Real Profit 2026: How Tax Reform changes tax calculations

In recent years, Brazil has approved a comprehensive tax reform, which will bring about significant changes from 2026 onwards in the way taxes are calculated for companies under the Real Profit.

Because it requires meticulous record-keeping of revenues, expenses, and tax credits, the Real Profit regime is considered the most sensitive to changes brought about by the reform. Any change in consumption taxes (such as PIS, Cofins, ICMS, and ISS) directly impacts its calculation and tax burden.

In 2026 will mark the beginning of the reform's implementation, with the introduction of new taxes (CBS and IBS) that will gradually replace PIS, Cofins, ICMS, and ISS.

Below, we detail what changes in the Real Profit with Tax Reform based on the concepts of IBS and CBS, the new credits and calculation bases, the end of PIS/Cofins, the transition schedule until 2032, and what your company should adjust now to avoid tax risks and take advantage of opportunities.

What will change in 2026 for companies under the Real Profit regime

The Consumption Tax Reform brings about a profound overhaul, gradually implementing a dual VAT model“. Instead of five taxes (PIS, Cofins, IPI, ICMS, and ISS), there will be two main: CBS at the federal level and IBS at the subnational level (states and municipalities).

The key changes from 2026 onwards are:

• Replacement of PIS and Cofins by CBS: The two current federal taxes on revenue (PIS/Pasep and Cofins) will be abolished and merged into a single contribution called CBS (Contribution on Goods and Services).
• Unification of ICMS and ISS in the IBS: At the state and municipal levels, the following will be created: IBS (Goods and Services Tax), which will gradually replace the ICMS (state) and ISS (municipal) taxes.
• Full Value Added Tax (VAT): Both CBS and IBS will follow the logic of a Modern VAT. This implies broad calculation basis (covering virtually all goods and services, with few exceptions or exemptions) and full non-cumulativeness.

• More comprehensive credits: With full non-cumulativeness, there will be much more expenses generating credits than today. Direct production inputs will continue to generate credit, but in addition to these, administrative expenses, services used, rents, marketing expenses, and anything subject to IBS/CBS tax may be credited.
• Reduction of special regimes and exceptions: The reform seeks to simplify the system, so many different regimes will be reviewed. The CBS model, for example, will be uniform for virtually all sectors, ending the current distinction between cumulative and non-cumulative PIS/Cofins regimes.
• Selective Tax (IS): In addition, the Selective Tax federal tax, dubbed the “sin tax,” which will be levied on specific harmful products (such as cigarettes, alcoholic beverages, sugary drinks, weapons, luxury vehicles, etc.). The IS does not directly interfere with the calculation of the Real Profit of most companies, as it will be restricted to a few segments, but it is worth mentioning that it will not be subject to VAT (does not generate credits in the chain).

Impact on the calculation of actual profit

For companies under the Real Profit regime, the changes significantly alter the way indirect taxes are calculated and even impact the formation of results. Below, we explore the main effects:

1. More “clean” and transparent costs

Today, many expenses carry taxes that do not become ISS credits on services, embedded ICMS, and partially recoverable PIS/Cofins.
With IBS and CBS, the rule changes: almost everything generates credit.

That means:

• The tax is included in the purchase and comes out as credit.

• Costs and expenses are recorded tax payments.

• The DRE now better reflects the actual cost of the operation.

Simple example: energy continues to be taxed on the bill, but the credit is full. Result: lower and clearer net cost.

2. Direct effect on margin and profit

The reform is intended to be neutral, but not all sectors will feel this equally.

• Industry and commerce tend to have a moderate impact because they already use ICMS and PIS/Cofins credits. In some cases, there is even an improvement due to credits that were previously prohibited.

• Pure services should suffer more: those who currently pay ISS (~5%) and PIS/Cofins with little credit will face IBS/CBS close to 25%.

If the company is unable to pass on the price increase, the margin falls.
On the other hand, if profits decline, IRPJ and CSLL also decrease, which softens some of the impact.

The message is clear: companies will need to recalculate prices and margins as early as 2025 to avoid surprises in 2026.

3. Changes in prices and tax highlights

In invoices, IBS and CBS will appear similar to the current ICMS.

• B2B: the customer takes credit → tax tends to be neutral → passing on costs does not generate competitive loss.

• B2C: consumers do not take out loans → prices tend to rise or margins fall.

The initial inflationary effect should mainly appear in services and retail aimed at the end consumer.

Companies with long-term contracts need to include adjustment or renegotiation clauses, otherwise they will have to swallow the increase.

4. New credit opportunities

Here is one of the biggest gains for companies in the Real Profit.

With broad non-cumulativeness, administrative expenses and indirect services now generate credit, including:

• marketing (currently without credit),

• logistics,

• energy,

• auxiliary services.

This reduces the effective IBS/CBS debt and improves the result.
But it requires caution: review the chart of accounts and classify everything correctly so as not to lose credit unnecessarily. Fiscal BI and simulations will be essential to identify all opportunities.

