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The 1st Section of the Superior Court of Justice has submitted Special Appeal No. 2,223,487/RS to the repetitive appeals procedure (Theme No. 1,427), through which the Court will determine whether dental services fall within the concept of “hospital services” for purposes of applying the reduced percentages set forth in article 15, §1, III, a, and article 20, both of Law No. 9,249/1995, as amended by Law No. 11,727/2008.

Law No. 9,249/95, which governs the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profits (CSLL), provides that hospital services and other specific services (such as diagnostic and therapy support services, clinical pathology, imaging, pathological anatomy and cytopathology, nuclear medicine, and clinical analyses and pathology services) may benefit from reduced tax rates, provided that the service provider is organized as a business corporation, is subject to the presumed profit tax regime and complies with the regulations issued by Brazilian Health Regulatory Agency.

Specifically regarding the term “hospital services,” the Superior Court of Justice, in the judgment of Special Appeal No. 1.116.399/BA (Theme No. 217), which is binding upon lower courts, interpreted the scope of the expression broadly, holding that it must be construed objectively, considering as hospital services “those connected to activities carried out by hospitals and directly aimed at promoting health,” such that they are “as a rule, though not necessarily, rendered within hospital facilities, excluding ordinary medical consultations, an activity that does not correspond to those provided within the hospital environment, but rather in medical offices.”

In other words, in the judgment of Theme No. 1,427, the Superior Court of Justice will decide whether the legal thesis established in Theme No. 217 may be applied to dental services and, if so, the percentage adopted to determine the IRPJ and CSLL tax base applicable to clinics providing such services will be reduced from 32% (thirty-two percent) to 8% (eight percent) and 12% (twelve percent), respectively.

In order to safeguard their rights and anticipate any potential modulation that may restrict the effects of the decision to be rendered by the Superior Court of Justice on the matter, it is therefore advisable for taxpayers to consider filing legal actions seeking a declaration that the dental services rendered satisfy the conditions established by the aforementioned Law, thereby entitling the business corporation to the reduced IRPJ and CSLL rates, as well as reimbursement of amounts overpaid during the 5 (five) years preceding the filing of the action.

The Tax Law team at BRZ Advogados remains available in case of any questions.