A word from the President

Leia em Portugues

The unpredictability and the long wait for the solution of the ISS collection

Federal Supreme Court of Brazil (STF) decides and confirms the place for the payment of the Service Tax on leasing operations.

the saga involving the collection of the Service Tax (ISS) incident on leasing operations ended on June 2, in a virtual trial in the Federal Supreme Court of Brazil (STF), after 20 years of disputes in the courts. By 8 votes to 2, the STF ministers decided to confirm the effects of the Precautionary Measure granted in the Direct Action of Unconstitutionality (ADI) 5,835 and judged as PROCEEDING the request for a declaration of unconstitutionality of article 1 of Complementary Law 157/2016 and article 14 of Complementary Law 175/2020, as well as by dragging, of articles 2, 3,  6, 9, 10 and 13 of the aforementioned Complementary Law 175/2020.

With this, the leasing companies will continue to collect the ISS at the place of provision of the services, that is, at the place of the headquarters of these companies.

Complementary Law 157/2016 changed the collection of ISS to the domicile of service borrowers and Complementary Law 175/2020 established the national standard of ancillary obligation of ISS, including for sub-item 15.09 ¾ Commercial Lease and, in article 14, included item XXV, in the exceptions provided for in article 3 of Complementary Law 116/2003.

Although it was in force since 2016, leasing companies, as well as credit cards, consortium, fund administration and health insurance companies, continued to pay ISS to the municipalities that hosted the establishments providing services, taking into account the injunction granted in ADI 5,835, filed in 2018, by the National Confederation of the Financial System (CONSIF) and the National Confederation of General Insurance Companies,  Private Pension and Life, Supplementary Health and Capitalization (CNSEG).

“Throughout all these years, we always adopted the correct procedure and never doubted that justice would prevail. This is a decision of extreme importance for the leasing sector, as it rescues the justice necessary for us to work with predictability”, celebrates Osmar Roncolato Pinho, president of the Brazilian Association of Leasing Companies (ABEL).  “Leasing is a complete product, which meets all the conditions to be a long-term funding  provider to industry, small and medium-sized companies, making machinery and equipment available for use in productive activities.”

In his vote, the rapporteur, Minister Alexandre de Moraes, pointed out that the change in the ISS collection system by Complementary Law 157/2016 demonstrates “offense to the principle of legal certainty,” giving rise to “true insecurity as to the incidence of the tax.”

“Complementary Law 175/2020 intended to define, to the satisfaction, the figure of the borrower of each of the aforementioned services. However, in the context of the present cognition it is possible to assess how weakened was the amendment originated from Complementary Law 157/2016, as well as those brought by Complementary Law 175/2020. There is no adequate definition of the figure of the service taker referred to in items XXIII, XXIV and XXV of article 3 of Complementary Law 116/2003, “said the rapporteur.

In addition, he highlighted: “The absence of this definition and the existence of several laws, decrees and antagonistic municipal normative acts already in force or about to enter into force will eventually generate difficulty in the application of the Federal Complementary Law, expanding the conflicts of competence between federated units and generating a strong shake-up in the constitutional principle of legal certainty, jeopardizing,  including the regularity of economic activity, with consequent disregard for the very reason for the existence of Article 146 of the Federal Constitution.”

Since the beginning of the legal challenges to Complementary Law 116/2003, which establishes the place of collection of ISS as the place of the providing establishment, leasing activities in the country have lost momentum.  The balance of the portfolio, which has already reached R$ 109 billion in 2009, equivalent to 3.5% of GDP, has currently been around R$ 15 billion, with a little significant share in our economy, precisely because of the legal uncertainty perpetrated on the leasing companies, in the face of a fiscal war imposed by the municipalities, in total transgression of the legal norms in force for the Service Tax.

Now a new reality presents itself, not only by the judgment on the taxation of leasing operations by the Service Tax, but above all, by the reestablishment of the necessary predictability in the relations between taxpayers and municipalities that collect the tax.

Ahead, we have the long-awaited Tax Reform, which must necessarily reestablish the balance of the redistribution of tax collection, in addition to creating a fairer and simplified system of the tax administration process in Brazil, which causes so much harmful impact on the Brazilian economy.

Brazil needs to align itself with the absolute majority of countries that already adopt the Value Added Tax, so the replacement of the Tax on industrialized products (IPI), the Social Integration Program (PIS), the Contribution to the Financing of Social Security (COFINS), the Tax on Operations related to the Circulation of Goods and on Services of Interstate and Intermunicipal Transport and Communication (ICMS) and the Tax on Services (ISS), by the Tax on Goods and Services (IBS), it is the path that Brazil needs to seek the long-awaited sustainable economic growth.

The Tax Reform is the opportunity to establish the favorable environment for the reduction of the bank spread (always considered as high), in view of the significant effect of the tax burden on its composition, so that the national financial system can contribute more and more to the increase of credit in the country, providing conditions to accelerate Brazilian economic growth.


Osmar Roncolato Pinho – President of the Brazilian Association of Leasing Companies (Abel) and vice-president of the Latin American Leasing Federation (Felalease)