The Brazilian tax reform, approved in 2024, is one of the most eagerly awaited and discussed changes in the business environment. One of the most important aspects of this new legislation is the introduction of the "automatic sales tax discount". This change promises to simplify tax collection and increase transparency for consumers and companies.
In this article, we'll explore how this new dynamic will work, its benefits, challenges, and how your company can prepare for this transformation.
What is the automatic sales tax rebate?
The concept of "automatic sales tax rebate" refers to the way in which the new Value Added Tax (VAT) will be applied. Unlike the current model, where taxes are built into the final price of products, the new reform will allow consumers to clearly see the amount of taxes paid at the time of purchase. This will make the system more transparent and in line with international practices.
With this change, each stage of the production chain will be taxed on a non-cumulative basis, allowing companies to take credit for taxes paid in previous stages. This is especially relevant for sectors that face complexities in calculating taxes and managing tax credits.
How dual VAT works
The new tax model divides VAT into two levels: a Contribution on Goods and Services (CBS)which will be applied by the federal government, and the Goods and Services Tax (IBS)This will be the responsibility of the states and municipalities. This division aims to simplify the payment of taxes, eliminating overlapping taxes such as PIS, Cofins, IPI, ICMS and ISS.
However, the application of VAT-Dual could mean an increase in rates for some sectors. It is estimated that the rates of the new VAT could vary between 27% and 33%, depending on the sector and region. On the other hand, the reform offers benefits such as the full non-cumulativenessThis will allow for the credit of taxes paid throughout the production chain, reducing the final tax burden.
Benefits for companies
The reform brings a number of advantages for companies, such as:
- Simplifying Tax ProceduresBy consolidating five taxes into two, the administrative burden on companies will be reduced. Less time will be spent assessing and paying taxes, which improves operational efficiency.
- Fiscal TransparencyWith automatic tax rebates, consumers will have a clear view of how much they are paying in taxes, which can increase the perception of tax fairness and improve confidence in the tax system.
- Competitiveness and Economic Growth: Tax simplification and transparency can increase the competitiveness of Brazilian companies, both in the domestic and international markets. This can result in greater economic growth and job creation.
- Legal certaintyClearer and more predictable tax rules will allow for more efficient financial planning. Companies will be able to make long-term projections with greater certainty, reducing uncertainties and risks related to taxation.
Challenges and considerations
Although the reform brings many benefits, there are also challenges that companies must face:
- Increasing the tax burdenFor some sectors, such as services, the new VAT may represent an increase in tax rates. Companies need to be prepared to adjust their prices and profit margins to absorb these increases.
- Complexity of implementationThe transition to the new system will not be simple. Companies will have to adapt their accounting and tax management systems to deal with the new rules, which could generate significant implementation costs.
- Regional impactsThe shift in tax collection from origin to destination could impact companies located in states that have historically granted tax incentives. These states may see a reduction in the attractiveness of new investments.
How your company can prepare
- Review of internal processesEvaluate and adjust your tax assessment and payment processes to comply with the new rules. Consider tax automation to ensure compliance and efficiency.
- Tax planning: Carry out strategic tax planning to mitigate possible increases in the tax burden and take advantage of tax credits paid along the production chain.
- Expert advice: Relying on tax consultancy can be essential for navigating the complexities of the reform. Specialized professionals can help your company adapt to the new requirements efficiently.
- Monitoring changesThe reform will be implemented gradually until 2033, which means that the rules may evolve over time. Stay tuned for legislative and regulatory updates to ensure your company is always compliant.
Read more about: Tax reform: what will change
Conclusion
The automatic sales tax rebate, a central part of the new tax reform, promises to transform the Brazilian tax system, bringing more transparency, simplification and competitiveness to companies. However, adapting to the new model will require careful planning and investments in technology and consultancy.
A CLM Controller is ready to support your company during this transition, offering customized solutions to optimize your tax management. Stay ahead of the changes and ensure that your company is prepared for the future of taxation in Brazil.
