Brazil Introduces Tax Simplification Proposal

On July 21, the Brazilian Minister of Economy, Paulo Guedes, personally presented the text containing the first part of the proposal for the long-awaited tax reform to the National Congress. A major tax simplification was part of the presidential campaign promise by the current president of Brazil, Jair Bolsonaro, and now the first step has been proposed by his Cabinet.

One of the key points of the text presented to Congress is the unification of two federal indirect taxes - Program of Social Integration and Contribution for the Financing of Social Security (PIS and COFINS) - in a new tax called the Contribution of Goods and Services (CBS), with a proposed rate of 12%. This highlights a change to PIS and COFINS tax in Brazil as part of a longer term reform path.

The proposal also stipulates that digital platforms should collect CBS when intermediating operations in which the seller does not issue electronic invoices, such as sales sites between individuals.

To facilitate the processing and approval, the text was delivered as a Project of Law, which requires the approval through a mere simple majority in the Chamber and the Senate. This could result in a significantly faster process than the other proposals already presented, as proposed amendments to the Federal Constitution require a three-fifths majority vote by Congress.

The main difference between the proposal presented in July and others previously presented is that it does not propose the unification of state and municipal level taxes ICMS and ISS. Readers following ICMS Brazil tax and ISS changes should note that unification would be addressed in later steps. The government's option for phasing the reform was to focus on something that already has a consensus and leave more controversial issues for a later date. According to the minister advisers, the second part of the reform will be presented sometime in August.

Guedes and his team expect to be able to implement the simplified tax structure within six months from the law publication, but for now, we must await the result of the appropriation of all the proposals that have already been presented by government authorities as part of broader Brazil tax reforms. As always, we’ll keep you updated as more information becomes available.

CBS is designed as a non cumulative levy that works like value added tax in Brazil, using credits and debits to reduce cascading on goods and services.

This proposal was an early milestone on the Brazil tax reform timeline and informed subsequent legislation that advanced a broader dual VAT model.

Policy details on CBS rates, credits and exemptions would be confirmed by complementary laws. Businesses should track Brazil tax policy updates during rollout.

For tax planning, align pricing and invoicing logic to a Brazil VAT tax style model where credits for inputs offset outputs under CBS.

Use this article to understand early Brazil tax changes that focused on federal simplification before state and municipal alignment.

The proposal aimed to simplify the Brazil tax system by consolidating federal levies first, then moving toward a broader reform sequence.