The constitutional amendment to Brazil’s tax reform, which was published in the Official State Gazette in December 2023, aims to restructure the tax system, and fundamentally simplify all processes related to tax payment and tax collection. A supplementary act, which is a prerequisite for the implementation of the new tax system, was submitted to the National Congress on 25 April 2024.

The biggest change as part of the Brazilian tax reform is the abolition of several import duties that were previously due. The social security contributions PIS/PASEP and COFINS as well as the tax on industrial products IPI are to be removed. The municipal tax ISS and the VAT on goods ICMS (levied by the individual federal states) will also be omitted in the new tax system.

To simplify matters, the cancelled taxes will then be seamlessly replaced by the new sales tax IVA (Imposto sobre Valor Agregado). This dual-structured sales tax will consist of a tax share for the government (CBS) and a separate tax share at federal state level (IBS). Apart from certain product groups (e.g. medical products), the standardized tax rate for CBS and IBS will be around 25%.

Another innovation in Brazil’s tax law is the introduction of a selective tax (Imposto Seletivo), which applies to the production, distribution or import of goods and services that are harmful to health and the environment.

The implementation of the comprehensive reform of the Brazilian tax system is scheduled to start in 2026 and come into force by 2033. Any necessary supplementary laws for details and administrative preparations for the realization of the reform will take place gradually until then.

Source: GTAI (in German)