The 2nd Panel of the Supreme Federal Court (STF) has secured a majority vote to maintain the inclusion of PIS, Cofins, and ISS in the tax base of the ISS itself. The ruling was issued in a virtual session as part of the Extraordinary Appeal (ARE) 1522508, with Justice Gilmar Mendes serving as the rapporteur.
The justices unanimously upheld the monocratic decision of the rapporteur, voting 4-0 in favor of maintaining the São Paulo Court of Justice’s (TJSP) understanding. The TJSP had previously denied the exclusion of these taxes from the ISS tax base, arguing that such deductions could only be made if explicitly provided for in complementary legislation. The taxpayer contended that taxes such as PIS and Cofins, which are transferred to the federal government, should not be included in the ISS tax base.
However, Justice Gilmar Mendes emphasized that the TJSP’s decision was consistent with STF precedents established in ADPFs 189 and 190. In those cases, the Court ruled unconstitutional municipal laws that excluded amounts from the ISS tax base without support from Complementary Law (LC) 116/2003. Thus, the Supreme Court reaffirmed that deductions from the ISS tax base are not permitted unless explicitly provided for in federal legislation.
Another key issue raised was that overturning the decision would require a reassessment of São Paulo’s Municipal Tax Code, which is prohibited under STF Precedent 280. This precedent bars extraordinary appeals for the review of local regulations.
As a result, the STF’s 2nd Panel denied the taxpayer’s appeal, which argued that the concept of “service price” should only encompass costs and profit margins, excluding taxes levied on the transaction.