All exceptions to the tax reform approved in the Senate

To guarantee the necessary support for the approval of the proposed amendment to the Constitution (PEC) of the tax reform in the Senate, the rapporteur of the matter, Eduardo Braga (MDB-AM), further expanded the list of sectors benefiting from a reduction in the rate in the new system of taxes.

The final text of the PEC, which will still be analyzed again by the Chamber of Deputies, contains a list of economic activities that may have a tax rate reduced by 30%, 60% or 100%, in addition to special tax credit situations and differentiated taxation regimes. .

During the plenary discussion, the senator accepted amendments that included the events sector among those benefiting from a 60% discount on taxes and operations with microgeneration and mini-energy generation, which includes solar panels, in the list of differentiated taxation regimes.

The basis of the proposal is the adoption of a dual Value Added Tax (VAT) system, composed of the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS), in addition to a Selective Tax (IS). ISS, ICMS, PIS, Cofins and IPI are extinguished.

In the final text, a device included by Braga was maintained that creates a lock to prevent the increase in the tax burden. But as this ceiling concerns total revenue, the reduction in taxes for certain sectors must imply an increase for those not included in the list of beneficiaries.

So far, the government is projecting a standard rate, adding IBS and CBS, of up to 27.5%, which would place Brazilian VAT as the highest among the 174 countries that adopt the taxation model. In the projections of independent analysts, however, the tax could be even higher. Warren Rena’s chief economist and former São Paulo Finance Secretary, Felipe Salto, for example, calculates that the level could reach 33.5%.

According to the PEC, they will have a 60% discount on the new tax rate:

• education services;
• health services;
• medical devices;
• accessibility devices for people with disabilities;
• medicines (includes compositions for enteral or parenteral nutrition and special compositions and nutritional formulas intended for people with inborn errors of metabolism);
• basic menstrual health care products;
• urban, semi-urban and metropolitan public transport services for road and metro passengers;
• foods intended for human consumption (includes natural juices without added sugars and preservatives);
• personal hygiene and cleaning products mostly consumed by low-income families;
• agricultural, aquacultural, fishing, forestry and plant extractive products in natura;
• agricultural and aquaculture inputs;
• national artistic, cultural, event, journalistic and audiovisual productions, sporting activities and institutional communication; It is
• goods and services related to sovereignty and national security, information security and cybersecurity.

Apart from these sectors, the PEC foresees two different types of basic food basket: a more restricted one, whose products will have the IBS and CBS rates reduced to zero, and another extended to other foods, on which there will be a 60% reduction in taxes. The items that will appear in each of the product packages will be defined by means of a complementary law.

The text also provides for hypotheses of exemption, or 100% reduction in the rate in specific cases, which will be regulated by complementary law, in the following sectors:

• urban, semi-urban and metropolitan public transport services for road and metro passengers;
• medical devices;
• accessibility devices for people with disabilities;
• medicines;
• basic menstrual health care products;
• vegetables, fruits and eggs;
• acquisition of medicines and medical devices by direct administration, agencies and public foundations of the Union, states, Federal District and municipalities, as well as by social assistance entities;
• services provided by non-profit innovation, science and technology entities (ICTs).
• automobiles when purchased by people with disabilities or autism spectrum disorder or by professional drivers who intend their use in the rental category (taxi);
• urban rehabilitation activities in historic areas and critical areas for urban recovery and conversion.

There will be the possibility of a 100% reduction in the CBS rate for higher education education services under the terms of the University for All Program (Prouni).

Rural producers who have annual revenue of less than R$3.6 million will also not need to pay CBS and IBS. According to the PEC, they “may choose to be tax payers”.

In addition, service providers “of intellectual professions, of a scientific, literary or artistic nature, will have a 30% reduction in the rate, as long as they are subject to supervision by a professional council”. This category includes independent professionals such as doctors, lawyers, accountants and engineers, for example.

The reform also provides for situations in which tax credits may be granted, which also entails tax waivers and may lead to an increase in the standard rate. Taxpayers who acquire credits for:

• goods and services from a rural producer, an individual or legal entity that does not choose to be a taxpayer;
• independent cargo transporter services for individuals who are not taxpayers;
• waste and other materials intended for recycling, reuse or reverse logistics, from individuals, cooperatives or other forms of popular organizations.
• Used movable property of a non-contributing individual for resale.

The tax benefits granted to the automotive sector in the North, Northeast and Central-West regions, which would end in 2025, are also extended until 2032. According to the text, the benefits will be transformed into presumed CBS credit in cases of production of electric or hybrid cars or of parts intended for this type of vehicle.

The immunities provided for in the Constitution will also apply to the new taxes – that is, the Union, states and municipalities are prohibited from collecting taxes from:

• religious entities, temples of any cult, including assistance and charitable organizations;
• political parties, including their foundations;
• non-profit workers’ unions, educational and social assistance institutions;
• books, newspapers, periodicals and paper intended for their printing; It is
• musical phonograms and videophonograms produced in Brazil containing musical or literary works by Brazilian authors and/or works in general performed by Brazilian artists as well as the material supports or digital files that contain them, except in the stage of industrial replication of optical laser reading media .

There are also sectors that will have specific taxation regimes, which in some cases may also have a reduced rate or calculation base, to be defined in a complementary law:

• fuels and lubricants;
• financial services, real estate transactions, health care plans and prognosis competitions;
• cooperative societies;
• hotel services, amusement parks and theme parks, travel and tourism agencies, bars and restaurants and regional aviation;
• operations achieved by international treaty or convention, including those relating to diplomatic missions, consular offices, representations of international organizations and their respective accredited employees;
• sanitation and highway concession services;
• collective passenger transport services by intercity and interstate road, rail, waterway and air;
• operations involving the provision of the shared structure of telecommunications services;
• goods and services that promote the circular economy aiming at sustainability in the use of natural resources; It is
• operations with microgeneration and distributed minigeneration of electrical energy.