Brazil: Proposed amendments to indirect tax reform
Bill 108/2024 continues the indirect tax reform approved earlier this year
The Brazilian Senate’s Constitution and Justice Committee (CCJ) on September 10, 2025, received a report on Bill 108/2024, which continues the indirect tax reform approved earlier this year through Complementary Law 214/2025.
Background
Complementary Law No. 214/2025 consolidates multiple federal, state, and municipal taxes into a dual value added tax (VAT) system, introducing two new taxes: the contribution on goods and services (CBS) at the federal level and the goods and services tax (IBS) at the state and municipal levels. It aims to simplify compliance, reduce tax distortions, and create a more predictable tax environment. The transition to the new system begins in 2026 and will be fully implemented by 2033.
Bill 108/2024
Bill 108/2024 seeks to reform Brazil's tax system by establishing the Committee for the Management of the Tax on Goods and Services (CGIBS). The committee will oversee the administration and distribution of the IBS, facilitating a transition from current taxes to the new IBS and proposes technical amendments to Complementary Law No. 214/2025. These amendments include:
Technical corrections and legal clarity
- Editorial and cross-referencing errors in various articles would be corrected.
- Ambiguities in definitions, such as the classification of leasing and temporary transfers of goods, would be clarified to promote consistent tax treatment.
Taxpayer protections and legal certainty
- Adjustments would be made to reduce litigation risks, including:
- Clear rules for determining the taxable event for recurring or fractional transactions
- Explicit provisions for credit appropriation and adjustments in cases of tax prepayments or cancellations
Sector-specific adjustments
- Energy sector: Rules would be refined for free-market energy consumers and energy imports, including tax deferrals for IBS and CBS.
- Digital platforms: Responsibilities for tax compliance would be clarified, including optional substitution mechanisms for platforms acting on behalf of suppliers.
- Real estate: Clear thresholds would be established for when individuals renting or leasing properties become regular taxpayers.
- Financial services: Adjustments would be made to the tax base and deductions for financial operations, including provisions for zero rates on imported financial services under specific conditions.
- Fuel and lubricants: Anti-fraud measures would be introduced for fuel derivatives, and flexibility would be granted for the taxation of natural gas until operational challenges are resolved.
- Hospitality and entertainment: Tax rules for hotels, amusement parks, and theme parks would be aligned with those for bars and restaurants.
Tax equity and simplification
- Cashback mechanism: Adjustments would be made to ensure the effective return of IBS and CBS to low-income families, particularly for essential utilities.
- Small businesses (simples nacional): Provisions would be added to allow small businesses to opt for regular tax regimes and clarify credit appropriation rules for transactions involving these entities.
- Nano-entrepreneurs: Tax exemptions for app-based drivers would be extended to taxi drivers and similar service providers.
Transition and implementation
- Gradual implementation of selective taxes on sugary beverages, aligning them with alcoholic beverages and tobacco to avoid abrupt tax increases.
- Transition rules for real estate and financial services would be refined to promote legal certainty.
Governance and compliance
- A national tax compliance program (PNCT) would be introduced to integrate IBS and CBS compliance frameworks, aiming to improve transparency and taxpayer relations.
- Provisions would be made for the unification of the electronic tax domicile (DTE) for IBS, with potential future integration with CBS.
Government purchases and split payment
- Adjustments would be made to the tax treatment of government purchases and the operational rules for split payments, promoting flexibility and clarity for digital and traditional transactions.
Incentives for the Manaus free trade zone (ZFM)
- Specific rules would be clarified for tax benefits and the split payment mechanism to maintain the competitive advantage of industries in the ZFM.
Judicial and administrative harmonization
- Provisions would be added to integrate IBS and CBS dispute resolution mechanisms, including a special appeals process and uniformity measures.
General harmonization
- Norms originally designed for IBS would be extended to CBS for consistency, including rules for infractions, penalties, and system integration.
Bill 108/2024 will be debated in the upcoming weeks. In addition, the Brazilian Congress accepted for consideration Bill 16/2025 that would clarify that CBS and IBS are not be includable in the taxable base of the current state value-added tax ICMS and the federal social security taxes PIS/COFINS during the transitional phase between the current indirect tax system and new system introduced by Complementary Law No. 214/2025.
For further information, contact a KPMG tax professional:
Paula Smith | ppsmith@kpmg.com
Atila Borba Vaccaro Pidoni Mota | atilamota@kpmg.com
Bruno Siqueira Peitl | bsiqueirapeitl@kpmg.com
Philippe Stephanny | philippestephanny@kpmg.com