If your company provides services, this decision could result in direct cash inflow. On the upcoming 25th (Wednesday), the Supreme Federal Court will resume the trial of Theme 118, which discusses the exclusion of ISS (Service Tax) from the PIS and Cofins bases.
This matter has the potential to generate the recovery of amounts unduly collected and reduce the future tax burden. It is a strategic decision for the service sector, with a concrete and immediate financial impact.
The controversy is simple in essence, but relevant in its effects. ISS is a municipal tax that does not form part of the company’s assets; it consists of an amount collected and subsequently transferred to the municipality. The legal argument is that, since it does not represent the company`s own revenue, it should not be included in the PIS and COFINS tax bases. The reasoning is similar to that adopted by the STF in the so-called – “thesis of the century,” when it excluded ICMS (Tax on Circulation of Goods and Services) from the base of these contributions. Now, the Court will specifically analyze the reality of service-providing companies, potentially consolidating or diverging from this previous understanding.
Given this scenario, 3 key points of attention stand out:
1. Who benefits from the judgment: The thesis is relevant for service-providing companies subject to ISS payment and opting for the presumed profit or real profit tax regimes. It does not affect to companies classified under the Simples Nacional (Simplified National Tax Regime).
2. Financial effects of the decision: If Theme 118 is decided in favor of taxpayers, the right to recover or offset overpaid amounts of PIS and Cofins for the past five years, since they were calculated on an improperly broadened tax base. However, companies that did not pay these contributions during this period, having benefited, for example, from tax relief programs, will not have amounts to recover, being subject only to the future effects of the decision.
3. Modulation of Effects: Even if the judgment is favorable to taxpayers, the STF may limit its scope through the modulation of effects. In this case, the right to recover funds may be restricted to companies that had filed lawsuits before the trial date. In recent years, especially in tax matters, the Court has frequently adopted this understanding, ensuring recovery only to taxpayers who had previously resorted to the Judiciary. In practice, companies who have not filed a lawsuit may only benefit from the date of the decision, without the right to a refund of what was unduly paid in the past.
The relevance of this decision goes beyond the specific issue. It reaffirms the debate about the constitutional concept of revenue and the limits of taxation on turnover. This case also falls within a sensitive context: the tax reform will increase the burden on the service sector, which historically has less opportunity to take advantage of tax credits. In a scenario of higher taxation on consumption, decisions that reduce the tax base and allow the recovery of amounts unduly paid become strategic for the financial health of companies.
For this reason, filing a lawsuit is not merely a legal measure, but a tax management decision, and business owners can no longer ignore what is being discussed in the courts. It preserves the right to recover amounts, mitigates the risk of potentially restrictive tax adjustments, and strategically positions the company in the face of a possible favorable precedent.
