Change the ISS payment location for specific activities

Supplementary Law 157/2016 changed the place of payment of the Tax on Services (“ISS”) for health plans, management of funds, consortia, credit and debit cards, and leasing. In relation to these services, the ISS should be paid to the Municipality where the contracting party is located.  

However, the enforcement of the Law is suspended by an injunction granted by the Federal Supreme Court (“STF”) – Direct Action of Unconstitutionality nº 5.835 -; which considered that this change would cause legal uncertainty due to the lack of a concrete definition of what should be considered the “contracting party”; as well as the practical impossibility to enforce the Law due to adjustments in ancillary obligations.

Accordingly, on September 24th, 2020, Supplementary Law nº 175/2020 was published in order to regulate the aspects mentioned by the STF, defining the contracting party, and creating the necessary inspection and collection instruments in order to make the changes promoted by LC 157/2016 enforceable.

Supplementary Law 175/2020 takes effect from 2021, with an adjustment period between 2021 and the end of 2022. During this period, the revenue arising from the ISS will be split between the municipalities of the borrower and the service provider. As from 2023 forward, 100% of the revenue will allocated to the Municipality where the contracting party is located.

We remain available for clarification.

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