Brazil's consumption tax reform reshapes Simples Nacional rules

Brazil's consumption tax reform introduces a new selective tax (Imposto Seletivo) that targets goods and services harmful to health and the environment. The law does not set a rate deadline, creating uncertainty for businesses and opening the possibility of judicial challenges, especially regarding its interaction with the industrial tax (IPI) and export duties.

The reform also establishes a dual value‑added tax system: the federal Contribuição sobre Bens e Serviços (CBS) and the state/municipal Imposto sobre Bens e Serviços (IBS). These replace existing taxes such as PIS, COFINS, ICMS and ISS. While the Simples Nacional regime remains, a “Simples Hybrid” option allows small firms to pay IBS and CBS outside the standard DAS guide, requiring companies to reassess tax planning, pricing and accounting systems. The transition is scheduled to run until 2033, prompting firms to review their tax classification, map B2C versus B2B sales, update software and run impact simulations.