The consumption tax reform, approved after more than three decades of debate, marks the most significant overhaul of Brazil’s indirect tax system since the 1988 Constitution. The primary goals of the reform are to simplify, modernize, and make the tax collection model fairer, aligning Brazil with international best practices. The new legislation was enacted in January 2025 and will be implemented gradually starting in 2026.
Among the main changes is the replacement of several existing taxes – PIS, Cofins, IPI, ICMS, and ISS – with two new taxes:
- Imposto sobre Bens e Serviços (IBS) / Tax on Goods and Services, under state and municipal jurisdiction
- Contribuição sobre Bens e Serviços (CBS) / Contribution on Goods and Services, under federal jurisdiction
Additionally, an Imposto Seletivo (IS) / Selective Tax will be introduced to discourage the consumption of products harmful to health and the environment. The reform also includes important measures such as the exemption of exports and the adoption of the destination principle, which ensures uniform rates and taxation based on the location of consumption.
The implications of the reform extend far beyond operational challenges (such as the immediate risk of companies being unable to issue invoices in January 2026). Businesses in Brazil will need to undergo significant transformations across multiple fronts, including:
- Economic modeling and tax intelligence
- Organizational strategy
- Risk management and resilience
- Corporate and operational restructuring
- Performance metrics and strategic communication
Successfully navigating this transition will require an integrated, forward-thinking approach tailored to the specific needs and realities of each organization.
We hosted an in-depth discussion on how organizations could prepare for and thrive under Brazil’s new tax landscape, turning compliance into a strategic advantage.
Opening Remarks:
- Paulo Vieira da Cunha, Founder, Verbank Consulting; Former Director, Central Bank of Brazil
Moderator:
- Kieran McManus, Partner, PwC
Speaker:
- Bruno Porto, Partner, PwC
