Brazil Advances Tax Reform: New IBS, CBS and Simples Nacional Rules

Brazil's tax system is undergoing a major overhaul. The government is promoting the use of tax transactions – agreements between tax authorities and taxpayers to settle debts – as a way to reduce litigation and improve revenue, a shift highlighted by São Paulo’s chief prosecutor Inês Coimbra.

The reform introduces two new consumption taxes: the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS). Both are set to replace existing federal levies such as PIS, Cofins and, eventually, ICMS and ISS. Technical updates to electronic fiscal documents add five new classification codes to accommodate IBS and CBS credits, with mandatory validation starting 10 July 2026.

Import purchases are also affected. The “taxa das blusinhas” rule now imposes a 20 % import duty on shipments up to US$ 50, plus a 17 % ICMS component, while higher‑value imports remain taxed at 60 % under the Simplified Taxation Regime.

A contentious issue is whether the new taxes will be included in the ICMS calculation, potentially creating a “tax on tax” cascade. State tax authorities argue that once CBS and IBS are levied, they could form part of the ICMS base, a scenario that could raise costs for businesses and consumers.

Finally, the regime for micro‑companies, Simples Nacional, may split into a “common” model that retains the traditional unified tax payment and a “hybrid” model that integrates IBS and CBS effects, influencing compliance complexity and credit‑generation opportunities for small firms.