Tax | Brazilian Fund Manager May Be Charged Service Tax For Managing Foreign Funds

Brazilian Superior Court of Justice (STJ) started, last week, an important judgment that will define whether managing foreign funds in Brazil is subject to Service Tax (ISS) in Brazil.  

The central issue is the definition of where the results of the service provided will occur.

If the result happens abroad, the service characterized as an export and so exempted from ISS. Otherwise, the ISS is due. 

There are currently two votes in the STJ. One favoring the taxation, based on the understanding that the result of the management occurs in Brazil, since the profits or losses from assets trade are consolidated on Brazilian soil. 

The other one is pro-taxpayer, in the sense that the result of management service is the increase in returns of the investors, which happens abroad.

For now, the municipalities take advantage of the lack of definition to charge ISS of fund managers that export management of funds. Thus, it is of utmost importance that fund managers pay attention to the outcome of the STJ judgment and possibilities for credit recovery.


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