Internet firms expected to boost Brazilian public treasuries in 2018

The city of São Paulo will be the main beneficiary from changes in service taxes online on-demand entertainment services will have to pay.

Subscription-based Internet streaming services operating in Brazil are expected to bring a substantial boost to city treasuries as new taxation changes are introduced.

The Brazilian service tax, ISS (which can only be implemented by the municipalities, with revenue going to them rather than to the federal government's bottom line) will see a 2-5 percent increase on online on-demand entertainment services such as those provided by Netflix and Spotify.

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The "Netflix tax" levy as it is known elsewhere, was approved by president Michel Temer in the last few days of December will be effective from 2018.

Home to most online services companies operating in Brazil. the city of São Paulo should be the main beneficiary from the changes, with some R$22.3m ($6.9m) in additional tax revenue expected to be generated annually, according data from the São Paulo Mayor's office.

Out of the projected total, about R$22m ($6.8m) is expected to come from video subscription services such as Netflix and its Brazilian competitor Looke. ISS revenue for São Paulo across all sectors currently sits at R$12bn ($3.7bn) annually.

Some US states and New Zealand have already introduced a so-called "Netflix tax".