18/02/2026
The Brazilian Supreme Court (STF) has scheduled for February 25, 2026 the resumption of a landmark tax case addressing whether the Municipal Service Tax (ISS) — a local tax levied on the provision of services — should be excluded from the calculation base of PIS and COFINS, Brazil’s federal social contributions on gross revenue. The issue is particularly relevant for companies operating in the services sector.
The case has been pending since 2020 and currently stands with five votes in favor of taxpayers. The prevailing position holds that the ISS, although itemized on invoices, does not constitute revenue of the service provider, as it merely passes through the company’s accounts and is fully remitted to municipal authorities, without representing an actual economic gain.
Market expectations suggest that the judgment may be concluded in 2026, with a realistic prospect of a taxpayer-favorable outcome. If confirmed, the decision could lead to a reduction of the effective tax burden on service revenues and enable the recovery of PIS and COFINS amounts unduly paid in prior years.
That said, from a recovery standpoint, a strategic assessment is essential. The Supreme Court has historically limited the retroactive effects of tax rulings with significant fiscal impact, often restricting refund rights to taxpayers that had already initiated legal proceedings prior to the final decision.
Against this backdrop, service providers are advised to evaluate their exposure and consider whether early judicial action may be appropriate to preserve rights and secure potential economic benefits arising from a favorable ruling.
Our tax team remains available to discuss the potential impacts of this case and to assist in defining the most appropriate legal strategy.
Co-authored: Tiago Zonta Guerreiro and Lívia Mauerberg Muscari
