Tax reform: what will change

Brazil's 2024 Tax Reform promises to significantly transform the country's tax system, seeking simplification, fairness and efficiency. Find out in this guide everything you need to know about the proposed changes and how they will impact businesses and consumers.

 

 

Introduction to Tax Reform

 

The central proposal of the reform is the creation of the Goods and Services Tax (IBS), which will replace five current taxes: PIS, Cofins, IPI, ICMS and ISS. In addition, the Contribution on Goods and Services (CBS) will be implemented to unify PIS/Cofins and IPI.

 

Read also: ICMS: What it is and how to calculate it

 

Main changes proposed

 

• Simplifying taxesReducing the complexity of the tax system by consolidating multiple taxes into a single consumption tax.
• Zero rate for basic food basketsProducts from the national basic food basket will have a zero tax rate, directly benefiting the population.
• Cashback for the low-income population: Introduction of a tax refund mechanism for those enrolled in the federal government's Single Registry (CadÚnico).
• Selective taxationApplication of selective taxes on specific products, such as alcoholic beverages and cigarettes.
• End of cumulativenessTaxes will no longer be cumulative and will only be levied once along the production chain.

 

Implementation and regulation of the reform

 

Implementation of the reform will be gradual, starting in 2026, with all the rules in full force by 2033. The regulations will involve defining tax rates, exempt products and tax compensation mechanisms.

 

Critical regulatory points

 

• Definition of the average IBS rateEstimated at 26.5%, which may vary according to political and economic agreements.
• Products from the basic food basket: Listing and tax exemption for essential items.
• Cashback and compensation mechanismsImplementation and operationalization for CadÚnico beneficiaries.

 

Reform implementation schedule

 

Year 2026:

• • IBS - Goods and Services Tax - begins to be levied at a rate of 0.1%.
  • The CBS - Contribution on Goods and Services began to be levied at the rate of 0.9%, offsetting this payment against the contributions due to PIS and COFINS.

Year 2027:

• • IBS will be charged at the state rate of 0.05% and the municipal rate of 0.05%.
  • Extinction of PIS/COFINS taxes, which will be completely replaced by CBS, which will be charged at a rate to be defined by a future Complementary Law with a reduction of 0.1%.
  • IS - Selective Tax - begins to be levied (rates still to be defined).
  • Reduction of IPI rates to zero, except for products with incentivized industrialization in the Manaus Free Trade Zone, according to criteria established by complementary law.

Year 2029:

• • 10% reduction in the ICMS and ISS rates defined according to each state and municipal legislation, adjusting the IBS rate to balance the revenue of states with ICMS and municipalities with ISS.

Year 2033:

• • Extinction of ICMS and ISS. The IBS rate should be adjusted so that there is no loss of revenue for states and municipalities.

 

Economic and social impacts

 

The reform promises to boost the Brazilian economy by increasing competitiveness, reducing operating costs and offering greater legal certainty to taxpayers. It is also expected to improve fiscal transparency and generate employment and income.

 

Read also: When to migrate from Simples Nacional to Lucro Presumido?

 

Conclusion

 

The 2024 Tax Reform represents an important milestone for Brazil, with the potential to positively transform the business environment and the lives of citizens. Prepare for the changes now by seeking specialized support from CLM Controller to successfully navigate this new tax landscape.