In general, a service is considered as rendered and the ISS (Service Tax) is due in the municipality of the establishment of the service provider or, in the absence of an establishment, the municipality of domicile of the service provider, except on some hypothesis in which the ISS is due in the place of domicile of the service hirer (Complementary Law 116/2003).

Complementary Law 157, published on December 29, 2016, brought relevant changes by including some activities to this exception, i.e., to determine that the ISS is due in the municipality of domicile of the service hirer on some activities. The activities included on this exception are the following: 

• Collective or individual medical plans;
• Plans for the provision of medical, hospital and dental assistance, or similar;
  
• Other health plans that are fulfilled through services rendered by hired third parties, accredited, under a cooperative or just paid by the administrator of the plan, indicating the beneficiary; 
  
• Plans for veterinary assistance or treatment;
  
• Management of funds of any sort of consortiums, debit or credit cards or similar, customer portfolio and pre-dated check or similar – considering that in the case of services rendered by companies operating debit and credit cards, the electronic terminals or machines in which the operations are performed must be registered in the municipality of domicile of the service hirer;
  
• Leasing;
  
• Franchising; and
  
• Factoring.
  

President Temer, through Message 720 sent to the Federal Senate, by guidance of the Ministry of Industry, Foreign Trade and Services and the Ministry of Treasury, vetoed this change for understanding, generally, that such change could lead to the potential loss of efficiency and tax collection. Among the reasons for the veto, some specific reasons include the following:

• Healthcare plans: this would bring pressure for raising their value, which would go against the government's strategy of seeking less costly alternatives to the access of such services;
• Credit card administrators, etc.: increase of the costs for companies in the sector, which would be passed on to the final cost, burdening the service contractor; and
• Leasing and factoring: contradicts the logic of taxation of these services, which should occur in the place where the analysis of the registration, deferral and control of the granted financing occurs, and not according to the domicile of the service contractor.

However, at the end of May 2017, the National Congress overturned the vetoes in question and the vetoed parts were enacted by President Temer and published in the Official Press on June 1, 2017, so that ISS became due in the place of domicile of the service contractor in the cases described above.

It is important to notice that it is still under discussion as to when such change should be considered valid and that it is necessary to internalize such change in the legislation of the ISS of each municipality.

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