The Brazilian Congress announced on December 20, 2023 (local time) the amendment of Constitution No. 132 of 2023 on tax reform. The most important change is the merger of five taxes into a value-added tax (IVA), i.e., the tax on industrial products, the tax on income, the tax on social integration, the tax on the circulation of goods and services, and the tax on services will be merged into a value-added tax. The rate of VAT is yet to be finalized.
The initial implementation of the new tax model will begin in 2026, with the federal government starting to levy a Contribution-Based Charge (CBS) on goods and services, and state and municipal governments at all levels levying a Goods and Services Tax (IBS). The new tax system is expected to be fully implemented by early 2033, with the old tax system being completely replaced.
In the meantime, it means that the two tax systems will co-exist, then we still need to understand and comply with the current tax system.
The following is a description of the types of taxes that are consolidated
01
ICMS (flow-through tax)
A state tax, ICMS is levied whenever there is a movement of goods; each state's tax rate varies, so the rate differential needs to be taken into account when trading across state boundaries; from 2019 onwards, the same type of VAT will be levied uniformly across states based on the transaction in which the goods are purchased.
02
IPI (Industrial Property Tax)
This tax is a federal tax, which is paid by industrialized production enterprises. For imported goods, it is paid by the importer and its branch or parent company at the customs clearance stage; wholesalers or retailers are generally not required to pay it again when they re-sell the goods; and all industrial products, no matter whether they are processed, assembled, packaged, or repaired, are subject to the tax. Taxes are calculated according to the classification and value of different commodities, with tax rates ranging from 0% to 3,30%, with specific rates varying according to the type of commodity and the country of production.
03
PIS and COFINS (Social Contribution Tax)
Both are federal taxes and, more simply, are income taxes, i.e., taxes levied on the income of a business. PIS and COFINS are levied when a business generates income and when imports are cleared through customs. The tax base is the monthly income of the business, and the tax rate is based on the business's income tax system. PIS and COFINS are cumulative and non-cumulative, with a total rate of 3.651 TP3T under the cumulative system, and a total rate of 9.251 TP3T under the non-cumulative system.
04
ISS (service tax)
It is a municipal tax and applies to all types of services in all sectors. It applies not only to companies, but also to architects or administrators engaged in construction or management work without an employment relationship, and to higher education personnel.
The tax reform will help manufacturing and trading enterprises to reduce the tax burden, significantly reduce the operating costs of enterprises, and promote the country's economic development. Therefore, the outside world is generally regarded as this tax reform is the country to simplify the tax system to take a historic step.
EN 
ZH_TW 
ZH