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June 6th, 2018

Legislative Newsletter - Edition 093

ISS Tax on transport by application

PLS 493/2017 in the Order of the Day of the Federal Senate, discussion about the Service tax incidence on Uber and Cabify activities.

Legislative Newsletter - Edition 093

Private transportation carriers such as Uber and Cabify - have been causing a great mobilization in society and in  services industry. At first, there was an opposing legislation to the use of transport services by application followed by a regulation for these types of services. Now, due to the necessity of revenue for the States ita was created Bill PLS 493/2017. It t will enter in the Order of the Day of the Federal Senate in the week of June, 4th in order to discuss the incidence of Service Tax of any kind (ISS) on this activity.

Uber arrived in Brazil in mid-2009 as a new type of private transport for people. It was basically the use of private cars to provide driver services creating competition in the industry with taxi drivers. The private transport sector, already consolidated in the Brazilian society, suffered an abrupt re-orientation, resulting in all kinds of social mobilization in all City Councils of Brazil, in special, the Legislative in São Paulo, that forbid, through the Law 13.775/10, the individual transportation by app in the city.

In attention to this prohibition, different sectors of civil society mobilized to debate the consequences of the prohibition or the liberation of such activity in the heart of society. Those against this new service claimed that the activity of these private drivers woud be illegal, once it does not have any regulation on this matter. Other issues were the lack of security when using this type of services The ones in favor, claimed the defense of the freedom to work in a Democratic State of Law and, also, the improvement of services by means of competition.

When the Judiciary of São Paulo declared unconstitutional the Law 13.775/10 from São Paulo, after 8 (eight) years of intense discussion and declarations of unconstitutionality, The National Congress approved and the Law 13.640 of 2018 (legal document that authorized the paid private transport for individual passengers – such as Uber, Cabify and etc.), the defense for free initiative and freedom of work has won.

The Federal Legislative guided the actions, letting to Municipalities, in terms of the art. 3-A of the Law 13.640/2018 the “regulation and monitoring of private passenger transport”. However, with the activity regulation, it is necessary to create a tax policy for State’s tax collection. Therefore, there will be a benefit for the population over the amount charged in the activity.

Benefit based on the tax incidence in this activity and the return in services to the society. Taking in mind the loss in the tax collection due to the price decrease of R$0.46 per litre of diesel fuel at gas stations, the Senate went along with Bill PLS 493/2017 and included it in the Order of the Day for the week of June,4th. This proposition objective is to establish “departure location of the service taker through electronic means of private transportation previously hired through internet provider in order to collect tax under service of any nature.” In other words, the incidence of the ISSQN (tax) for these services will be at the time of departure of the service taker (customer), and not where the tech company is located. This would be fair under tributary eyes for cities that are actually providing the service to the customer.

This proposal is being used as a platform by Senators aiming the upcoming elections, next October. They are proposing an increment in Municipal income where services are provided. That would be an alternative for municipal tax collection, once tributary reform will occur through Constitution Amendment Proposal (PEC), which is conditioned to the end of Federal intervention and to the presentation of proposition from Tributary Reform Commission at the House of Representatives.