The Brazilian Supreme Federal Court (STF) has scheduled for August 28, 2024, the in-person trial of Theme No. 118 of General Repercussion, which discusses the exclusion of ISS from the calculation basis of the contribution destined to the Social Integration Program (PIS) and the Contribution for the Financing of Social Security (COFINS). This thesis, discussed in Extraordinary Appeal No. 592,616/RS, is an extension of the decision adopted by the court in Theme No. 69, which decided to exclude the Tax on Circulation of Goods and Provision of Communication and Transportation Services (ICMS) from the calculation basis of PIS and COFINS, nicknamed the “thesis of the century”.

The virtual trial of the matter had begun on August 14, 2020, with the vote of Justice Celso de Mello. When judging the case, the rapporteur stated that the ISS, as it is a tax, could not be considered revenue or income to be included in the calculation basis of the contributions, since the amount paid of ISS was never integrated into the company's assets as new wealth, being a mere transit in the accounting, adopting the same reasoning used in the judgment of Theme No. 69. At the time, Justice Dias Toffoli requested a review.

When the trial resumed in an electronic environment on August 20, 2021, Justice Toffoli voted in opposition to the rapporteur. He understood that the concept of revenue is related to the result of business activities, with the inclusion of taxes. Furthermore, he also highlighted that the ISS would have a different collection system than the ICMS, stating that the tax would not necessarily be passed on to the end consumer. The dissenting opinion was followed by Justices Alexandre de Moraes, Edson Fachin and Luis Roberto Barroso. Justices Carmen Lúcia and Rosa Weber and Justice Ricardo Lewandowski agreed with the vote of Justice Celso de Mello. 

Later, Justice Luis Fux requested a hearing, which would have allowed the trial to take place in person. However, the Justice canceled this request in May 2024, and since then, the case has been waiting to be included on the agenda. Even with the resumption of the trial, Justices Celso de Mello, Ricardo Lewandowski and Rosa Weber, who retired and voted in favor of the taxpayers, will have their votes maintained. Justices André Mendonça, Gilmar Mendes and Luiz Fux have not yet voted.

Thus, the judgment of Theme No. 118 of General Repercussion, scheduled for August 28 of this year, may represent the definitive application by the STF of the understanding adopted in the exclusion of ICMS from the calculation basis of PIS and COFINS: tax is not the taxpayer's revenue, but rather that of public entities. The STJ, adopting the same understanding, recently defined in the judgment of Theme No. 1,125 that the ICMS due under the tax substitution regime (ICMS-ST) should be excluded from the calculation basis of the contributions.

However, it is worth noting that such a prospect is not certain, since the STF, in the judgment of Theme No. 1,148 of General Repercussion, decided that ICMS could be levied on the Social Security Contribution on Gross Revenue (CPRB), so that the understanding adopted in the judgment of the “thesis of the century” was not applied by the Constitutional Court. In addition, the tie score in the virtual judgment held in 2020 and 2021 stands out, showing that the discussion of the thesis is not peaceful among the Ministers. We will closely monitor any developments on the Theme.