ISS – Sales Tax on Services
ISS, short for Imposto Sobre Serviços de Qualquer Natureza in Portuguese, is imposed by municipal government on sale of services. It is a sales tax, mostly owed by businesses selling any type of service, from basic to professional services. It is not allowed to consider the tax on the purchase invoices as input tax and deduct the sum from the ISS liability. Each city has its own ISS tax law, and sometimes is hard to identify where the service is rendered and for each city the tax should be collected.
Imposed on
Even with the ISS being a local tax, it is only charged on the services listed in Law 116/2003, which is published by federal authorities. Some examples of services upon which ISS is charged are: accounting services, engineering services, and many other professional services.
Basically, ISS must be charged and paid to the city of the service provider. However, some specific services, such as cleaning and building, the place of taxation is determined by where the services are supplied. Therefore, ISS is paid to the city where the service is supplied. For some scenarios the customer must account for ISS if the vendor is not established locally.
Basis and Rate
The tax basis is the sales price for the service charged. Each service has a specific tax rate depending on the law of each city. Different rates of ISS are applied, ranging from 2% to 5%.
Exemptions
ISS is not imposed on rent, as rental property is not considered a service for tax purposes.
Taxpayer and Governmental Agency
The ISS is owed by the service provider, but for some services, the buyer must withhold it from the seller. The ISS is a municipal tax, therefore it is paid to the local authorities. The official document to pay the ISS depends on the city to which it must be paid.
Main Laws
- Complementary Law 116, July 31, 2003 (ISS – Sales Tax on Services)
- Complementary Law 157, December 29, 2016 (ISS – Sales Tax on Services)
Tax Returns and Forms
The taxpayer is required to report the ISS on the following tax returns and forms:
- Notas Fiscais (Brazil local invoices)
- Each city has its own ISS reporting methods.
Written by Thiago M. Silveira
Thiago M. Silveira is a Brazilian Chartered Certified Accountant (CRC) with more than 10 years of success in the accounting field, with insightful understanding in all aspects of accounting, financial reports preparation, local taxes and compliance in Brazil.
