Tax Changes to Expect in Brazil for 2023

At the end of each year, the Federal, State, and Municipal governments publish important changes to indirect taxes. It is expected that most of these changes start to take effect during the first quarter of 2023. Therefore, Brazilian taxpayers need to be aware, as some of these amendments may require adjustments to a companies' tax compliance, calculation, and payment procedures.

Below are the main changes to note for 2023 that could intensify a company’s indirect tax burden. 

PIS e COFINS

I – Rules Consolidation 

IN RFB 2121/2022

Consolidation of PIS and COFINS rules and some amendments by the Normative Instruction of the Federal Revenue Service of Brazil (IN 2121/2022), affecting the calculation bases composition (e.g. exclusion of ICMS); the inclusion of the events sector among those benefiting from a zero rate; new possibilities of deductions in such contributions calculation (e.g. deduction of ICMS amounts); inclusion and exclusion of items and services in the concept of inputs for PIS and COFINS credit purposes, among others.

II – Oil and Gas

MP 1.157/2023

The Provisional Measure 1157/2023 reduced to zero percent the rates of PIS and COFINS levied on operations carried out with diesel oil, biodiesel, liquefied petroleum gas, alcohol, aviation kerosene, vehicular natural gas, and gasoline.

ICMS

I – Increasing of the Standard Rate 

Many states have increased the standard rate for domestic transactions as shown below:

II - Essential and indispensable services

The ICMS tax rate for transactions with fuel, natural gas, electricity, communications, and public transportation became limited to the standard rate in force for internal transactions in the state, because such goods and services were included in the list of essential and indispensable items (LC 194/2022).

However, it has been noted that some states did not respect this regulation and are taxing such goods and services at higher rates than the limit imposed. In these cases, taxpayers and leaders should rely on the assistance of their legal and tax advisors in order to protect their rights appropriately.

Tax Documents

It is also worth mentioning the following changes in the tax document, such as:

• Institution of DACE (Auxiliary Electronic Declaration of Content) - SINIEF ADJ 05/ 2021
• New lay-out for EFD-REINF - ADE COFIS 93/2021
• New list of activities for CNAE -  MP 1.147/ 2022 e REGULATORY ORDINANCE 11.266/2022
• Mandatory bookkeeping in the Block K (of EFD ICMS/IPI) for companies with annual revenues equal to or greater than R$300 million. – SINIEF ADJ 25/2022
• Changes to the NF-e layout and validation rules – TECHNICAL NOTE 2022.003
• Extends the starting date of the mandatory NF3e (new Electronic Invoice for Electricity)- SINIEF ADJ 057/2022

It is important to understand these changes for 2023 to able to properly validate tax documents, avoid eventual legal exposures, or even imminent questions and penalties.

Taxpayers should analyze the new regulations of each state in detail according to their specific activities. Take into consideration the economic, accounting, tax and even legal consequences involved, in addition to the benefits and special regimes eventually in use.