Business · Economy · 4 hrs ago
Brazil’s Supreme Court excludes ISS from PIS/Cofins tax base
Brazil’s Supreme Court voted 6-5 to exclude ISS from the tax base used to calculate PIS/Cofins.
ISS is a tax on services, while PIS/Cofins are federal taxes charged on company revenue.
The winning side said ISS money merely passes through a company’s accounts before going to public coffers, so it should not count as company revenue.
The ruling benefits service businesses and could cost the federal government up to 35.4 billion reais, though that estimate assumes some past payments are returned.
The court has not yet decided whether the ruling applies to the past or only going forward; Justice Luiz Fux proposed applying it only from publication of the judgment, while protecting pending cases.
The court may revisit the timing and wording after appeals, and the dispute follows an earlier landmark case about excluding ICMS, another tax, from the PIS/Cofins base.
Brazil’s Supreme Federal Court voted 6-5 to exclude the municipal services tax, ISS, from the calculation base for federal PIS/Cofins contributions.
The ruling followed Luiz Fux’s deciding vote in favor of taxpayers.
The court said ISS is a temporary inflow that does not become part of companies’ revenue because it is passed on to municipalities.
The decision is a setback for the federal government and a benefit to the services sector.
The ruling’s financial effects remain uncertain because the court has yet to decide when it will take effect.
- Who
- Brazil’s Supreme Federal Court ruled on the issue. The decision was supported by taxpayers’ representatives.
- What
- The court excluded ISS from the calculation base for PIS/Cofins.
- When
- October 21, 2026.
- Where
- Brazil.
- Why
- The court majority said ISS is a temporary inflow passed on to municipalities, not revenue that becomes part of a company’s assets.
Taxpayers and services sector
Federal government
Calculation of PIS/Cofins
Taxpayers and services sector
ISS should be excluded because it passes through companies’ accounts and is not their revenue.
Federal government
ISS should remain in the calculation base; the government opposed excluding it.
The court’s virtual plenary began considering the case.
The vote had reached a 5-5 tie, with Luiz Fux’s vote still outstanding.
Fux voted for the taxpayers’ position, producing a 6-5 decision to exclude ISS from the calculation base.
The court is expected to consider whether the decision applies to past or future tax periods.
- Vote
- 6-5
- Deciding vote
- Luiz Fux
- Tax excluded
- ISS
- Contributions affected
- PIS/Cofins
- Potential government impact
- R$35 billion estimated by Brazil’s Federal Revenue Service; up to R$35.4 billion cited by Estadão
- Effects of ruling
- Not yet determined