The Contribution on Goods and Services (CBS) would be replacing the Program of Social Integration (PIS) and Contribution for the Financing of Social Security (COFINS).
The CBS, intended to function as a federal VAT, would be a flat 12% tax on gross revenue (reduced by taxes due on revenue). Both chambers of the National Congress still need to vote on the CBS measure, and the timing is unclear. The government indicated it intends to implement more comprehensive tax reform, in phases:
- Phase I — replace PIS and COFINS with CBS
- Phase II — replace federal excise tax with a selective tax
- Phase III — change the income taxation of legal entities and individuals, with a shift toward taxing dividend distributions (which are currently exempt)
- Phase IV — reduce the payroll tax
Source EY
