Brazil: Tax reform bill involving federal, state, and municipal indirect taxes
Brazilian Chamber of Deputies approved a constitutional amendment bill
Brazilian Chamber of Deputies approved a constitutional amendment bill
The Brazilian Chamber of Deputies (lower house of parliament) on 6 July 2023 approved a constitutional amendment bill with the basic text of a tax reform involving federal, state, and municipal indirect taxes. If the tax reform is enacted, Brazil will introduce a dual value added tax (VAT) regime including (1) a Tax on Goods and Services (Imposto sobre Bens e Serviços, or IBS), that will replace the state VAT (Imposto sobre Circulação de Mercadorias e Serviços, or ICMS) and the Municipal Tax on Services (Imposto Sobre Serviços de Qualquer Natureza, or ISS); and (2) the Contribution on Goods and Services (Contribuição sobre Bens e Serviços, or CBS), that will substitute the federal PIS/COFINS contributions as well as the federal excise tax on manufactured products (Imposto sobre Produtos Industrializados, or IPI).
If enacted, the reform will be introduced over a transitional period of seven years beginning in 2026—with the Introduction of CBS at a rate of 0.9%, and IBS at a rate of 0.1% which will be increased gradually, and termination of the PIS and COFINS and IPI (except for products manufactured in the “Manaus Free Trade Zone”) from 2027. By 2029, the ICMS and ISS will be gradually reduced, the CBS and IBS rates will be gradually increased. Full implementation of the regime is set to happen from 2033.
Read an August 2023 report [PDF 1 MB] prepared by the KPMG member firm in Brazil
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