On March 9 2022, the Brazilian Federal Supreme Court (STF) concluded the judgment of Direct Unconstitutionality Action (ADI) 6034, deciding that the insertion of advertising is a service subject to the municipal service tax (ISS), rather than a communication service, which would be subject to the state VAT (ICMS). In doing so, the Court settled a long-lasting controversy between the municipalities and the states, in which taxpayers were caught in the crossfire.
In the Brazilian tax system, ISS is generally levied on the provision of services by the municipalities, provided that the activity is listed as a taxable service in Supplementary Law 116/2003. On the other hand, communication services are subject to the ICMS; therefore, they are not subject to ISS.
According to the Brazilian tax system, the same activity cannot be simultaneously subject to ISS and ICMS. Therefore, the correct delineation of each economic activity and its respective taxation is of the utmost importance.