STF Maintains the Collection of ISS in the Municipality of the Service Provider’s Headquarters


In the judgment of ADI 5835, 5862, and 499, the Supreme Federal Court (STF) ruled that the collection of the Tax on Services (ISS) should take place in the municipality where companies engaged in health insurance, payment methods, fund administration, consortium, and leasing are located. By a vote of eight to two, the court determined that taxation should remain according to the current model, without changes that would generate significant bureaucracy and unpredictability.

The complexity would arise from the proposal to distribute the tax among all the municipalities where services are used by clients. With over five thousand municipalities in Brazil, each with its own rules, systems, and rates, ranging from 2% to 5%, this proposal would lead to an exponential increase in the cost of tax compliance for companies. It is worth noting that this division could lead to double taxation, tax wars, and an almost unmanageable control over which municipality should receive the tax.

This discussion centered around Complementary Law No. 157, from 2016, which proposed a change in the place of taxation, from the municipality where the company is headquartered to the municipalities where the services are being used. A second Complementary Law, No. 175, from 2020, attempted to implement a standardized system for the reporting and calculation of ISS for all municipalities. However, companies continued to make payments according to the previous model, supported by a decision of the STF itself (ADI 5835).

The rapporteur, Justice Alexandre de Moraes, recognized the legitimacy of sharing the tax in his vote, advocating for tax fairness. However, the way the service recipient was defined in the new laws, filled with inaccuracies, could lead to jurisdictional conflicts in tax matters and problems for taxpayers. This was a decisive factor in the recognition of the unconstitutionality of the provisions of the two new laws by the court, ensuring the continuity of the current tax model.


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