- Brazil’s new tax law introduces changes that may lead to varied interpretations by tax authorities and the judiciary.
- Multinational companies should understand the new indirect tax reform to avoid incorrect criteria and tax assessments.
- The reform introduces two new taxes: IBS and CBS, replacing current indirect taxes from January 1, 2026, with coexistence until 2033.
- IBS is a subnational tax collected by the state and municipality, while CBS is a federal tax collected by the federal government.
- The reform redefines the place of supply for indirect tax purposes, affecting the IBS rate, while the CBS rate is uniform.
- The destination principle will now determine the tax burden, differing from the current origin-based system.
- Firms may need to restructure business models to benefit from tax advantages in origin states.
- The destination principle is new for Brazil and may lead to controversies.
- Complementary Law 214/2025 outlines 10 rules for defining the place of supply, varying by transaction type and characteristics.
- This may result in new discussions and conflicts.
Source: news.bloombergtax.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
