Brazil: Set of precedent in service tax

In a judgment held on 03/24/2021, the 1st Section of the Superior Court of Justice (STJ) standardized understanding that guarantees the right of uniprofessional companies to the fixed taxation regime by ISSQN (service tax), regardless of the corporate form adopted.

Since the publication of Decree-Law No. 406/68, the provision of services in the form of personal work (as in medicine, law and accounting, among others) has been subject to ISSQN based on a fixed amount per professional. Since said regime is, as a rule, more advantageous than the regular taxation over the total services revenue, some Municipalities seek to restrict its scope, imposing different requirements, such as the demand of constitution in the form of a “pure simple company”, with registration at the Civil Registry of Legal Entities.

In the case judged by the 1st Section of the STJ, by a majority of three votes against two, the Ministers recognized the right of a doctors’ limited liability company to the fixed taxation regime, highlighting that what matters is the personality of the services rendered, not the adopted corporate model.

Although the case did not refer to a Repetitive Appeal, the understanding adopted in the case is an important precedent, which resolves an old divergence between the 1st and 2nd Classes of the STJ.