Tax reform is moving forward in Brazil with the recent approval of the supplementary bill (PLP 68/2024) by the Chamber of Deputies, consolidating important changes to the tax system. It is worth remembering that the proposal aims to replace federal, state and municipal taxes with a dual system of Value Added Tax (VAT), divided between the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS).
However, the reform raises concerns about the tax burden and operationalization. The rate ceiling was set at 26.5% from 2033, but projections indicate that the effective rate could reach 27.84%. The government has until 2031 to reassess the exceptions and ensure that the ceiling is respected.
In addition, products in the basic food basket will now have a zero rate, while selected food and hygiene items will see a 60% reduction in rates. Some products will be subject to the Selective Tax (IS) surcharge, which is levied on goods that are harmful to health and the environment.
Essential sectors, such as education and services, may face an increase in the tax burden. Education will see a 60% reduction in the tax rate but may be affected by the increased cost of suppliers. Independent professionals will have a 30% discount, provided they are regulated by a professional council, but this benefit may not compensate for the jump in the base rate, making the tax burden higher.
Essential sectors, such as education and services, may face an increase in the tax burden. Education will receive a 60% reduction in the tax rate but may be affected by rising supplier costs. Independent professionals will have a 30% discount, provided they are regulated by a professional council, but this benefit may not offset the jump in the base tax rate, ultimately increasing the overall tax burden.
The transition to the new system will be gradual, starting in 2026 with the application of test rates for CBS and IBS. In 2027, CBS will be fully implemented, and between 2029 and 2032 ICMS and ISS will be replaced by IBS.
Between 2027 and 2033, tax rates will be gradually adjusted, and current taxes will be phased out.
Although the reform brings advances in the modernization of the tax system, the risks of an increase in the tax burden and greater operational complexity remain. Only time will tell whether Brazilian taxpayers will really benefit from the changes.
In this context of tax transformation, the partnership of a company like Pryor Global becomes essential. We offer Business Process Solutions (BPS), helping companies to manage financial, accounting and administrative processes efficiently. With global expertise and advanced technology, Pryor helps its clients adapt to new tax requirements, ensuring compliance and cost optimization in a constantly evolving regulatory environment.
Talk to one of our experts and prepare your company for the changes!
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