Brazilian Supreme Court rules that ISS does not comprise the PIS and Cofins calculation basis

The Brazilian Supreme Court (STF) has ruled that the Services Tax (ISS) does not comprise the PIS (Employees’ Profit Participation Program) and Cofins (Tax for social security financing) calculation basis. This understanding was established in the judgment of Extraordinary Appeal (RE) 592616, with recognized general repercussion (Theme 118), and must be applied to other similar cases in court.

According to the majority of the panel, ISS does not constitute revenue or gross revenue of the service provider, since the amount corresponding to the tax represents a temporary financial inflow, intended for the competent municipality, with no definitive increase in equity for the taxpayer.

It is worth noting that the STF did not analyze the modulation of the effects of the decision, that is, whether they will be retroactive or apply only prospectively. The matter may be reviewed by the Plenary if motions for clarification are filed.

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