Brazil Tax Reform: New IBS and CBS Rules Impact Businesses

Brazil is undergoing a major tax reform, transitioning to a new system featuring the Contribution on Goods and Services (CBS) and the Goods and Services Tax (IBS). The reform introduces significant operational changes for businesses, including new requirements for managing tax credits. Under Complementary Law No. 214/2025, the appropriation of credits is tied to the effective extinction of debts and the use of valid electronic tax documents, requiring deeper integration between fiscal, financial, and procurement departments.

Key implementation milestones include the effective collection of CBS and IBS starting in 2027, with a gradual phase-in of the IBS through 2033. During the transition, authorities have implemented flexibility in electronic invoice requirements to prevent revenue interruption, though experts note this does not delay the overall implementation schedule. For e-commerce, the reform may shift logistics strategies as state-level tax incentives are phased out.

Legal developments are also reshaping the landscape. The Superior Court of Justice (STJ) ruled that law firms under the Simples Nacional regime must include success fees in their ISS tax base. Additionally, the Supreme Federal Court (STF) expanded tax exemptions for individuals with autism and intellectual disabilities regarding the purchase of new vehicles, declaring previous restrictions unconstitutional. Furthermore, the enactment of the Taxpayer Defense Code (LC No. 225/2026) aims to modernize tax administration by establishing duties for the State and fostering a more cooperative relationship with taxpayers.