Brazil’s government submitted a proposal on Wednesday, 24 April, 2024, to introduce a new dual Value Added Tax (VAT) system in accordance with the tax reform bill to Congress.
The bill is yet to be discussed, but if it is approved it will be presented to the Senate for revisions, before sending it to the President to be signed into law.
If passed, under this tax reform bill, Brazil will implement a dual VAT regime, which includes:
- A goods and services tax (IBS) that will replace the state VAT (ICMS) and the municipal service tax on services (ISS).
- The proposed goods and services contribution (CBS) which will replace the federal PIS/COFINS contributions and the federal excise tax on manufactured products (IPI).
The tax reform bill will be implemented in phases over seven years, starting in 2026. Initially, the bill will enforce CBS at a rate of 0.9% and the IBS at 0.1%, which will gradually increase.
The PIS, COFINS, and IPI will be phased out starting in 2027.
By 2029, the ICMS and ISS rates will be reduced in phases, while the CBS and IBS rates will gradually increase.
