Brazil Tax Reform

Brazil has been undergoing a significant tax reform aimed at simplifying its complex tax system and fostering economic growth. The reform focuses on streamlining various taxes and consolidating them into a more simplified structure. One key aspect involves merging federal, state, and municipal taxes into a single unified tax. This move is designed to reduce bureaucratic hurdles and enhance efficiency in tax administration. Brazil is known to have one of the most complicated tax systems in the world and the government has been trying since 1988 to pass legislation to improve the tax system. On December 20, 2023, the Brazilian Congress succeeded in this effort.

The new taxes are the Goods and Services Tax (IBS), the Contribution on Goods and Services (CBS), and the Excise Tax (IS).  These will replace all existing taxes. Most goods and services will see a significant drop in tax with most taxed around 27.5%making US exports more competitive. Several sectors will be considered exceptions with either no tax or a lower tax. Some food, medicine, and personal hygiene products, among others, would fall into these categories. The areas for exceptions will be re-evaluated every five years, except for items in the basic food basket, which will remain exempt from taxes.

Beginning in 2027, an Excise Tax will be added for products that are considered harmful to health or the environment, such as cigarettes. The new tax cannot be applied to the electricity or telecommunications sectors.

The tax reform will not be fully implemented until January 2033. It is expected to lead to economic growth and to increased investment in the country. With improved economic growth U.S. businesses will likely find increased market opportunities. A thriving Brazilian economy would create a more robust consumer base, providing U.S. companies with a larger market for their products and services. Tax simplification has been a top request of the business community for many years.

For more information about the tax reform and about opportunities for U.S. companies in the Brazilian market please contact:

Diogo Pinto 
Commercial Specialist 
U.S. Commercial Service – Brazil 
Email: diogo.pinto@trade.gov