As the saying goes, “In this world nothing can be said to be certain, except death and taxes.” And in Brazil, we’re talking about a lot of taxes.

Every year, the World Bank publishes a Doing Business report. This year, Brazil was the 184th most difficult country for paying taxes. Only 6 countries fared worse. In São Paulo, for example, it takes 1,501 hours on average per year for businesses to prepare, file, and pay their taxes.

Let’s consider the two most common types of business taxes.

Taxes on Services

ISS (Imposto sobre Serviços) is a municipal tax charged on services. The tax is paid to the local government where the company is established.

Taxes on Goods

ICMS (Impostos Sobre Circulação de Mercadorias e Prestação de Serviços) is a tax charged by the state on the sale of goods. In some cases, it covers services that are not taxed as ISS. The rate varies from state to state and depends on the particular goods being sold.

Seems clear, right? But what if you’re selling a product and providing installation? The distinction between a good and service is often not clear. It can turn into a battle between the state and the municipality. Each wants its share of the revenue, leaving the business stuck in the middle.

The legal risk for business owners is real, so make sure you do your due diligence. A careful analysis of the tax consequences from the get-go is essential.