- Brazil is proposing to simplify its indirect tax system by replacing its multiple level VAT system with a dual VAT approach and an additional selective tax.
- The proposal creates a dual VAT system by combining the state VAT and the service tax into a single tax on goods and services administered by the states and municipalities, and combining the federal contributions on gross revenues into a contribution on goods and services administered by the federal government.
- Both the IBS and CBS would be subject to the same rules currently applicable, but the levy would be broader and cover goods as well as intangibles, and the system would use a full noncumulative approach giving rights to input credits on any taxable acquisitions.
- The proposal includes specific concessions for certain sectors and validated ICMS state tax incentives would be maintained through 2032.
- The transition to the dual VAT system is expected to occur over a seven-year period, with full implementation as from 2033.
- The proposal will require a detailed assessment to ensure all potential tax consequences are taken into consideration.
Source Deloitte
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