The tax reform represents a significant transformation in the tax system in Brazil. Approved in 2023, it proposes a comprehensive restructuring of consumption taxation, consolidating taxes and introducing specific rates. With an implementation timeline that extends over 50 years, the reform will have profound impacts, especially in sectors such as services, health and education, which may face increased costs. In view of this, it is essential that companies start preparing for this transition now.
Although the implementation of the reform is gradual, the initial phases already require immediate attention from business owners. Understanding the timeline and possible effects of the changes is essential to adjust processes and strategies appropriately. Despite the challenges, the reform can open up opportunities to optimize tax management and increase the competitiveness of companies, reinforcing the need to closely monitor the new guidelines and necessary adaptations.
What changes with tax reform?
>>One of the main changes brought about by the tax reform will be the creation of two new taxes: the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS). The CBS, which is federal in scope, will start to be collected in 2027, while the IBS, whose revenue will be shared between states, the Federal District and municipalities, will be implemented gradually from 2029.
The main new feature is that the IBS and CBS will follow the dual Value Added Tax (VAT) model. In this format, taxes will be effectively paid only by end c level contact list consumers, eliminating cumulation and ensuring uniform collection throughout Brazil, without different rules for each state.
The Tax Reform will maintain the benefits for the Manaus Free Trade Zone (ZFM), with changes in tax rates and rules for tax credits, in addition to including more products in the Selective Tax (IS). A fund financed by the Union will also be created to help in the development and diversification of the economy of Amazonas.
This change aims to reduce the complexity of the current tax system, which generates confusion and increases companies’ operating costs, in addition to promoting greater transparency and standardization of tax rates.
What is VAT?
>>VAT will be the main pillar of the tax examples of continuous campaign reform, and its implementation will represent a significant change in the way taxes are collected. The goal of VAT is to simplify the tax system by unifying five existing taxes, such as ICMS, PIS and Cofins, into two main taxes: IBS and CBS.
In addition to these, the IS will also be created. Which will be levied on products that are harmful to health and the environment. Such as cigarettes, alcoholic beverages and products with a high sugar content. The main advantage of the VAT is that it eliminates the collection of cascading taxes, that is, taxation at each stage of the production chain, which currently results in distortions and increases the tax burden. In the new model, taxes will be charged only on the value added at each phone database stage. Simplifying collection and reducing bureaucracy for companies.
VAT will be implemented gradually, between 2026 and 2033, together with current taxes and new ones during the transition period. The average VAT rate is expected to be around 28%, and may vary depending on the sector. The reform aims to make taxation more transparent and balanced. This change is part of a larger effort to modernize the Brazilian tax system. Making it more efficient and less complicated for taxpayers. And ensuring that the tax burden is evenly distributed. Across the different sectors of the economy.
Goods and Services Tax – IBS
The IBS will unify two taxes: the ICMS, which is a state tax, and the ISS. Which is a municipal tax. Its goal is to establish uniform taxation throughout the country, making the tax system simple, transparent and equal.
Main features:
Rate: Will be established by the Federal Senate, but allows adjustments by states and municipalities.
Non-cumulative : Allows for the offsetting of tax credits, avoiding double taxation.
Transition period: Full implementation will take place by 2033 starting in 2026. During this period, guidelines and adjustments. Will be made to ensure a smooth transition.
The IBS will impact both companies and consumers. By influencing production costs and final prices. The unification of these taxes will reduce additional obligations and facilitate tax compliance.