Brazil is replacing five consumption taxes with a dual VAT. This guide sets out the 2026–2033 timeline, the likely rates, how credits and imports will work, and the decisions a foreign-owned company needs to make before 2027.
Brazil’s consumption taxes have long been the main reason foreign companies call the country hard to do business in. Five overlapping taxes — two federal contributions, a federal excise, a state VAT and a municipal services tax — each with its own base and credits, and with 27 state and some 5,500 municipal rulebooks. Constitutional Amendment 132/2023 and Complementary Law 214/2025 replace them with a dual value-added tax: a federal CBS and a shared state-and-municipal IBS, plus a Selective Tax on products such as tobacco, alcohol, sugary drinks and vehicles.
| Today | Replaced by | Level | Old tax ends |
|---|---|---|---|
| PIS and COFINS | CBS — Contribuição sobre Bens e Serviços | Federal | 1 January 2027 |
| IPI | Zero rate, plus the Selective Tax (IS) on harmful goods | Federal | Zero from 2027, except products also made in the Manaus Free Zone |
| ICMS | IBS — Imposto sobre Bens e Serviços | State | 1 January 2033 |
| ISS | IBS | Municipal | 1 January 2033 |
The design is a modern VAT: broad credits, tax charged on top of the price rather than inside it, and taxation where the customer is, not where the supplier sits. For a foreign-owned company that is good news in the long run. The problem is the run itself — eight years in which the old and new systems operate side by side.
Law and practice: Constitutional Amendment 132/2023; Complementary Law 214/2025 (16 January 2025); Complementary Law 227/2026 (January 2026), which created the IBS Management Committee and amended Law 214.
The federal side moves fast: CBS replaces PIS and COFINS completely in 2027. The state and municipal side moves slowly: ICMS and ISS are cut by a tenth of their current rates each year from 2029 while IBS rises in step, until the old taxes disappear in 2033.
| Year | CBS (federal) | IBS (states and municipalities) | Old taxes |
|---|---|---|---|
| 2026 | 0.9% test rate | 0.1% test rate | All in force; test amounts offset, payment waived if obligations are met |
| 2027 | Full rate, less 0.1 point | 0.1% | PIS and COFINS abolished; IPI at zero (Manaus exception); Selective Tax starts |
| 2028 | Full rate, less 0.1 point | 0.1% | ICMS and ISS unchanged |
| 2029 | Full rate | 10% of full rate | ICMS and ISS at 90% |
| 2030 | Full rate | 20% | ICMS and ISS at 80% |
| 2031 | Full rate | 30% | ICMS and ISS at 70% |
| 2032 | Full rate | 40% | ICMS and ISS at 60% |
| 2033 | Full rate | Full rate | ICMS and ISS abolished |
For a company opening in Brazil today, that means planning for three regimes in succession: the old system with a test overlay in 2026, a mixed system from 2027 in which federal tax is new and state tax is old, and the full new system only from 2033.
In 2026 invoices carry CBS at 0.9% and IBS at 0.1%. These amounts can be offset against PIS and COFINS, and payment is waived for companies that meet the new reporting obligations — Receita Federal and the IBS committee describe the 2026 calculation as informational only.
The reporting is not optional, though. Electronic invoices — NF-e, NFS-e, CT-e and the rest — must carry the new IBS and CBS fields and classification codes. The grace period ended with the regulations: fines for missing fields apply from 3 August 2026. Where a fine is assessed this year, the company is first invited to correct the document, and correcting it extinguishes the penalty.
What you pay
Nothing extra, if obligations are met: the test amounts are offset or waived.
What you must do
Issue invoices with the new IBS and CBS fields and codes.
Since August 2026
Fines for missing fields can be assessed, with a chance to correct first.
What it is for
Calibrating the real rates that apply from 2027.
Law and practice: Joint Act RFB/CGIBS 1/2025; Decree 12,955/2026 (CBS regulation) and CGIBS Resolution 6/2026 (IBS regulation), both of 29–30 April 2026.
The law aims for a combined standard rate of about 26.5%, with a review mechanism if revenue overshoots. The working estimates published in 2026 point higher: projections attributed to the Finance Ministry and the IBS committee put the combined rate at around 28%. These are estimates, not rates. The 2027 CBS rate is being set now — the Federal Court of Accounts reports to the Senate by 30 October 2026 and the Senate has until 15 December to fix it.
Standard rate
Combined CBS and IBS of roughly 26.5–28%, charged on top of the price.
60% reduction
Education, health, medicines, food, agricultural inputs, culture and several other sectors.
30% reduction
Eighteen regulated professions, including lawyers, accountants, engineers and architects.
Zero rate
The national basic food basket and certain other items.
Cashback
Low-income families registered with the social programme get part of the tax back.
Selective Tax
On top of CBS and IBS for harmful goods; its 2027 rates await a provisional measure expected after the October elections.
The headline looks high next to European VAT, but compare like with like. Today’s five taxes, charged partly inside the price and with restricted credits, often cost a business more than their nominal rates suggest. The new rate is visible; the old one was hidden.
Three mechanics change how a company in Brazil handles tax day to day.
Broad credits
Any purchase that bore CBS or IBS generates a credit, except items for personal use. Credits depend on the tax actually having been paid upstream, and they must be used within five years.
Tax on top
CBS and IBS are charged outside the price and are not included in each other’s base — prices and contracts must show them separately.
Destination principle
IBS goes to the state and municipality of the customer, ending most of the old fights over where a service is taxed.
