New tax reform: The impacts on the industrial sector

Find out how the New Tax Reform could affect the industrial sector and discover tax planning strategies to face the challenges and take advantage of the opportunities arising from the reform.

Approved by the Chamber of Deputies on July 7, the New Tax Reform aims to simplify tax collection in Brazil. With significant changes for companies and self-employed professionals, the first phase of the reform proposes replacing five taxes with two Value Added Taxes (VATs), with management shared between the Union, states and municipalities.

In this article, we will analyze and explain the main impacts of the New Tax Reform on the industrial sector, highlighting the proposed changes in tax legislation that could affect industries and the possible consequences and challenges for the sector.

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Tax simplification and benefits for entrepreneurs

One of the main promises of the Tax Reform is to simplify the tax system, which is currently complex and costly for taxpayers and for the Tax Administration and the Judiciary. By reducing the number of taxes, it is hoped that entrepreneurs will spend less time and money fulfilling their tax obligations.

In addition, the reform proposes an end to "double taxation", allowing companies to deduct the tax paid at previous stages of the production chain. This change could attract even small entrepreneurs, who will be able to opt out of Simples Nacional and join VAT, seeking not only simplification, but also greater competitiveness.

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Impacts on the industrial sector and the extension of the tax burden

From the industry's point of view, the Tax Reform could have significant impacts, especially with regard to the tax burden. Sectors with a longer production chain, such as industry, should benefit, since the reform provides for an end to cumulative tax, allowing companies to deduct the tax paid at each stage of production. This could result in a reduction in production costs for industry, making it more competitive.

On the other hand, service providers are likely to face a considerable increase in the tax burden, especially those with a short production chain and who will not be able to take credits for the biggest input, which is salaried labor. Services provided to individuals may also be impacted, as they will not be able to benefit from credits arising from the services consumed.

The possible taxation of dividends, as contemplated in the reform, could also aggravate the increase in the tax burden for the service sectors, representing a challenge for the sector that is the largest employer in the country

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Tax planning to mitigate impacts and seize opportunities

Faced with the changes proposed by the New Tax Reform, the industrial sector will need to prepare itself to face the challenges and take advantage of the opportunities arising from the reform. To this end, tax planning becomes essential, allowing companies to identify strategies to mitigate possible negative impacts and benefit from the changes in the tax system.

Detailed analysis of tax rates, the search for tax incentives and adjusting the tax regime are important measures that can help industries adapt to the new rules and ensure their competitiveness in the market.

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Production sector with a new look

The New Tax Reform brings significant changes for the industrial sector, with possible impacts on the tax burden and the competitiveness of companies. Although simplification is a promise, it is necessary to consider the challenges that may arise during the transition and the adjustments required during the reform's implementation period.

In this context, tax planning plays a crucial role, helping industries to prepare for the changes and adopt strategies that put them at an advantage in the new tax scenario.

In order to obtain personalized guidance tailored to the reality of each company, it is recommended to seek the help of an experienced accounting firm that offers tax planning and accounting consultancy services to help industries face the challenges of the Tax Reform and thrive amid the opportunities that will arise.

If you need to rely on experienced accounting advice, capable of providing the best strategies for your company to improve its financial performance, get to know CLM Controller's solutions now.