Brazil launches split‑payment system under tax reform

The Brazilian government is implementing a "split payment" mechanism as part of its ongoing tax reform. Under the new system, the amounts due for the soon‑to‑be‑introduced Imposto sobre Bens e Serviços (IBS) and Contribuição sobre Bens e Serviços (CBS) are automatically separated from the transaction value at the point of sale and transferred directly to the tax authority, leaving businesses with only the net amount.

The change does not alter the overall tax burden, but it reduces the cash that companies can retain between the sale and the tax‑payment date, affecting working‑capital management. A test phase begins in 2026, with full adoption expected by 2027. Companies are required to update ERP systems, fiscal documents and internal processes, and many will need to reconsider short‑term financing, credit lines or receivables‑advance arrangements.

From 3 August, firms must record IBS and CBS fields on invoices, initially using an informational test rate of 1 % (0.1 % IBS, 0.9 % CBS). The rate is not a charge and will not raise prices for consumers at this stage. The government expects the split‑payment model to curb tax evasion, improve collection efficiency and increase transparency, while businesses anticipate tighter liquidity, especially in low‑margin sectors such as distribution, construction, capital‑goods manufacturing and retail.