5. Risk of misclassification

Even with simpler rules, misclassification causes damage.

If a company does not identify that a particular transaction has a reduced tax rate or exemption, it pays too much tax. Declaring exemption where none exists, take action.

Sectors such as education, medicine, construction, and exports will have specific rules. Tax engines will be allies in avoiding mistakes.

6. Adequacy of systems and accounting

The arrival of IBS and CBS requires immediate adjustments in IT and accounting:

• new accounting accounts for credits and debits;

• coexistence of two tax systems (current + IBS/CBS) between 2026 and 2032;

• new fields in NF-e and NFS-e;

• review of CFOPs and tax codes.

The beginning is more difficult, but then the amount of taxes will be lower. The pain is temporary, the gain is structural.

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Transition 2026–2032

The implementation of the reform will not be abrupt; it will take place over several years (2026 to 2032), so that companies and governments can gradually adapt. The main milestones of this transition are:

2026 — Year of Testing (CBS 0.9% + IBS 0.1%)

• The tax rate is symbolic: it serves only to test invoice, bookkeeping, and credits.

• The amount paid for CBS/IBS will be deducted from PIS/Cofins in the same period → no real financial impact.

• Those who fulfill ancillary obligations correctly may even be exempted from payment.

• Objective: to test systems, adjust ERP, and prevent bugs in 2027.

Business translation: 2026 is for tidy up the house, not to recalculate prices.

2027 — CBS comes into effect and PIS/Cofins ends

• CBS enters with the full tax rate (around 9%).

• PIS and Cofins will cease to exist.

• Credits become broader: everything that is taxed generates credit.

• Companies must update their declarations (DCTF and EFD-Contribuições will no longer exist).

• IPI becomes practically zero, except for Free Trade Zones.

Actual impact:
More simplicity, larger credits, a more linear system — but pricing needs to be reviewed.

2027–2028 — IBS Pilot + Selective Tax (IS)

• IBS does not yet truly replace ICMS/ISS.

• ICMS and ISS continue with the same rates.

• IBS appears in an almost symbolic value to test the system.

• Selective taxation already applies to “harmful” products.

For companies: There is little change in the load, but the fiscal operation is starting to become hybrid.

2029–2032 — Years of “Double Counting”

These are the most challenging years, because the company will have to deal with two worlds:

• IBS growing

• ICMS/ISS decreasing

• Two calculations, two credits, two lines on the invoice.

Percentage migration table

On the invoice (example 2030):

If the total regional tax rate should be 18%, it appears as:

• 3.6% IBS

• 14.4% ICMS/ISS

SPED: two investigations.
ERP: you need to calculate each part correctly.
Credit: IBS offsets IBS; ICMS offsets ICMS — no mixing.

Warning: These are the years that will demand more IT, more attention, and more internal auditing.

2033 — New 100% system active

This year:

• ✖ ICMS and ISS cease to exist

• ✔ IBS assumes 100% of regional tax

• ✔ CBS remains federal

• ✔ Selective Tax remains separate

Brazil is, in fact, starting to operate a Modern dual VAT, with fewer obligations and a much simpler structure.

There is also a safety rule:
If the sum of IBS + CBS exceeds 26.5%, the government must make adjustments.
So there should be no “spike” in the tax burden.

Accounting Effects on the Income Statement during the Transition

1. 2026–2028: EBITDA may “rise artificially” because CBS comes before net revenue, while PIS/Cofins was an operating expense.

2. 2029–2032: Profits and margins fluctuate due to double counting.

3. Recommendation: create internal reports comparing:

• scenario with renovation x without reform
• impact on cash flow
• margin variations by period

This avoids surprises and provides a basis for pricing decisions.

Tips for companies under the Real Profit regime

To take advantage of opportunities and mitigate risks, the watchword is preparation. Here is a checklist of recommended actions for companies under the Real Profit regime:

• Review tax records (products, services, and suppliers) Make a list of all your items (goods sold, supplies purchased, services provided and received) and check that the tax classifications are correct and up to date.

• Adapt IT systems (ERP, billing, tax) Contact your company's software vendors or your internal IT team to implement the necessary changes.

• Simulate the financial impact and adjust planning Use your historical data from 2024/2025 to run simulations of how much your company would pay in taxes under the new model.

• Review commercial contracts and tax clauses You may want to bring forward or postpone investments depending on tax advantages, renegotiate long-term contracts already anticipating tax adjustments, and inform key customers about possible price changes in 2027 to avoid surprises.

• Seek specialized support and monitor legislation Review your contracts with suppliers and customers in light of the reform.

Conclusion: how CLM Controller can assist

Navigating all these tax changes can be challenging, but the CLM Controller is ready to be your partner on this journey. We are specialists in accounting and tax consulting, focused on supporting companies under the Real Profit regime during the Tax Reform. With our help, your company can transform obligations into opportunities for efficiency gains.

Count on the experience of CLM Controller to safely navigate the Tax Reform. Together, we will simplify the complex and keep your company compliant and competitive!

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