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Report: Brazilian banks benefit from court ruling on ISS service tax

Banco Santander(Brasil) SA, Banco doBrasil SA and Itaú UnibancoHolding SA are among the Brazilian banks benefiting from a recent courtruling that blocks states and municipalities from charging a service tax on certainbanking activities, Valor Econômico reported.

The São Paulo Court of Justice rendered the decision after findingthat the tax, called ISS, was being imposed on operations that are not consideredcore business functions of the financial institutions, but rather were types ofrefund transactions that don't merit the ISS taxation. The three Brazilian bankshave all paid ISS taxes to states and municipalities where they have argued theywere unfairly taxed on operations that were not related to banking.

Brazilian tax lawyer Pedro Moreira was cited as saying the bankingsector, in general, has faced undue ISS charges through municipal laws.

"The precedents are very relevant to the entire bankingsector and cause a great impact on financial institutions in general … the ISS taxbase should be restricted to revenue arising from banking services actually renderedand which are core to the business of the bank," Moreira said.