Brazil: Draft regulations to introduce new dual VAT regime

The Brazilian government on 24 April 2024 presented to Congress the regulations to introduce the new dual value added tax (VAT) regime under the tax reform bill.

There will still be discussions on the bill, and if approved, it will be revised by the Senate before being submitted for presidential approval. There are many key items related to the tax reform bill that are yet to be regulated by additional laws, which are likely to be drafted upon the approval of the bill.

Under the tax reform bill, Brazil would enact a dual value added tax (VAT) regime including:

• A tax on goods and services (imposto sobre bens e serviços—IBS) that would replace the state VAT (imposto sobre circulação de mercadorias e serviços—ICMS) and the municipal tax on services (imposto sobre serviços de qualquer natureza—ISS)
• The contribution on goods and services (contribuição sobre bens e serviços—CBS) that would replace the federal PIS/COFINS contributions, as well as the federal excise tax on manufactured products (imposto sobre produtos industrializados—IPI)

The tax reform bill would 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 would be increased gradually, and termination of the PIS and COFINS and IPI from 2027. By 2029, the ICMS and ISS would be gradually reduced, the CBS and IBS rates would be gradually increased. Full implementation of the regime would occur from 2033.

Read a preliminary report featuring an AI summary of the basics of the regulations prepared by the KPMG member firm in Brazil