Brazil's tax reform reshapes tax system and sparks sector-wide adjustments

Brazil’s 2023 constitutional amendment (EC 132) introduces a new consumption tax model, replacing ICMS, ISS, PIS, Cofins and IPI with the dual‑level Imposto sobre Bens e Serviços (IBS) and the federal Contribuição sobre Bens e Serviços (CBS). The reform takes effect gradually from 2026 to 2033.

The Superior Court of Justice (STJ) has created a new procedural class, “Conflito Federativo,” to resolve disputes among the Union, states, municipalities and the IBS Management Committee, aiming to ensure uniform interpretation of the new regime.

Businesses across sectors warn of cost pressures and operational challenges. Auto‑parts retailers fear higher labor costs if a separate working‑hour reduction bill passes. Pharmacies, drugstores and other retailers are preparing for system upgrades and credit‑management changes. Real‑estate developers will face a 28 % IBS/CBS rate on transactions, reduced to 14 % with a statutory discount. Rural producers must obtain a CNPJ for tax identification by January 2027. The cultural and sports sectors have lobbied to preserve incentive‑law credits during the transition. Analysts stress that delaying adaptation until 2027 could increase errors, raise expenses and erode competitiveness.

Separately, the Federal Revenue warned that beneficiaries of the 2024 income‑tax cashback must link a Pix key to their CPF by 30 June 2026, or risk losing refunds of up to R$ 1,000.