On October 21, 2026, the Brazilian Supreme Federal Court (STF), in Theme 118 of its binding precedent system (RE 592.616), ruled that ISS should not be included in the calculation basis of PIS and Cofins. According to the majority opinion, ISS is a temporary inflow destined for municipalities and does not constitute revenue or income of the service provider. The legal thesis established by the Court will guide other cases involving the same issue.
What changes
Companies subject to PIS and Cofins that included ISS in their tax bases may be entitled to reduce future tax calculations and, depending on the circumstances, seek recovery of amounts overpaid in the past. The financial benefit will depend on factors such as the tax regime, applicable rates and tax bases, available documentation, and the period eligible for recovery. Therefore, there is no single percentage of savings applicable to all businesses.
Issue still pending
The STF has not yet ruled on the modulation of the effects of the decision. This matter may be revisited through motions for clarification. As a result, it is not yet defined whether there will be any time limitations or specific conditions for recovering past amounts. The favorable ruling does not, by itself, mean that tax credits are automatically available for refund or offset.
Deadlines and considerations
Motions for clarification generally must be filed within five days of the relevant notification or publication, although the specific deadline depends on the official publication date and the applicable procedural rules. Under the Brazilian National Tax Code (CTN), taxpayers generally have five years to claim a tax refund. However, the recoverable period may be affected by the modulation of effects and by each taxpayer’s procedural situation.