Decree 12,955, Resolution CGIBS No. 6, and Joint Ordinance MF/CGIBS No. 7, all issued in late April 2026, lay the operational groundwork for Brazil's sweeping consumption tax overhaul — replacing five legacy taxes with two streamlined value-added taxes and introducing phased implementation through 2033.
Brazil is implementing a major indirect tax reform, replacing five existing taxes — three federal (PIS, COFINS, IPI), one state (ICMS), and one municipal (ISS) — with two new taxes:
- CBS (federal contribution on goods and services), managed by the federal government.
- IBS (tax on goods and services), managed by states and municipalities.
The reform was enacted in late 2024 and subsequently regulated by Complementary Law No. 214 on 16 January 2025, with new implementing regulations now issued to guide its execution.
The new regulations set out the main operational framework and governing rules for the new indirect tax system, including:
Decree 12.955 of 29 April 2026
Decree No. 12,955 establishes a comprehensive regulatory framework for the Social Contribution on Goods and Services (CBS) while providing common rules that apply to both the CBS and the Tax on Goods and Services (IBS).
Both share standardised definitions, NCM/SH and NBS classifications, unified registration, and electronic documentation. The CBS features non-cumulative credits, export immunity, a split payment mechanism, and sector-specific regimes for fuels, financial services, real estate, and hospitality. A notable provision is a “cashback” system returning CBS to low-income families. Transitional rules manage the shift from PIS/COFINS. Harmonisation committees ensure uniform interpretation across administrations.
Resolution CGIBS No. 6 of 30 April 2026
This Resolution establishes the regulatory framework for the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS). The regulation is divided into common rules for both and specific rules for the IBS. Common rules govern both taxes, covering incidence on onerous and select non-onerous operations, destination-based location principles, and non-cumulative credit appropriation. Digital platforms bear joint or substitute tax liability for intermediated transactions.
IBS-specific rules grant states and municipalities authority to set their own rates, with Senate reference rates as defaults. A cashback mechanism refunds 20% of IBS to low-income CadÚnico-registered families. Special regimes protect the Manaus Free Trade Zone through suspensions and presumed credits. Transitional test rates apply from 2026–2028. Differentiated regimes include 60% rate reductions for essential services, 30% for regulated professionals, and monophasic taxation for fuels.
Joint Ordinance MF/CGIBS No. 7 of 30 April 2026
Joint Ordinance MF/CGIBS No. 7 formally recognises the common provisions governing both the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS). It confirms that Book I of Decree No. 12,955/2026 and Resolution CGIBS No. 6/2026 contain the shared rules intended to ensure coordinated operation of the two taxes, while Book II sets out provisions specific to each tax. The Ordinance also clarifies that future amendments to these regulations will not automatically be covered and will take effect upon publication.
Brazil’s comprehensive tax reform introduces significant changes to its consumption tax system, replacing multiple existing taxes with two streamlined value-added taxes (VAT) designed to simplify compliance and modernise the tax structure.
Core components and definitions
The reform establishes the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS) as the foundation of the new system. These taxes apply broadly to both tangible and intangible goods, including rights, as well as all services. The regulations clearly define who qualifies as suppliers, purchasers, and recipients under the new framework.
A critical aspect is the tax trigger and location rules, which determine exactly when tax obligations occur (the taxable event) and where taxes are due. The system leans heavily toward a destination-based approach, ensuring taxes are collected where goods and services are consumed rather than where they originate.
Administrative features
The reform introduces centralised monthly tax assessment, requiring companies to consolidate tax calculations globally across all branches and file declarations monthly through a unified process. This centralisation aims to reduce complexity and improve compliance.
The tax credit system allows businesses to accumulate and use input credits on their acquisitions, ensuring taxes are only paid on value added at each stage of the supply chain. The regulations include provisions for fast-tracked refunds, improving cash flow for businesses.
A groundbreaking split-payment mechanism automatically separates tax at the point of transaction—the net sale value goes directly to the seller’s bank account, while the tax amount is withheld and remitted immediately to tax authorities, significantly reducing evasion opportunities.
Special provisions
The regulations establish special and differentiated regimes with specific tax rules, exemptions, or reduced rates for essential sectors, including education, health services, public transport, real estate, fuels, and financial services.
Digital platforms and marketplaces are designated as responsible parties for collecting and remitting taxes on transactions conducted through them, extending tax enforcement to the digital economy.
Phased implementation timeline
- 2026 (Test Year): Both CBS and IBS are calculated at low test rates (0.9% for CBS and 0.1% for IBS), but actual payment is waived or offset against existing tax obligations. This year serves as a transition period for businesses to adapt systems. Importantly, penalties for failure to include these taxes in tax documents will begin on 1 August 2026.
- From 1 January 2027:
- CBS is collected at its official standard rate (minus a temporary 0.1% reduction for two years), fully replacing the existing PIS and COFINS taxes
- IBS begins collection at an initial low rate of 0.1% (split equally: 0.05% for States, 0.05% for Municipalities), while ICMS and ISS taxes remain fully active
- The split-payment system becomes operational
- From 1 January 2029: The IBS rate progressively increases while ICMS and ISS taxes are proportionally reduced over a four-year transition period, ensuring gradual adaptation.
- From 1 January 2033: Full implementation is achieved—ICMS and ISS are completely eliminated, and both IBS and CBS are imposed at their full standard rates.
Selective tax
Additionally, a new federal Selective Tax (Imposto Seletivo – IS) will be introduced in 2027, replacing the existing IPI. This tax targets goods and services considered harmful to health and the environment. When IS applies to a product, its value must be integrated into the tax base before calculating IBS and CBS, ensuring proper taxation across the supply chain.
