STF Excludes Municipal ISS From PIS/Cofins Base

Cutting the taxable base of the federal contributions, the rulings leave the size and timing of company refunds to later court and administrative decisions.

Overview

The Supreme Court, which decided on Wednesday, October 21, 2026, voted 6–5 to rule that municipal ISS does not form part of the tax base for PIS and Cofins, with Minister Luiz Fux casting the decisive vote.
The court earlier in October held by 7–4 that state‑granted presumed ICMS credits also do not enter the PIS/Cofins base, extending the line of precedent that began with the 2017 ICMS ruling.
The rulings create broad grounds for companies to seek recovery of amounts they paid in excess, but the courts have not fixed modulation or retroactivity so which payments can be reclaimed remains unresolved.
Budget estimates in the 2026 LDO put the potential five‑year fiscal impact at about R$35.4 billion for the ISS decision and R$16.5 billion for the ICMS‑credits ruling, pressuring federal accounts.
Next steps include possible embargos from the Procuradoria‑Geral da Fazenda Nacional, case‑by‑case accounting and proof by companies, and limits from the five‑year prescription under article 168 of the Tax Code.