Split payment
The tax is separated from the payment at the moment of settlement. Receita Federal now plans to start it in the second half of 2027, optional and for business-to-business payments only, with no mandatory date yet.
Refunds of excess credits — the chronic sore of the old system — are promised in 30, 60 or 180 days depending on the taxpayer’s compliance profile. Whether that holds will decide much of the reform’s credibility with exporters.
Imports of goods pay CBS and IBS at customs, in place of PIS/COFINS-Import, IPI and import ICMS. Imports of services and intangibles — software, consulting, management fees, royalties — pay CBS and IBS in place of PIS/COFINS-Import and ISS, and the Brazilian buyer is the taxpayer. A business buyer in the regular regime takes the tax back as a credit, so for most business-to-business imports the cost is cash flow, not margin.
Exports of goods and services are immune, with credits kept. For services and intangibles the test is consumption abroad: if the service is in fact used in Brazil, it is treated as an import, whatever the contract says. Exporters of services should document where the benefit is consumed.
Selling B2B into Brazil
The Brazilian business customer self-assesses CBS and IBS and credits it. Your invoice changes little.
Selling B2C into Brazil
A foreign supplier must register and collect, with no threshold. If it does not, the bank handling the remittance collects at reference rates.
Through a platform
Digital platforms that control billing, payment or delivery are liable in place of the foreign supplier.
Withholding taxes
IRRF and CIDE on payments abroad are outside the reform and still apply.
Law and practice: Complementary Law 214/2025: registration of non-resident suppliers, platform liability, collection by the remitting bank, and the export immunity for services consumed abroad.
Most of the work is not tax technique but plumbing: systems, contracts and cash. The decisions with money attached fall in 2026 and 2027.
Invoices and ERP
The new fields are already mandatory. If your system cannot issue them, that is a 2026 problem, not a 2033 one.
Contracts
Automatic rebalancing for the reform applies only to public-sector contracts. Private contracts need their own clauses: prices net of tax, tax added on top, and pass-through of rate changes.
Simples Nacional
Small companies chose by 30 September 2026 whether to charge CBS and IBS inside or outside Simples for the first half of 2027; outside means customers get full credits. The next window is March 2027.
PIS/COFINS balances
Accumulated credits can be offset against CBS or other federal taxes, or refunded. Opening stock on 1 January 2027 earns a presumed CBS credit of 9.25% in many cases.
ICMS balances
Credits left at the end of 2032 are indexed and used over 240 months, transferred, or refunded.
Intercompany fees
Management fees and royalties to the parent become subject to CBS and IBS on import — creditable for a regular-regime subsidiary, but price and document them properly.
Law and practice: Complementary Law 214/2025, transition rules for PIS/COFINS balances and private contracts; Complementary Law 227/2026 for ICMS balances; CGSN Resolution 186/2026 for the Simples option.
For a company using Paraguay as its base — the model in our market-entry guide — the reform mostly simplifies the Brazilian end.
Goods
Your Brazilian importer pays CBS and IBS at customs instead of four separate taxes, and takes a full credit if it is in the regular regime. Mercosur tariff preferences are unaffected.
Services to Brazilian businesses
Your customer self-assesses and credits the tax. Expect it to ask for cleaner invoices and contracts that state prices net of tax.
Services to consumers
Selling directly to Brazilian consumers now means registering in Brazil and collecting — or selling through a platform that does it for you.
Paraguayan side
Exports from Paraguay remain VAT-exempt there; the maquila regime is untouched by Brazil’s reform.
The reform does not change whether you need a Brazilian company. That still turns on hiring, local contracts and regulated activity — see Brazil market entry.
New IBS and CBS fields and codes on every electronic document — fines run since August 2026.
Move long-term contracts to net-of-tax pricing with a pass-through clause.
Which purchases will carry CBS and IBS, and which suppliers can pass full credits.
Plan the offset or refund of PIS/COFINS credits and the 9.25% presumed credit on stock.
The 2027 CBS rate is fixed by mid-December 2026; budget with a range, not a guess.
Document where services are consumed to keep the export immunity.
It replaces PIS, COFINS, IPI, ICMS and ISS with a dual VAT — the federal CBS and the state-and-municipal IBS — plus a Selective Tax on harmful goods, under Constitutional Amendment 132/2023 and Complementary Law 214/2025.
2026 is a test year with CBS at 0.9% and IBS at 0.1%. CBS replaces PIS and COFINS fully in 2027; IBS phases in from 2029 while ICMS and ISS phase out, and the new system is complete in 2033.
Not in practice: the amounts are offset against PIS and COFINS and payment is waived for companies that meet the reporting obligations. The new invoice fields, however, are mandatory, with fines since 3 August 2026.
The law targets about 26.5%; 2026 estimates point to around 28%. The 2027 CBS rate is set by the Senate by 15 December 2026. Some sectors get 60% or 30% reductions.
No. CBS and IBS are charged on top of the price and are not included in each other’s base, unlike ICMS today.
The Brazilian buyer pays CBS and IBS on the import and, if it is in the regular regime, takes the amount back as a credit. Withholding taxes such as IRRF and CIDE still apply separately.
Yes. A non-resident supplier selling to consumers must register and collect, with no threshold, unless a platform does it. Otherwise the remitting bank collects at reference rates.
It simplifies the Brazilian end: one set of import taxes with full credits for business buyers. It does not change whether you need a Brazilian company, which still depends on hiring, contracts and regulation.
What changes for foreign shareholders in 2026.
Ltda, CNPJ and the Central Bank, handled from a Paraguay base.
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