ISS Service Tax BR

Service tax (ISS) calculation

The ISS (Imposto Sobre Servicos) is a Brazilian municipal tax that falls on revenue from services rendered. Article 156-III of the Federal Constitution created it, and Lei Complementar 116/2003 set the national ground rules. You compute it with ISS = valor_servico × aliquota. Constitutional Amendment 37/2002 fenced the rates in, so no city can go below 2% (minimum) or above 5% (maximum).

The anexo of LC 116/2003 enumerates over 200 taxable services: consulting, IT, healthcare, education, construction, transport that stays inside the municipality, and so on. Because each city picks its own rate inside the 2-5% band, competition followed. Barueri-SP, Itu-SP, Santana de Parnaiba-SP and a handful of other satellite towns dangle 2% to pull in service companies, whereas the Sao Paulo capital sticks to 5% for most activities. Self-employed professionals such as advogados, dentistas and contadores usually owe a fixed annual ISS tied to their profession rather than a cut of revenue.

Applications

A provider issues a Nota Fiscal de Servicos Eletronica (NFS-e) on the municipal portal, and the ISS comes out calculated for you. For MEIs (microempreendedores individuais), about 1% of revenue rides along as ISS inside the monthly DAS guide. Simples Nacional companies settle their ISS through the unified guide (Anexos III/IV/V). Accountants and freelancers reach for the calculator when they want to price a job net of tax, weigh one municipality against another for the company's headquarters, or check an NFS-e against the books.

FAQ

Which city collects the ISS? Usually the one where the provider is headquartered. LC 116/2003 carves out exceptions, though: for construction, security, cleaning and transport, the money goes to the city where the work actually happens.

Does the client withhold ISS? Sometimes. When the law names the client a substituto tributario, the contractor holds the ISS back at the source and pays it to the city.

Can a service be tax-free? Yes. Services exported to foreign markets are exempt under LC 116/2003 art. 2-I, and a number of social and cultural activities carry municipal exemptions too.