The Brazilian Tax Reform does not represent merely a change in fiscal rules; it symbolizes a true redefinition of Brazil’s economic future.
It is common to hear that “taxation is for the insane.” And, in a way, this perception makes sense—not because the topic lacks importance, but because of the complexity of the current system.
The reform proposal emerges precisely to simplify and reorganize a large portion of these taxes, making the process clearer, more efficient, and aligned with models already adopted internationally.
Despite its gradual implementation, it is essential for companies to begin preparing now. Proper planning and a thorough understanding of the new rules are crucial to absorb the impacts without compromising management practices or the organization’s financial health.
Additionally, experts indicate that the new model is likely to attract more foreign investment, as the tax structure becomes simpler, more predictable, and standardized.
Main Changes
Currently, Brazil operates under a fragmented structure made up of federal taxes (PIS and COFINS) and state/municipal taxes (ICMS and ISS). With the Tax Reform, these taxes will be eliminated and replaced by the Dual VAT, composed of:
– CBS – Contribution on Goods and Services (replaces PIS and COFINS; administered by the Federal Government)
– IBS – Tax on Goods and Services (replaces ICMS and ISS; administered by a Managing Committee)
In addition, a Selective Tax will be created, popularly known as the “sin tax,” aimed at taxing products harmful to health—such as cigarettes and alcoholic beverages—with the objective of discouraging their consumption.
While some items will have tax increases due to their harmful nature, certain services and specific products will receive tax reductions, such as basic food items, medical devices, specific medications, regulated professions overseen by professional councils (such as lawyers and accountants), travel agencies, health insurance plans, among others.
Another relevant point is the standardization of tax calculation rules. After the reform, the application of tax rates will be unified for all regimes, reducing discrepancies between companies. The only exceptions will be Microentrepreneurs (MEIs) and companies under the Simples Nacional regime, which will maintain differentiated treatments.
Tax credits will also undergo significant changes. Today, only specific types of companies can fully benefit from credit recovery.
In the new model, however, the logic becomes much broader: all companies will be able to generate credits for one another, except for certain cases under Simples Nacional and MEIs.
On the other hand, a new rule emerges: a company will only be able to use tax credits from its suppliers if those suppliers are up to date with their tax obligations. If not, the credit will not be validated—creating a direct incentive for the entire supply chain to maintain tax compliance. This aspect directly impacts how companies evaluate and negotiate with suppliers.
Another significant change introduced by the reform is the method of tax payment. Today, a company issues an invoice, receives the full payment, and pays the taxes in the following month.
In the new model, the Split Payment system will be adopted: taxes will be automatically separated at the moment of purchase—especially when payment is made through electronic means (PIX, credit card, bank slip, etc.).
Example:
If an invoice totals R$ 1,250 — composed of R$ 1,000 for the product/service and R$ 250 in taxes — the customer pays R$ 1,250, but the company receives only R$ 1,000. The R$ 250 in taxes go directly into a government-linked account, where they remain until the tax calculation is processed.
At the end of the fiscal period, the actual tax due is calculated. If the withheld amount is sufficient, the tax is settled automatically, and any excess may be refunded.
Overall, this new collection method will significantly impact cash flow, since the tax amount will no longer remain temporarily available in the business’s cash and will instead be directed immediately to the government. This requires special attention to financial planning and receivables management.
Other important changes are also expected, such as the adoption of a single national invoice model, eliminating differences among states and municipalities and providing greater standardization.
Additionally, rental agreements will no longer be formalized solely through receipts; they will now require the issuance of an invoice. The real estate sector as a whole will also undergo specific changes, with new taxation rules and classifications.
The Tax Reform also introduces two new business classifications: Hybrid Simples Nacional and Unified Simples Nacional, which will provide different tax calculation and payment models, allowing for greater adaptability.
It is also important to highlight that one of the government’s main goals is to make the true cost of products and services more transparent. Today, most taxes are “embedded” in the final price, meaning consumers do not see how much they are actually paying in taxes.
In the new model, taxes will be listed “on top,” allowing everyone to clearly see the price composition.
For example, if today a cucumber costs R$ 7.00 with taxes included, under the new model the price would be displayed as: R$ 7.00 + 25% tax.
This separation makes the process more transparent, showing explicitly how much is actual cost and how much is tax.
However, it is important to note that if a business does not fully understand the new mechanism, it may simply add 25% on top of the current price, significantly increasing the final value. This reinforces the importance of study, training, and planning among all involved teams to avoid improper price increases.
Impact on Costs
So far, there is still no official definition of the tax rates that will be applied. However, current estimates indicate that the Dual VAT should range between 25% and 28%.
Another relevant point concerns the impact related to tax credits. Although most companies will begin to generate and use credits more broadly, payroll will not generate credits, which deserves special attention — especially for service-providing companies, where payroll usually represents the largest portion of expenses.
In a hypothetical example, for a service-providing company, taxes would become approximately 180% more expensive (before the reform = 8.65% / after the reform = 25%).
How to Prepare for the Tax Reform
Although the implementation will be gradual, companies cannot wait until the final deadline to begin adapting. The sooner organizations start their preparation process, the smaller the financial, operational, and strategic impact will be.
It is essential that organizations take action in advance by conducting simulations, reviewing their business models, and adjusting their internal processes.
In summary, the key lies in preparing the team: companies that begin studying, simulating, and adjusting their operations now will be far more protected and competitive when the reform is fully in effect.
It is also important to highlight that the Tax Reform does not modify taxes that are not related to the consumption of goods and services. Taxes such as Corporate Income Tax (IRPJ), Social Contribution on Net Profit (CSLL), payroll-related contributions, and other similar charges will continue to operate under the current model.
Author: Samanta Ohlweiler da Costa
Administration and Finance
