Federal Court Clears Construction Firm to Exclude ISS from PIS/Cofins Calculation

Judge Rules in Favor of Construction Company on ISS Exclusion

A federal magistrate from the 8th Civil Court of the Federal District granted a construction firm’s request to remove the Municipal Service Tax (ISS) from the tax base used to calculate the Social Integration Program (PIS) and the Contribution for the Financing of Social Security (Cofins). The decision, handed down by Judge Márcio de França Moreira, follows a line of jurisprudence that has been solidified by the Supreme Federal Court under General Repercussion Theme 118.

Legal Reasoning Behind the Ruling

The judge emphasized that ISS does not constitute revenue or billing for the purposes of the contributions in question. He recalled that the Constitution’s article 195, I, b, defines the taxable base for PIS and Cofins as gross revenue or turnover—essentially the total income earned by a legal entity before any fiscal or accounting deductions. Because ISS is a tax levied on the provision of services, it does not increase the taxpayer’s net worth and therefore should not be included in that base.

Connection to the “Tese do Século” Precedent

The ruling draws an analogy to the landmark “Tese do Século” (Theme 69), in which the Supreme Court held that the Tax on the Circulation of Goods and Services (ICMS) also cannot be part of the PIS/Cofins calculation. By applying the same logic, the judge ordered the exclusion of ISS amounts that appear separately on invoices.

Context of Ongoing Tax Reform

The decision arrives at a time when Brazil’s tax landscape is undergoing significant changes. Effective 1 January 2027, PIS and Cofins will be abolished and replaced by the Contributions on Goods and Services (CBS). Meanwhile, the Municipal Service Tax (ISS) will be phased out gradually, with reductions starting in 2029 and complete disappearance by 2033, giving way to the new Goods and Services Tax (IBS).

Practical Impact for Businesses

For companies that provide services and have historically included ISS in their PIS/Cofins calculations, this judgment offers immediate relief. It allows them to reassess their contribution liabilities, potentially resulting in lower payments and improved cash flow. Moreover, the ruling provides clarity ahead of the broader tax reforms, helping firms align their compliance strategies with both current law and future regimes.

Who Represented the Taxpayer?

The construction company was advised by attorney Felipe Bayma, who argued that the ISS should be excluded from the concept of billing referenced in the constitutional provision.

Access to the Full Decision

The complete judgment can be reviewed at the following link: https://conjur.com.br/wp-content/uploads/2026/10/Sent_JFDF_ISS_Municipal.pdf. The case number is 1010453-46.2026.4.01.3400.