Brazil's Tax Reform: What Changes for Companies Selling Here
Paulo Wesley·
·3 min read
Brazil's tax reform replaces five consumption taxes with a value-added tax (VAT) model in three parts: CBS, federal, replacing PIS and Cofins; IBS, shared by states and municipalities, replacing ICMS and ISS; and the Selective Tax (Imposto Seletivo), on products harmful to health and the environment. The change was approved by Constitutional Amendment 132/2023 and regulated by Complementary Law 214/2025. The transition started in 2026 and ends in 2033.
For anyone selling in Brazil, or planning to, it changes pricing, invoices and the cost of importing services.
What goes and what comes
| Out | In | Level |
|---|---|---|
| PIS and Cofins | CBS (Contribution on Goods and Services) | Federal |
| ICMS (state) and ISS (municipal) | IBS (Tax on Goods and Services) | States and municipalities |
| IPI (mostly) | Selective Tax, for specific products | Federal |
IPI does not disappear completely: it is zeroed for most products but remains for items also produced in the Manaus Free Trade Zone.
The timeline
| Year | What happens |
|---|---|
| 2026 | Test phase: CBS at 0.9% and IBS at 0.1%, shown on the invoice. Companies that meet the reporting obligations may be exempted from paying, and the amount can be offset against PIS and Cofins. |
| 2027 | CBS takes full effect and PIS and Cofins are abolished. The Selective Tax begins. IPI is zeroed for most products. |
| 2027 and 2028 | Symbolic IBS (0.05% state and 0.05% municipal). |
| 2029 to 2032 | ICMS and ISS fall gradually, year by year, while IBS rises in the same proportion. |
| 2033 | ICMS and ISS cease to exist. The new system is complete. |
The main changes in logic
Taxation at destination
Today, part of the ICMS stays with the state where the sale originates. In the new model, the tax belongs to the destination, where the consumer is. This ends much of the "tax war" between states.
Broad credits (non-cumulative)
Buyers can, as a rule, offset the tax paid on their purchases. Tax applies only to the value each stage adds. For this to work, the supplier's correct nota fiscal is essential.
Tax shown separately
Tax is no longer confusingly embedded in its own price; it is shown separately. Consumers see how much tax they pay.
Split payment
The law provides for tax to be collected at the moment of payment: part of the amount the customer pays goes straight to the government, separated by the payment system. Implementation is gradual, but it should change how processors and merchants receive money.
Rate
The reference rate still depends on calibration. Government estimates point to a combined total (CBS + IBS) above 25%, one of the highest VAT rates in the world. Some sectors have reduced rates (such as health and education) and there are specific regimes.
What changes for foreign companies
- Imports of services and digital goods: the reform provides for CBS and IBS on imports, including services and digital goods sold by suppliers abroad, with responsibility rules for platforms and intermediaries. If you sell software or digital content to Brazilians from abroad, follow these regulations. See can you sell in Brazil without a local company?.
- B2B customers: since CBS and IBS generate credits, business customers will value suppliers that issue correct Brazilian invoices even more.
- Price: the final tax burden on your product may go up or down, depending on the sector. Review your price table in reais during the transition.
What to do now
- Talk to your accountant about the impact on your sector and regime.
- Update systems: invoicing, ERP and checkout must handle CBS and IBS.
- Review long contracts: contracts that span the transition should say how prices adjust to tax changes.
- Simulate prices for 2027 (full CBS) and for 2033 (complete system).
- If you are still opening a company, factor the transition into the choice of regime. See how to open a company in Brazil as a foreigner.
Summary
The tax reform simplifies the system in the long run but creates a long transition, from 2026 to 2033, in which two systems coexist. For those selling in Brazil, the key points are correct invoices, updated systems, revised prices and attention to the rules on imported digital services. If you want to understand the effect on your business, a conversation with BrazilDoor can help organize the next steps.
Frequently asked questions
What are CBS and IBS?
CBS is the Contribution on Goods and Services, a federal tax replacing PIS and Cofins. IBS is the Tax on Goods and Services, shared by states and municipalities, replacing ICMS and ISS.
When does the tax reform take effect?
The transition started in 2026 with a test phase. In 2027 CBS takes full effect, and by 2033 the new system will be complete, with the end of ICMS and ISS.
Does the tax reform affect foreign companies?
Yes. It provides for CBS and IBS on imports of goods and services, including digital ones, and changes how Brazilian customers use tax credits.
What will the new tax rate be?
The reference rate is still being calibrated. Official estimates point to a combined CBS and IBS rate above 25%, with reductions for sectors such as health and education.
Sources
About the author
Business consultant with a degree in Accounting, MBA in Finance (UFRJ) and certified financial market analyst. Since 2014 he has helped companies from more than 10 countries understand and enter the Brazilian market.
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