The Brazilian Chamber of Deputies approved a constitutional amendment bill on July 6, 2023, outlining a comprehensive tax reform that involves federal, state, and municipal indirect taxes. If enacted, the reform will introduce a dual value-added tax (VAT) system, including the Tax on Goods and Services (IBS) to replace state VAT (ICMS) and Municipal Tax on Services (ISS), and the Contribution on Goods and Services (CBS) to replace federal PIS/COFINS contributions and the federal excise tax on manufactured products (IPI). The reform is planned to be phased in over seven years starting in 2026, with CBS starting at 0.9% and IBS at 0.1%, gradually increasing. PIS, COFINS, and IPI (except for products from the “Manaus Free Trade Zone”) will end by 2027. By 2029, ICMS and ISS will be reduced while CBS and IBS rates rise. The full implementation of the new regime is targeted for 2033.
Source: KPMG
