The Federal Supreme Court declared the application of Tax on Services of Any Nature (ISS) on franchise agreements constitutional. The decision is of the majority of the Full Bench of the STF in judgment of appeal, with general repercussion, ended on May 28th.
According to the rapporteur, Justice Gilmar Mendes, the structure of the franchise business includes both obligations to give and to do. “The franchise agreement includes a service provision liable to incur municipal tax. In this contractual instrument, there is an undeniable application of human effort aimed at generating utility in favor of others (the franchisee). The contractual bond, in this case, is not limited to a mere obligation to give, nor to a mere obligation to do”, said the Justice.
In cases of leasing per se, the STF does not understand it as a service, as it is an obligation to give, not to do. However, other precedents state that ISS is levied on activities that represent both obligations to do and mixed obligations, which also include an obligation to give.
The Justice also pointed out that even the new franchise law (Law 13,966/2019) has not changed the conceptual aspect, which characterizes franchise as a hybrid and complex contract.
“The case analyzed by the Supreme Court, regarding the application of ISS on franchise contracts, differs from those in which the application of the tax on other contracts of a complex nature is discussed, such as the chartering of assets, for example, once the operation carried out between holder and franchisee finds express provision in Supplementary Law No. 116/03, which provides for services subject to ISS. In the case of chartering, for example, the same is not true. Therefore, there is no need to agree with the understanding that in case of mixed obligations, the municipal tax on the entire contract is automatically required – it is necessary, at least, to segregate the nature of the obligations for purposes of levying the tax, under penalty of unduly taxing the taxpayers”, concludes Bruno Zaroni, partner at Zaroni Advogados.

Liability: Consultor Jurídico