Brazilian Tax Reform

The Tax Reform approved in in Brazil has had worldwide repercussions. The implemented changes alter the consumption tax system in the country and unify five taxes into a dual Value-Added Tax.

The Contribution on Goods and Services (CBS) will replace, at the federal level, the Contribution for the Social Integration Program (PIS), the Contribution for Social Security Financing (COFINS), and the Tax on Industrialized Products (IPI). At the state and municipal levels, respectively, the Tax on Circulation of Goods and Services (ICMS) and the Tax on Services of Any Nature (ISS) will be replaced to create the Tax on Goods and Services (IBS).

Additionally, there will be the creation of the Selective Tax, which will apply to the production, extraction, commercialization, and/or importation of products, goods, and services harmful to health and the environment. This new federal tax aims to increase the cost of harmful behaviors.

For over 30 years, there have been consideration for a tax reform in the country, and this is just one of the reasons why these changes represent a significant step forward. The reform is based on simplification, transparency, sustainability, encouragement of efficiency and economic activity, and correction of distortions. Legislative complexity, bureaucracy, and a high rate of legal disputes are factors that place Brazil in bad positions in global rankings that assess the most favorable investment environments. The reduction in the volume of laws, along with the system to be adopted in Brazil, which is present in more than 170 countries, will undoubtedly attract more investments to the country due to the similarity of the new regulations to global practices. The negative impact will be in the adaptation, which is inherent in any change. The positive effects will be gradually noted as taxation in Brazil ceases to be an obstacle.