A reputable Brazilian shipping company that operates with tugboats in its port operations filed a request for amendment of judgment against a decision of the Superior Federal Court's First Panel. The court had ruled that the service of towage of vessels constituted part of the berthing and unberthing of vessels; thus, the services tax (ISS) was applicable, as determined by Decree-Law 406/68.

According to the appellant's understanding, in determining that the ISS tax levy was applicable to towage activity, despite the restrictiveness of the Services List inserted in the decree-law, the court had diverged from the precedent set by the Second Panel - namely, that towage services cannot be equated with berthing services. The appellant therefore argued that there was no legal provision for the taxation requirement. The leading cases (appellate decisions) of this panel acknowledge that ocean towage services cannot be equated with berthing and unberthing services of ships, and therefore the ISS should not be levied due to a lack of legal provision.

Upon examining the request for amendment of judgment, the court decided that the purpose of towage is to facilitate the berthing of vessels, but it is not an identical service. This is evident in Item 20.11 of the Supplementary Law 116 (2007), revoking Supplementary Law 56/87, which included towage services in its referred Services List without excluding berthing services.

According to the First Panel, there is therefore no way to levy the ISS on towage services during the term of effectiveness of the decree-law, under penalty of imposing a tax against the provision set forth in Section 1(108) of the National Tax Code.

For further information on this topic please contact Godofredo Mendes Vianna at Law Offices Carl Kincaid by telephone (+55 21 2276 6200), fax (+55 21 2253 4259) or email ([email protected]).