A traditional port support shipping company brought a lawsuit against the Municipality of Salvador regarding the services tax (ISS) levy on towage services for the term of Decree-Law 406/1968. The proceedings were referred to the Superior Federal Court.

On examining the case, the court's First Bench rendered a decision against the company, ruling that towage services are a service essentially related to the berthing and unberthing of vessels and that the tax levy is therefore applicable, as Decree-Law 406/1968 determines the ISS incidence in berthing and unberthing services.

Dissatisfied with the decision, the company appealed, upholding that it diverged from the Second Panel's understanding that towage services cannot be included in berthing. It argued that there was therefore no legal provision for this tax collection, as the Second Panel had mentioned several decisions with this same understanding in its decision.

When judging the appeal against the divergent decision, the First Bench agreed with the understanding that maritime towage services cannot be included in services of berthing and unberthing of ships and are therefore not subject to any ISS levy, due to lack of legal provision.

In his decision, the judge highlighted that Item 20.01of Supplementary Law 116/2003, which revoked SL (CL) 56/87, included, among other things, the services of towage in the referred list of services, without excluding berthing services for not being an identical service. However, the tax cannot be levied during the term of Decree-Law 406/1968 in view of a lack of legal provision.

Accepting the tax incidence would thus represent a violation of Article 108(1) of the National Tax Code, which sets forth that to resort to analogy cannot result in a tax requirement not provided for in law, thus making the extensive or analogical interpretation of the list unfeasible.

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]).