Brazil Moves Forward on Tax Overhaul Plan

Brazil is in the initial stages of a multi-year tax reform plan that will replace the country’s complex and fragmented system – often called a “tax jungle” – with a more simplified VAT-like system.

The new plan replaces the ICMS (State Tax on Circulation of Goods and Services) and the ISS (Municipal Service Tax) with the IBS (Tax on Goods and Services). The PIS and COFINS (federal social contributions) will be replaced by the CBS (Contribution on Goods and Services). The tax reform will play out from 2026 to 2033, with this year being primarily a test year, according to a web posting from Nova Trade on how the reforms impact foreign companies.  

Under the changes, digital platforms are responsible for collecting taxes, even if based abroad. Among key aspects of the tax reform plan:

• Foreign platforms selling to Brazil are also liable: Platforms selling to Brazil must register and collect the taxes due, under penalty of sanctions and blocking.

• Courier companies (express shipments): Couriers remain responsible for customs clearance and the advance payment of taxes on imports but are now integrated into the IBS/CBS system and the Remessa Conforme (Compliant Shipment) program. This advance payment will be maintained until the full and mandatory adoption and implementation of the split payment.

• The estimated standard rate is about 28% (combining IBS and CBS), but the exact value will depend on the rates set by each federative entity and the national reference rate. This will be among the world’s highest VATs, even as efficiency is expected to improve.

• An FAQ on the tax reform, with Q&A geared toward ecommerce companies, was shared with IMAG.