The constant clash between taxpayers and the tax authorities shows that it is increasingly difficult to reconcile the desire and need for a more lenient tax burden with the power/duty to collect taxes to enable the activities of political entities.
This balance is far from being achieved, even more so considering the news reports on the reprehensible behavior of some taxpayers, who use illegal practices to gain illicit advantages, as well as the constant revelations of how public money is misused.
However, it is not only the tax burden that needs to be analyzed, as often some obligations end up having an equally significant financial impact.
By way of example, among the various obligations inherent to taxpayers is the obligation imposed on service providers to withhold the amount corresponding to the Tax on Services of Any Nature – ISSQN.
In the case of ISSQN, it is necessary to look at Complementary Law no. 116/2003 to find the basic guidelines for its requirement and thus determine whether each municipality’s legislation complies with the general rules.
When dealing specifically with the mandatory withholding of ISSQN by the service provider, it is necessary to carefully read article 6 of Complementary Law no. 116/2003. Check it out:
Art. 6 The Municipalities and the Federal District, by law, may expressly assign responsibility for the tax credit to a third party, linked to the triggering event of the respective obligation, excluding the taxpayer’s responsibility or assigning it to the taxpayer on a supplementary basis for total or partial fulfillment of the said obligation, including with regard to the fine and legal increases
Paragraph 1 – Those responsible under this article are obliged to pay the full amount of the tax due, the fine and legal increases, regardless of whether it has been withheld at source.
2º Without prejudice to the provisions of the main section and § 1 of this article, the following are liable:
I – the borrower or intermediary of services coming from outside the country or whose provision began outside the country;
II – the legal entity, even if immune or exempt, which takes on or intermediates the services described in sub-items 3.05, 7.02, 7.04, 7.05, 7.09, 7.10, 7.12, 7.14, 7.15, 7.16, 7.17, 7.19, 11.02, 17.05 and 17.10 of the attached list.
III – the legal entity that takes over or intermediates services, even if it is immune or exempt, in the case provided for in § 4 of art. 3 of this Complementary Law.
Paragraph 3 In the case of the services described in sub-items 10.04 and 15.09, the amount of the tax is due to the municipality declared as the tax residence of the legal entity or individual taking delivery of the service, according to the information provided by the latter.
4º In the case of services provided by credit and debit card companies, as described in sub-item 15.01, the electronic terminals or machines used in the transactions must be registered at the place where the service taker is domiciled.
It is clear that there are several situations in which the service taker is obliged to withhold the amount corresponding to the ISSQN, and there is even authorization for the Municipalities and the Federal District, by law, to expressly assign other situations in which a third party, linked to the triggering event of the respective obligation, is liable for the respective tax credit.
It is important to note that the authorization contained in the heading of the article in question is worded very similarly to article 128 of the National Tax Code – CTN. See:
Art. 128. Without prejudice to the provisions of this chapter, the law may expressly attribute liability for the tax credit to a third party, linked to the event giving rise to the respective obligation, excluding the taxpayer’s liability or attributing it to the taxpayer as a supplement to the total or partial fulfillment of the said obligation.
Both rules authorize the liability of a third party, linked to the triggering event, for the tax credit, provided that a law so determines, and no other type of legislation is allowed to deal with this matter.
The Municipality of Marília issued Decree No. 11.959, of February 17, 2017, with the aim of establishing rules for holding third parties liable for withholding ISSQN.
In other words, the municipality issued a list of companies that are now considered tax substitutes and are responsible for withholding the amount corresponding to the ISSQN whenever they are in the position of borrowers of any services.
Considering article 6 of Complementary Law no. 116/2003 and article 128 of the CTN, there is no doubt that only a law can assign responsibility for the tax credit to a third party, so Decree no. 11.959/2017 of the Municipality of Marília is flagrantly illegal.
For these reasons, all the companies listed in the single annex to Decree no. 11.959/2017 can use the courts to remove the obligation contained in that rule and thus not be subject to withholding tax when they are service providers, which will result in a reduction in their tax burden, since there will be a mitigation of the risks of possible liability for the payment of said tax.
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BRAZIL, Complementary Law no. 116, of July 31, 2003. Provides for the Tax on Services of Any Nature, which is the responsibility of the Municipalities and the Federal District, and makes other provisions. Federal Official Gazette, Brasília, August 1, 2003.
BRAZIL, Law. 5.172, of October 25, 1966. National Tax Code. Diário Oficial da União, Brasília, DF, v. 27, n. 10, 1966.
