Hello @Jonnathan Pope ,
Our product group have replied as follows:
Yes, that is correct RDS CALs are not allowed for Azure. From a licensing perspective Windows Server CALs are not required for accessing Windows Server running in the Azure environment because the access rights are included in the per-minute charge for the Virtual Machines. However access to Remote Desktop Services (RDS) will require a Windows Server RDS CAL with active Software Assurance (Extended Rights).
You can find this information in the following Azure Virtual Licensing FAQ as well as the Product Terms, regarding the Extended Rights: https://azure.microsoft.com/en-us/pricing/licensing-faq/
Commercial Terms: https://www.microsoft.com/licensing/terms/productoffering/WindowsServerStandardDatacenterEssentials/EAEAS
Remote Desktop Services (“RDS”) User CAL and User SL Extended Rights
Customer may use its RDS User CALs and User SLs with Windows Server software running in OSEs dedicated to its internal use on either Microsoft Azure Services or the shared or dedicated servers of a License Mobility through Software Assurance Partner for which it has completed and submitted the License Mobility verification form. Other than administrative access by Customer’s License Mobility through Software Assurance Partner, no other party may access the OSE(s). For any CAL or User SL Customer has used in this manner, it may later move to Microsoft Azure Services or a new License Mobility through Software Assurance Partner, but not sooner than 90 days after it initiated use in the environment it is leaving.
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