- Brazil’s consumption tax reform impacts financial services, focusing on banking spreads.
- The reform introduces a differentiated VAT regime for financial services, allowing credits and deductions.
- Brazil decided to tax the bank spread through new VATs, CBS and IBS.
- The banking spread is the difference between interest rates on loans and investments, acting as a profit margin.
- Previously, financial institutions paid PIS and COFINS on revenues without tax credits.
- Disputes arose over whether the banking spread should be taxable.
- In June 2023, the Brazilian Supreme Court ruled that financial intermediation revenues are subject to PIS and COFINS.
- Banking services with client fees are subject to ISS, PIS, and COFINS, but the banking spread is not subject to ISS.
- Under the old system, financial services were taxed by PIS and COFINS on the banking spread and by ISS, PIS, and COFINS on fee-based services.
Source: internationaltaxreview.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.
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