Pedro Rezek Andery Altran
Lawyer at Marcos Martins Advogados
The decision by the Federal Supreme Court ( STF) recognizing the need to exclude ICMS from the PIS and COFINS calculation bases, because the state tax is not part of the company’s turnover or gross revenue, has triggered a series of legal disputes aimed at applying the same understanding in other situations. Examples include:
- Exclusion of PIS and COFINS from the calculation basis itself;
- Exclusion of ISS from the PIS and COFINS calculation base.
Another discussion that has gained ground is the need to exclude PIS and COFINS from the Service Tax (ISS) calculation base.
Complementary Law 116/2003 stipulates that the calculation basis for ISS is the price of the service and does not allow any other value to be included.
However, in practice, some municipalities require taxpayers to pay ISS on gross revenue, so that it also ends up being levied on PIS and COFINS.
For this reason, taxpayers have gone to court to have this illegality recognized and, as a result, the ISS calculation basis adjusted, with the STF’s understanding prevailing.
One of these lawsuits, despite all the arguments presented, demonstrating that PIS and COFINS cannot be part of the company’s billing or gross revenue, under the terms of the understanding established by the STF, the request was rejected. See excerpt from the decision:
…the basis for calculating the ISS is the gross price of the service, and not the net income of the taxable person. The concept of revenue, adopted in the description of the basis for calculating federal taxes, is not to be confused with the concept of the value of the price of the service, adopted as the basis for calculating the municipal tax. For this reason, the reasoning cited in the exordial pertinent to the judgment that determined the exclusion of ISS from the PIS and COFINS calculation basis does not apply here, insofar as the calculation basis for these taxes is precisely revenue, which is in no way to be confused with the concept of service price pertinent to the ISS calculation basis.
For this reason, the matter was brought before the São Paulo State Court of Justice, which, when analyzing the request for an injunction in the appeal, issued a decision suspending the inclusion of PIS and COFINS in the ISS calculation base.
In her decision, the Judge was succinct and did not go so far as to analyze the merits of the issue, but understood that the argument put forward by the taxpayer was plausible.
Applying the same understanding established by the Federal Supreme Court, the decision handed down by the TJSP should be upheld, following the idea that taxes cannot be part of a company’s turnover or gross revenue.
Even though it is an isolated decision, it deserves to be highlighted because it may represent a trend in jurisprudence, revealing itself as another opportunity to adjust the tax burden.
Faced with a scenario of crisis and high competitiveness, any possibility of reducing the tax burden, with legal certainty, should be analyzed with care and attention, as it may represent an important way for the company to stand out from its competitors.
Marcos Martins Advogados puts its tax team at your disposal to answer any questions you may have about this thesis and to analyze the company’s operations in order to suggest other ways of reducing your tax burden.
