Assistance Ltd.: reducing taxes of 1% of revenues
We designed and implemented tax planning that allowed our client to save more than R$4 million per year, or 1% of its revenues, increasing its margin and giving it a competitive advantage over its competitors. Our tax planning was endorsed by PwC and confirmed by the Municipal Government.
Our client, “Assistance Ltd.”, is a provider of 24 hour assistance services. Its clients are insurers, which the company serves by providing its policyholders with winch, locksmith and plumbing services, among others. These services are provided by third party suppliers.
Assistance Ltd. receives a fixed monthly payment per insured person, and over 50% of this revenue is for the payment of third party service providers.
The revenue of reaches R$400 million per year. The sales taxes were levied as follows:
• IRPJ (Corporate Income Tax) and CSLL (Contribution on Net Profit): actual profit
• PIS (Social Integration Program ) and COFINS ( Contribution for the Financing of Social Security: 9.25% of revenue, discounting the amount paid to third party service providers, in accordance with the expressed legislative forecast
• ISS (tax on services): 2% of total revenue
The municipal legislation did not allow the deduction of the calculation basis of the ISS of the amount paid to third party service providers.
We saw this case as a double taxation, and that the amount transferred to the third party should not form the basis for calculating the ISS. We relied on legislation applicable to health insurance plans, according to which the values transferred by HMOs to doctors, hospitals and laboratories do not form the basis for calculating the ISS.
With planning, the company obtained a reduction of the basis of calculation of the ISS at over 50%, allowing a reduction in the effective tax rate of ISS from 2% to less than 1% of revenues, resulting in a nominal saving of R$4 million per year and more than 1% of revenues.
For the implementation of this tax planning, we hired a renowned tax expert whose legal opinion was endorsed by auditors of PricewaterhouseCoopers and permitted the company a special tax regime from the Municipal Government.
This same tax planning has already been extended to other companies that have a similar operation, that is, whose revenues are largely directed toward the payment of third party services. If your company is in this situation, please contact us to verify the tax savings you could make.