Service tax

The Municipal Service Tax (ISS) is a form of sales tax payable to municipalities in Brazil. It applies to the supply of any services that are not otherwise taxable by the state authorities (ICMS). The general list of taxable services is outlined in federal law also known as Complementary Law. The specific services are listed in each municipal law.

For example, a foreign company provides services outside Brazil for the benefit of a Brazilian recipient. The company can be subject to ISS (withheld by the Brazilian entity) even if a non-resident pays for the services.

ISS is a single-stage tax with no right of recovery for ISS previously paid. Consequently, regardless of status, the recipient of a service subject to ISS bears the tax paid as a cost.

Depending on the municipality and the type of service, ISS rates vary between 2% and 5%. Imported services are also subject to ISS. Exported services can be exempted if the result of the supply is exclusively located abroad.