISP is an SVA for internet providers that offers competitive advantages , differentials and benefits for ISPs and their customers.

The DNS filter in SVA format for the Lumiun ISP was developed to offer more security and control over the subscriber's internet and increase the providers' profitability.

Strategic differences and competitive advantages of Lumiun ISP :