As of February 24, 2022, sole-professional entities headquartered in the City of São Paulo will be subject to the Tax on Services (ISS) payment based on a new progressive calculation system, which should result in a significant increase in the tax due.

Concept of Sole-professional Entity:

The change in the ISS collection system is foreseen in Law No. 17,719/2021, which framed as sole-professional entities “those whose professionals (partners, employees or not) are qualified to exercise the same activity and provide services in a personal manner, on behalf of the entity, assuming personal responsibility”. Among others, entities composed exclusively of doctors, lawyers, psychologists, engineers, economists and accountants fit this definition.

What changes:

The ISS will no longer be due based on a fixed amount and will now be ascertained based on the monthly presumed gross revenue (RBP) ranges of the entity, according to the number of professionals acting in it, as shown below:

  1. RBP: R$ 1,995.26 multiplied by the number of qualified professionals, up to the limit of 5;
  2. RBP: R$ 5.000,00 multiplied by the number of licensed professionals, for the number of professionals exceeding 5 to 10;
  3. RBP: R$ 10.000,00 multiplied by the number of qualified professionals, for the number of professionals that exceed 10 to 20;
  4. RBP: R$ 20.000,00 multiplied by the number of qualified professionals, for the number of professionals that exceed 20 to 30;
  5. RFB: R$ 30.000,00 multiplied by the number of accredited professionals, for the number of professionals that exceed 30 to 50;
  6. RFB: R$ 40,000.00 multiplied by the number of professionals qualified, for the number of professionals exceeding 50 to 100;
  7. RBP: R$ 60,000.00 multiplied by the number of qualified professionals, for the number of professionals exceeding 100.

Vices of Unconstitutionality:

The progressivity of the ISS, based on the presumption of the monthly revenue of the uniprofessional entity, may be subject to challenges, notably for its potential affront to the constitutional principles of non-confiscation, isonomy, legal reserve, contributive capacity and reasonability, in addition to violation of articles 146, III, a, and 150, II and IV, of the Federal Constitution and article 9, paragraphs 1 and 3 of DL No. 406/1968.

On the matter, the Plenary of the Federal Supreme Court, in the judgment of RE 940.769, under the system of general repercussion, decided with binding effects for the “unconstitutionality of municipal law that establishes impediments to the submission of professional law firms to the system of fixed or per capita taxation on an annual basis in the manner established by decree-law 406/1968 (received by the Constitution of the Republic of 1988 with the status of national supplementary law)”.

The matter is already being discussed in the writ of mandamus filed jointly by the Brazilian Bar Association – São Paulo Section (OAB-SP), Center for Studies of Law Firms (CESA) and the Union of Law Firms of the States of São Paulo and Rio de Janeiro (Proc. 1005773-78.2022.8.26.0053).

The tax team of Fraga, Bekierman & Cristiano Advogados is available to clarify any doubts.