The Brazilian Supreme Court (STF) decided that the Tax on Services' (ISS) non-levy on toll commissioned manufacturing activities, whenever these activities refer to the intermediary activities of a production cycle. The decision was issued by majority vote on February 26, 2025.
The Leading Case (Extraordinary Appeal no. 882,461) discussed the unconstitutionality of ISS on the transactions listed at sub-item 14.05 of the Supplementary Law no. 116/2003 (LC 116/2003), regarding the steel cut, in the context of intermediary activity.
The deciding vote from Rapporteur Dias Toffoli stated that ISS's levy is unconstitutional when the product it is destined for manufacture or commercial use.
STF thus established the authority of the Federal Government and States to collect the Tax on Industrialized Products (IPI) or the Tax on the Circulation of Goods and Services (ICMS), depending on the purpose of the activity.
In addition, from the perspectives of prohibition of forfeiture and legal certainty, STF determined that federal entities must comply with a maximum rate of 20% of the tax credit charged for the collection of a default fine.
Finally, it's notable that the decision's effects were formulated to attribute ex nunc effectiveness (prospective effects), as the time of publication of the minutes of the judgment, excepting lawsuits filed up to that date and cases of double taxation.
Visit us at mayerbrown.com
Mayer Brown is a global services provider comprising associated legal practices that are separate entities, including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England & Wales), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian law partnership) and non-legal service providers, which provide consultancy services (collectively, the "Mayer Brown Practices"). The Mayer Brown Practices are established in various jurisdictions and may be a legal person or a partnership. PK Wong & Nair LLC ("PKWN") is the constituent Singapore law practice of our licensed joint law venture in Singapore, Mayer Brown PK Wong & Nair Pte. Ltd. Details of the individual Mayer Brown Practices and PKWN can be found in the Legal Notices section of our website. "Mayer Brown" and the Mayer Brown logo are the trademarks of Mayer Brown.
© Copyright 2025. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
