Impacts of Remote Work on the Brazilian Service Tax

Breno Vasconcelos, Josy Almeida e Thais Shingai, of our tax practice, wrote a paper, published by The Legal 500, regarding the challenges in defining the place of collection of service taxes (ISS) in Brazil and alternatives that are suitable for services involving remote work.

The collection based on the origin rule and the multiple competent authorities to charge service taxes in Brazil made the ISS’ active jurisdiction (namely, where the tax should be collected) the pivotal element of the so-called “tax war” among the Municipalities, resulting in tax litigation and high compliance cost for taxpayers.

The economic and social evolution have made this situation even more complex: especially after the Covid-19 pandemic, the use of technologies to strengthen the physical-digital relation has been intensified, allowing completely remote services provisions, without the need of a physical establishment for the service provider, since employees can work permanently from alternative locations as their homes, co-working spaces, cafés and libraries.

According to the authors, it is undeniable that the identification of the competent Municipality to tax services rendered remotely is a new and complex issue that requires in-depth reflection not only on the formal concept of service provider establishment as foreseen in LC 116 and supported by case law, but also on the need to change the criterion for taxation on consumption at destination, which is present in the discussions on the Brazilian tax reform.

More information: