LC 214/25: What Changes Under the Tax Reform Supplementary Law

A Tax reform The Brazilian initiative is no longer just a project; it has become a reality for companies.

Following the approval of Constitutional Amendment 132/2023, the next major regulatory milestone came with the publication of the Complementary Law 214/2025 (LC 214/25), which is responsible for regulating various operational aspects of the new Brazilian tax system.

For CFOs, controllers, financial managers, and tax professionals, understanding Law No. 214/2025 has become a strategic priority.

This legislation establishes practical rules that will directly impact tax assessment, the use of tax credits, pricing, cash flow, and investments in technology and compliance.

In this article, we'll explain What is LC 214/25, what its main provisions are, how it affects the various tax regimes, and what steps companies should take to prepare for the new tax landscape in Brazil.

What is LC 214/2025?

A Complementary Law 214/2025 It is one of the main regulatory provisions of the Consumption Tax Reform approved by the Constitutional Amendment 132/2023.

Its purpose is to translate the principles established by the Constitution into operational rules, detailing fundamental aspects of how the new taxes created by the reform will function.

Among the main topics covered by the regulations are:

• CBS (Tax on Goods and Services);
• GST (Goods and Services Tax);
• Tax credit system;
• Non-cumulative rules;
• Specific and differentiated regimes;
• Split Payment;
• Taxation of imports;
• Taxation of digital transactions;
• Tax refunds (cashback);
• Accessory obligations.

In practice, LC 214/25 represents the Tax Reform Operating Manual.

The Context of Tax Reform

For decades, the Brazilian tax system has been characterized by a high degree of complexity. Companies had to deal simultaneously with taxes such as:

• PIS;
• Cofins;
• ICMS;
• ISS;

Each tax had its own rules regarding assessment, calculation, credits, and ancillary obligations. This fragmentation led to:

• High compliance costs;
• Ongoing tax disputes;
• Legal uncertainty;
• Challenges for investments;
• Loss of competitiveness.

The Tax Reform aims to simplify this situation by adopting a Dual VAT model.

Under this model, several existing taxes will be replaced by two new taxes:

• CBS – A federal tax that will replace PIS and COFINS.
• IBS – A tax shared between states and municipalities that will replace the ICMS and ISS.

A LC 214/25 It specifically regulates the implementation of these new taxes.

Key Changes Introduced by LC 214/25

The legislation introduces a series of structural changes that go far beyond simply replacing taxes.

Taxation at the destination: One of the most important changes is the definitive adoption of destination-based taxation.

Currently, part of the tax revenue is collected at the point of origin of the transaction. Under the new model, the tax will be directed to the location where consumption occurs. This change particularly affects companies that operate nationwide.

Broad financial credit: Law No. 214/25 establishes a much more comprehensive credit model than the one currently in place.

Broadly speaking, companies will be able to claim tax credits on virtually all purchases related to their economic activity. This reduces distortions and eliminates many of the tax disputes that exist today.

Standardization of rules: Another significant change is the creation of more standardized national rules.

This reduces differences between state and municipal laws and tends to simplify compliance with tax obligations.

How does LC 214/25 affect companies under the Simples Nacional tax regime?

Although Simples Nacional Although it was retained under the Tax Reform, it was not entirely exempt from the changes. Companies that have opted into the system will continue to pay taxes through the DAS.

However, the legislation has made it possible for companies to adopt the hybrid regime.

Under the hybrid system, companies registered under the Simples Nacional program may choose to report CBS and IBS separately for their transactions. This option allows for the generation of tax credits.

In practice, this can increase competitiveness in B2B operations. On the other hand, it will also require more sophisticated controls and a detailed analysis of the financial impacts.

Companies that primarily serve end consumers may not see any significant benefits. However, those that sell to other companies will need to carefully evaluate this possibility.

How does LC 214/25 affect companies under the Simples Nacional tax regime?

Although Simples Nacional Although it was retained under the Tax Reform, it was not entirely exempt from the changes. Companies that have opted into the system will continue to pay taxes through the DAS.

However, the legislation has made it possible for companies to adopt the hybrid regime.

Under the hybrid system, companies registered under the Simples Nacional program may choose to report CBS and IBS separately for their transactions. This option allows for the generation of tax credits.

In practice, this can increase competitiveness in B2B operations. On the other hand, it will also require more sophisticated controls and a detailed analysis of the financial impacts.

Companies that primarily serve end consumers may not see any significant benefits. However, those that sell to other companies will need to carefully evaluate this possibility.

How Does LC 214/25 Affect the Presumed Profit System?

Companies in the Presumed Profit are among those that should pay the closest attention to these changes.

Although the system remains in place, the replacement of consumption taxes significantly alters the fiscal dynamics.

