Brazil STJ rules bank smart cards are not subject to ICMS

The Superior Tribunal de Justiça (STJ) has ruled that personalized smart cards used by banks are not subject to the state tax ICMS. The 1st Panel of the court unanimously denied an appeal by the São Paulo Treasury, which had sought to tax a technology company responsible for manufacturing these cards.

The smart cards in question are custom-made pieces featuring personal information, financial institution data, and a chip for payment systems. Justice Paulo Sérgio Domingues explained that because these cards are manufactured to order for a specific client and bank, they do not function as general commercial merchandise. Instead, they are strictly tied to service contracts, such as credit or debit card services.

Because the cards cannot circulate in the general market outside the legal relationship between the bank and the customer, the court concluded that they should be subject to municipal service tax (ISS) rather than state ICMS.