Brazil’s Tax Reform marks a historic milestone aimed at restructuring the country’s consumption taxation system to simplify and modernize tax collection.
Following the initial regulation through Complementary Law No. 214/2025, which established the Goods and Services Tax (IBS), the Contribution on Goods and Services (CBS), and the Selective Tax (IS), there are still regulatory gaps, technical challenges, and practical bottlenecks that need to be addressed to ensure legal certainty, efficiency, and transparency.
The progress of the reform depends on the approval of Complementary Bill No. 108/2024 (PLP 108/2024), currently under review in the Federal Senate, which will regulate key aspects of the new system.
Below are 12 crucial points of the tax reform that require further regulation:
- IBS Management Committee: it is essential to regulate the governing body of the IBS to define competencies, audit guidelines, administrative procedures, and the application of penalties.
- IBS and CBS Rates: reference rates for the IBS and CBS will be set by a Senate Resolution, which has not yet been issued. Additionally, the initial application of test rates (0.9% for CBS and 0.1% for IBS) will depend on rules for collection, offsetting, and reimbursement.
- Ancillary obligations: there are uncertainties related to the models of tax documents, requirements for companies currently exempt from issuing invoices (e.g., leasing movable assets), and the integration with management systems (ERPs).
- Split payment: the automatic tax payment splitting model lacks clear rules on whether it will be mandatory or optional, its scope and phased implementation, and the associated costs of adoption (given the substantial adjustments required in systems). Regulation depends on joint acts from the Federal Revenue Service and the IBS Committee.
- Crossed Tax Base: although the reform stipulates that ICMS and ISS will be excluded from the IBS and CBS tax base, it is still unclear whether IBS and CBS will be included in the calculation base of those taxes.
- Judicial jurisdiction: it remains to be defined whether disputes involving IBS and CBS will be adjudicated by State Courts, Federal Courts, or specialized Federal Tax Courts.
- Sanctions and penalties: PLP 108/2024 outlines more than thirty sanctionable conducts under the IBS, some of which overlap, which can lead to conflicting interpretations. There is also a lack of clarity regarding how these penalties will be enforced.
- Selective Tax (IS): strategic sectors such as oil and gas, mining, aviation, and automotive await the definition of IS rates and the list of products that will remain subject to the IPI.
- Special and differentiated regimes: implementation of the new tax system relies on complex calculation systems that are not yet structured, which may hinder integration for specific industries.
- ICMS Credit Balance: rules for validating and using ICMS credit balances until 2032 remain undefined.
- Presumed credit: criteria for presumed credit for specific industries are still pending, particularly concerning their link to actual tax payment and supporting documentation.
- Price display and formation: it is still unclear whether consumer prices should be displayed as net or total amounts and whether this display should occur only at checkout or throughout the purchasing process.
Practical challenges ahead
In addition to these regulatory gaps, companies will need to adapt their systems and contracts to avoid tax assessments, economic distortions, and litigation. Even though the reform will be implemented gradually, the deadlines are tight, given the technical and legal complexity involved in the transition.
Planning will be crucial to update management systems (ERPs), internal processes, and to reconcile the calculation of current taxes (ICMS, ISS, PIS, COFINS) with the new model until 2033.
Long-term contracts will also require special attention, particularly those involving tax benefits. For example, contracts in the real estate sector must be registered at a notary’s office by December 2025 to benefit from the current gross revenue taxation regime.LBM Advogados is closely monitoring each stage of the tax reform regulation and is prepared to assist domestic and international companies in analyzing risks, opportunities, and the practical impacts of the new system.