Regulatory updates - Brazil

On 31 July 2024, the NFS-e Management Committee released the DFe Technical Note 2024.001 IBS/ CBS version 1.00. This note introduces critical updates to the layouts of electronic fiscal documents (DFes) to incorporate the new consumption taxes — Contribution on Goods and Services (CBS), Tax on Goods and Services (IBS), and Selective Tax (IS) — established by Constitutional Amendment No. 132/2023.

New information groups are introduced

The technical note introduces new information groups and fields designed to handle the new taxes. This update is part of broader efforts to ensure that electronic tax documents comply with the latest tax system mandated by the ongoing reform. The changes will affect several electronic invoice types, including those related to transportation and communication services.

The main updates are:

• New Information Groups: These include optional fields for recording IBS/CBS taxation details, such as tax rates, calculation bases, and specific tax codes.
• Totalization Groups: New fields have been added to summarize the total amounts for IBS and CBS, ensuring clarity in tax reporting.

These updates are essential for complying with Brazil’s new tax requirements. Businesses should familiarize themselves with these changes to prepare for the latest reporting obligations.

Implementation timelines

• Approval environment (company testing environment): 1 September 2025;
• Production Environment: 31 October 2025;
• Operational Deadline: The new groups and fields must be operational by 1 January 2026.

The processing deadlines, with the urgency requested by the President of the Republic, of 45 days, begin to count from when the PLP 68/2024 is read in the Plenary, which should occur in August.

The Brazilian government is working to meet deadlines and implement tax reform by 2033. The schedule foresees that the reform will be regulated between 2024 and 2025. After this phase, the transition from current taxes to the VAT model will begin in 2026.

The reform simplifies the tax system, replacing multiple taxes with new consumption taxes, aiming for a more efficient and equitable system. This regulation is essential to promote business growth and ensure sustainable economic development.

The new rules will be implemented gradually, with full effects becoming apparent over time.

Key Highlights:

• Beef and chicken have been added to the list of tax-exempt products in the basic food.
• The project sets rules for three new consumption taxes (IBS, CBS, and Selective Tax), replacing five current taxes (PIS, Cofins, IPI, ICMS, and ISS).
• Significant changes include tax adjustments on various products, including medicines, electricity, and food.

Goals:

• The reform aims to maintain the current tax burden, capping the new model at 26.5% of product prices;
• Taxes will no longer be cumulative, meaning they will only be charged once between production and the final sale;
• This change should reduce production costs and increase efficiency, potentially lowering consumer prices.

Main Discussion Points:

• The standard VAT rate is 26.5% (Estimated average VAT rate of 26.5%, with potential variation between 25.7% and 27.3%).
• Addition of beef and salt to the basic food list (The reform exempts several essential food items from taxes, benefiting low-income families).
• The establishment of rules for a cashback system for domestic expenses like electricity and gas beginning in January 2027 for CBS and in 2029 for IBS.
• Functioning of the Selective Tax on products harmful to health and the environment like coal, lotteries, and certain games.
• Professions that are eligible for reduced tax rates.

Other Key Points:

• Significant tax reductions for medicines, veterinary items, health products, real estate transactions, and digital platform purchases.
• New tax categories and exemptions are introduced, such as nano entrepreneurs.

Lists of taxpayers and items affected are available here.

New taxes:

• CBS: Contribution on Goods and Services
• IBS: Tax on Goods and Services
• IS: Selective Tax

Current taxes:

• COFINS: Contribution to Social Security Financing
• ICMS: Tax on the Circulation of Goods and Services
• IPI: Tax on Industrialized Products
• ISS: Tax on Services
• PIS: Social Integration Program

Following SINIEF Adjustment 49/23, Tax on Circulation of Goods and Services (ICMS), taxpayers must adopt an Electronic Invoice for Communication Services (NFCom) starting 1 April 2025, with all service charges incorporated into the electronic document.

Who should issue the NFCom?

NFCom electronic invoices must be used to charge communication services of any nature, such as:

• Radio and television stations (including pay TV);
• News portals;
• Printed newspapers and magazines;
• Internet providers;
• Fixed or mobile telephony, among others.

Which states already comply with the regulation?

Several states have proactively adopted the new requirements of NFCom despite the initial deadline extension to 1 July 2025:

• Acre – Decree 11,133/2022
• Alagoas – SEF Normative Instruction 48/2023
• Amazonas – Resolution 0027/2023
• Ceará – Decree 34,732/2022
• Federal District – Decree 44,223/2023
• Goiás – Decree 10,192/2023
• Mato Grosso – Decree 352/2023
• Mato Grosso do Sul – Decree 16,290/2023
• Minas Gerais - Decree 48,737/2023
• Paraíba – Decree 42,560/2022
• Piauí – Decree 21,737/2022
• Rio Grande do Norte – Decree 31,825/2022
• Rondônia – Decree 27,613/2022
• Santa Catarina – Decree 2,364/2022
• Sergipe – Decree 401/2023