The Complementary Law 175/2020, published on Sep-24-2020, establishes rules for the payment of the Tax on Services of Any Nature (ISS) to the municipality where the hirer of the service (destination), and no longer in the headquarters-city where the service provider (source) is, in order to benefit the smaller municipalities that do not have the presence of large companies.
It is important to highlight that the measure includes the ISS incurred in the following activities:
a) health and medical assistance plans;
b) veterinary care plans;
c) management of any funds, consortium, credit or debit card; and
d) leasing of any property.
The new ISSQN payment-sharing rule will start in January/2021 and will be applied gradually until 2023, in the percentages defined in the law, between the municipality where the service provider is located and the municipality in which is the service purchaser. From 2023 on, the ISS will be fully paid to the municipality where the service purchaser is domiciled.
CL 175/2020 seeks to correct the rules brought by Complementary Law 157/2016, which, although it brings similar provisions on the location of payment of tax on these services, its effects were suspended by the STF in March 2018.
The ISS will be calculated by the service provider by the 25th day of the month following the provision of the service, and must be reported through a country-unified electronic system, which will be developed following the guidelines of the ISSQN Accessory Obligation Management Committee (CGOA) now established to rule the application of the national standard of accessory obligation.
The amount of ISS collected for the aforementioned services, whose determination period is between the LC 175/2020 publication date and the last day of the year 2022, shall be shared between the municipality of the provider's establishment and the municipality of the domicile of the user of these services, as follows:
a) for the determination periods in the fiscal year 2021, 33.5% of the total collected proceeds shall belong to the municipality of the service provider's location and 66.5% to the municipality of the domicile of the contractor;
b) for the determination periods in the fiscal year 2022, 15% % of the total collected proceeds shall belong to the municipality of the service provider's location, and 85% to the municipality of the domicile of the contractor;
c) for the determination periods from the fiscal year 2023 on, 100% of the proceeds of the collection will belong to the municipality of the domicile of the contractor.
The aforementioned Complementary Law is already in force and will be effective from 2021, however other actions and legislative acts are still necessary for publication so that such legal provision is effectively possible to be operationalized by ISSQN taxpayers.
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