Brazil’s Tax Reform: Opportunities and Challenges for Businesses

Brazil’s  tax system has long been recognised as one of the most complex in the world. Businesses operating in the country often find it difficult to stay compliant due to its fragmented structure, with a lack of harmonisation between jurisdictions leading to inconsistent interpretations and costly errors. According to the Organizsation for Economic Co-operation and Development (OECD), Brazilian companies spend an average of 1,501 hours per year on tax compliance – the highest globally.

To address these challenges, Brazil has approved a landmark tax reform law aimed at simplifying the system, improving efficiency, and enhancing transparency. By consolidating indirect taxes and introducing a more unified structure, the government hopes to foster a more business-friendly environment and stimulate economic growth.

While the new structure promises to reduce the administrative burden over the longer term, the transition period presents a significant challenge for businesses, requiring them to manage both systems simultaneously.

To support businesses through this transition, Vertex offers a comprehensive solution with robust support for Brazil, powered by our industry-leading tax engine Vertex O Series. It is designed to help organisations  stay compliant and reduce risk throughout the reform and beyond.

What’s Changing? The Brazil Tax Reform Explained

Brazil’s tax reform will be introduced gradually between 2026 and 2033.  During this transition period, businesses will need to comply with both the legacy and new tax systems, making early preparation essential.

Until the end of 2025, Brazil’s tax system will remain divided across federal, state, and municipal levels, with overlapping taxes such as PIS, COFINS, ICMS, and others. However, from 1 January 2026, a simplified structure will be introduced alongside the existing system during the transition period:

1. Federal level: CBS (Contribution on Goods and Services) will replace PIS and COFINS.
2. State / municipal level: IBS (Tax on Goods and Services) will replace ICMS and ISS, beginning in 2027.
3. Additional taxes: IS (Selective Taxes) will apply to specific goods, such as tobacco and alcohol, and IPI (Tax on Industrialised Products) will continue to apply in Free Trade Zones only.

CBS and IBS will function as value-added taxes (VAT), applied at each stage of the supply chain to improve transparency. Oversight will be centralised, with the federal government managing CBS and a national committee managing IBS.

Vertex O Series: Supporting Businesses During Brazil’s Tax Reform

As Brazil transitions to its new tax regime, businesses face significant operational and compliance challenges. Vertex provides a comprehensive solution with built-in support for Brazil, helping organisations manage complexity and adapt confidently to the evolving tax landscape.

It enables automated, centralised tax determination and is fully equipped to handle both the legacy and new tax systems throughout the 2026–2033 transition.

Key features include:

• Parallel tax regime support: Enables simultaneous calculation and reporting under both the legacy and new systems during the transition period.
• Brazil-specific tax content: Monthly updates covering all 27 states and 340+ municipalities, including reform-related changes and Free Trade Zones.
• Flexible configuration and localisation: Customisable logic for special regimes, exemptions, and tax treatments, with jurisdiction assignment via IBGE for accurate tax application.
• NF-e (Nota Fiscal Eletrônica) and ERP Integration: Compatible with leading ERP platforms, featuring ERP-ready fields such as key codes, mark-up rates, and reduction basis and value by imposition.
• VAT withholding determination: Automated identification and calculation of WHT at federal and municipal levels with precision.

With over 16 years of experience supporting businesses in Brazil and a network of trusted local connections, Vertex is a proven and reliable compliance partner, delivering accuracy, efficiency, and strategic insight through a single, integrated solution.

Contact us or visit our product page to find out how Vertex O Series can help your business navigate Brazil’s tax reforms.