- Introduction of New Consumption Taxes: Complementary Law No. 214/2025, sanctioned on January 16, 2025, introduces new consumption taxes in Brazil, including the Tax on Goods and Services (IBS), Contribution on Goods and Services (CBS), and Selective Tax (IS), with a transition period starting on January 1, 2026.
- Key Features and Vetoes: The new tax system includes credits conditioned on payment of the IBS and CBS, a Split Payment mechanism to curb fraud, and maintenance of special tax regimes for certain sectors. However, several provisions were vetoed by President Lula, affecting definitions of nontaxpayers and tax collection responsibilities.
- Implications for Businesses: The reform aims to create a more efficient and equitable tax system in Brazil, significantly impacting business operations. Companies must understand and measure these changes to adapt effectively, as further legislative actions regarding the vetoes and the Selective Tax rates are anticipated in 2025.
Source EY
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