The Registry of Companies Outside the Municipality (CPOM), established by the City of São Paulo, requires service providers based in other cities to register with the administrative agency. If this registration is not completed, or even rejected (which is very common given the numerous requirements), the service recipient will be required to withhold the ISS (Service Tax) resulting from the service provided by the taxpayer.
In practice, the service provider will collect the ISS for the municipality in which it is headquartered and will also suffer the withholding of the same tax by São Paulo, i.e., a classic example of double taxation.
Originally established in São Paulo, this registry has spread throughout Brazil, being required by numerous municipalities. However, in the first half of this year, the Supreme Federal Court declared the registry unconstitutional, believing that such a requirement is incompatible with the Federal Constitution.
The STF acted correctly, because, in addition to the obvious double taxation, it is a fact that the municipality of São Paulo does not have the authority to tax, or retain the tax, on services that must be collected by another municipality, according to the rules defined in the Federal Constitution and in LC nº 116/03.
However, many municipalities have not complied with the Supreme Court’s ruling, and taxpayers who feel wronged should seek legal action to waive the registration requirement. Furthermore, those who suffered undue ISS withholding can also seek reimbursement of the amounts unduly collected over the past five years.
