Originally published in the April 8 edition of World Tax Daily (Copyrights Tax Analysts – www.taxanalysts.com)
Marking a major victory for the Internet access industry, Brazil’s Superior Court of Justice (Superior Tribunal de Justiça, or STJ) recently ruled that Internet access providers are not subject to the state VAT (ICMS) or the municipal service tax (ISS).
Special Appeal 674,188-PR was decided March 25 in favor of DI 1000 Internet Ltda., an Internet access company located in the Brazilian southern state of Paraná.
The court ruled unanimously to exempt Internet access activities from ICMS, according to the court’s summary (the court has not released the full rationale). The exemption of Internet access activities is well established at the STJ, which previously published Precedent (Súmula) 344. Although not binding to lower courts, all members of the STJ follow Precedent 344 when deciding similar cases.
The court decided by majority vote to exempt the company from ISS (unlike ICMS, no precedent exists). The decision reviewed the levy of ISS on Internet access services both before and after the general ISS statute, Complementary Law 116/2003, which significantly broadened the number of ISS taxable services, and ruled that ISS does not apply before or after the statute.
David Roberto R. Soares da Silva