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  • CPOM - What changes in ISS withholding

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The Registration of Service Providers of Other Municipalities (CPOM) was an initiative of the prefectures of several Brazilian states in order to guarantee the correct payment of the service tax (ISS) in typical cases in which the provider has a CNPJ an EIN in a municipality other than where the service will be provided. This measure aims to combat tax evasion practiced by some companies that use fictitious addresses to pay less taxes.

How this evasion works:

By the Complementary Law Statute no. 116/03, ISS must be collected at the service provider’s establishment (rule that includes numerous exceptions). The municipalities have the autonomy to define the ISS rate between 2% and 5%. Some business owners, in face of this fact, register companies in addresses from municipalities where the rate is lower than that of the municipality where the business is actually established.

Informações
For more details on the legislation, access the link for the city of São Paulo: Registration of Companies Outside the Municipality


02. EXEMPLIFIED CONCEPT

With CPOM in force, the provision of services is now subject to ISS double taxation. We are talking specifically about the following scenario: 

  • City A - 2% ISS rate
  • City B - 5% ISS rate
  • Service provider’s CNPJ EIN - City A
  • Service contractor’s CNPJ EIN - City B

Prefecture of city B requires CPOM

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Informações

The detailed configuration for ISS calculation and withholding can be found at this link: DOC0020_ISS_Withholding


  • How it works in the System (simple ISS double taxation scenario):

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