In a recent decision, the São Paulo State Court of Justice (TJSP) recognized that PIS, COFINS and ISS should not be included in the calculation basis of the Services Tax (ISS). This position is important for companies providing services, as it reinforces the understanding that has been forming in the judiciary about the concept of gross revenue and its composition, allowing for a reduction in the amounts due as ISS.
According to the understanding established by the TJSP, if PIS, COFINS and the service tax itself were kept in the ISS calculation base, the result would be an undue increase in the tax, since the contributions and ISS itself do not fit in with the amount charged for providing the service.
In addition, the Court held that municipal legislation which imposes on the taxpayer the calculation of ISS “inside” (embedded in the price of the service) went beyond the material aspect of the tax, since, unlike ICMS, there is no provision in National Complementary Law 116/03 for ISS to be included in its own calculation basis.
To the extent that PIS, COFINS and the tax itself do not form part of the ISS calculation base, companies providing services that choose to seek this right can benefit by improving their results, increasing their cash flow, as well as gaining advantages in price disputes with their competitors.
Another important fact is that, in addition to saving money on future ISS payments, companies that have this right recognized will be able to obtain a refund of what has been unduly paid over the last five (5) years.
It is therefore important to have the help of a qualified tax team to discuss the best way to reduce the amount of Service Tax, as good tax management is capable of promoting financial gains and simplifying procedures.