Among the most significant impacts are:

• End of the current PIS and Cofins;
• CBS entry;
• Changes in the incidence of IBS;
• The need for technological adaptation;
• New credit controls.

What's more, Many businesses will need to review their training programs prices to accurately reflect the effects of the new system.

Companies that currently operate on tight margins may see significant changes in their effective tax burden.

How Does LC 214/25 Affect the “Lucro Real” Tax Regime?

Companies in the Real Profit will likely experience some of the most significant changes. This is because the new model substantially expands the opportunities to utilize tax credits.

Organizations with large supply chains can benefit from:

• Less cumulative;
• Greater tax transparency;
• Reduction of tax distortions;
• Simplification of calculations.

On the other hand, it will be necessary to invest in:

• Technology;
• Fiscal governance;
• System integrations;
• Team training.

Companies that do not make this adjustment may miss out on opportunities to use their credits.

Split Payment: One of the Biggest New Developments

Among the mechanisms introduced by LC 214/25, one of the most talked-about is the Split Payment.

Under this model, the amount corresponding to the tax can be automatically separated during the financial settlement of the transaction.

This means that part of the payment will go to the supplier, and another part will be automatically remitted to the government.

The goal is:

• Reduce tax delinquency;
• Combat fraud;
• Enhance the security of tax credits;
• Improve tax collection.

For many companies, the main impact will be on cash flow. Therefore, CFOs They need to assess the financial implications of this new system right away.

(See also our article on Split Payment in the Tax Reform: How It Works and How to Prepare.)

How does LC 214/25 affect the industry?

O industrial sector is among those who will feel the effects of the reform the most. Expanding tax credits could lead to significant efficiency gains.

At the same time, it will be necessary to review:

• Cost structures;
• Supply chains;
• Tax systems;
• Pricing strategies.

Manufacturing companies that begin this work early tend to gain a competitive advantage.

Impacts on Import Companies

A LC 214/25 It also redefines key aspects of the taxation on imports.

The general principle adopted is to ensure competitive neutrality between domestic and imported products.

This means that imported goods will be subject to Prevalence of CBS and IBS under conditions similar to those applied to domestic products.

Importers will need to review:

• Tax structure;
• Price formation;
• Credit management;
• Logistics planning.

Impacts on service companies

O service sector deserves special attention. Historically, many service companies have operated with a low incidence of tax credits. With the new model, the landscape changes.

Depending on the company's operational structure, the An increase in credit may offset part of the rise in nominal taxation.

Therefore, individualized assessments will be essential.

Impacts on Technology Companies

Technology companies They are also among those most affected by the reform.

Models based on:

• SaaS;
• Licensing;
• Marketplaces;
• Digital platforms;
• Recurring services;

They will need to be reviewed from the perspective of CBS and IBS.

However, the high degree of digitization in these companies may make it easier for them to adapt to the new tax controls.

How does LC 214/25 affect the industry?

O industrial sector is among those who will feel the effects of the reform the most. Expanding tax credits could lead to significant efficiency gains.

At the same time, it will be necessary to review:

• Cost structures;
• Supply chains;
• Tax systems;
• Pricing strategies.

Manufacturing companies that begin this work early tend to gain a competitive advantage.

Impacts on Import Companies

A LC 214/25 It also redefines key aspects of the taxation on imports.

The general principle adopted is to ensure competitive neutrality between domestic and imported products.

This means that imported goods will be subject to Prevalence of CBS and IBS under conditions similar to those applied to domestic products.

Importers will need to review:

• Tax structure;
• Price formation;
• Credit management;
• Logistics planning.

Impacts on service companies

O service sector deserves special attention. Historically, many service companies have operated with a low incidence of tax credits. With the new model, the landscape changes.

Depending on the company's operational structure, the An increase in credit may offset part of the rise in nominal taxation.

Therefore, individualized assessments will be essential.

Impacts on Technology Companies

Technology companies They are also among those most affected by the reform.

Models based on:

• SaaS;
• Licensing;
• Marketplaces;
• Digital platforms;
• Recurring services;

They will need to be reviewed from the perspective of CBS and IBS.

However, the high degree of digitization in these companies may make it easier for them to adapt to the new tax controls.

Talk to our tax team to assess the impact of LC 214/25 on your business

A LC 214/25 brings about profound changes that require planning, technical analysis, and strategic vision.

The CLM Controller Accounting closely monitors tax reform regulations and can help your company understand the specific impacts of the CBS, IBS, split payment, and other changes provided for in the legislation.

Contact our experts and request a personalized assessment to evaluate how Law No. 214/25 will affect your operations, cash flow, and tax burden in the coming years.