Tax reform foresees implementation of the new VAT from 2026 and eight-year transition – 06/22/2023 – Market

The PEC (Proposed Amendment to the Constitution) of the tax reform provides for the implementation of the new IVA (Additional Value Tax) from 2026, but full migration will only take place in 2033.

The longer transition, anticipated by the Sheetseeks to accommodate the tax benefits already granted by states and municipalities and whose maintenance is guaranteed by the National Congress until 2032.

Even with this departure, the federal government will inject BRL 160 billion over eight years to help offset this bill, not counting the FDR (Regional Development Fund), which will have BRL 40 billion annually from 2033.

The first version of the legal text of the proposal was presented this Thursday (22) by the rapporteur, deputy Aguinaldo Ribeiro (PP-PB), but it is still far from being the final version to be voted on in plenary. The mayor himself, Arthur Lira (PP-AL), acknowledged that there are still points under negotiation.

“It is a preliminary report. We are going to revisit productive sectors, city halls of large cities, governors, expand the dialogue with Minister Fernando Haddad, with President Lula”, said the coordinator of the reform working group, deputy Reginaldo Lopes (PT-MG ).

Despite this, Lira committed to publishing the text in an attempt to “guarantee the time for criticism”, that is, a period for parliamentarians to study the proposal and present suggestions for change.

In Congress, allies of the President of the Chamber defended postponing the disclosure until next week to avoid the PEC being exposed for a long time before finally going to the vote, “beating” from different sectors. Even so, the promise of disclosure was kept by Lira, who wants to vote on the proposal in the plenary of the Chamber until June 7.

One of the pillars of the proposal is the merger of PIS, Cofins and IPI (federal taxes), ICMS (state) and ISS (municipal) into one IVA, which will be called IBS (Tax on Goods and Services). The system will be dual: it means that a portion of the rate will be administered by the federal government, and the other by states and municipalities.

A selective tax will also be created, which does not have a collection purpose and is applied to goods and services whose consumption the government intends to discourage (such as cigarettes and alcoholic beverages). Some parliamentarians defend applying it to curb polluting activities.

The text does not indicate what the definitive rates of each of the new taxes would be, which will be defined later in a supplementary law and will still depend on calculations carried out jointly with the Ministry of Finance.

So far, it is only known that, in 2026, when the transition begins, a test rate of 1% will be applied – whose payment can be deducted from the current PIS/Cofins.

In the following year, there would be the complete implementation of the CBS (Contribution on Goods and Services), a federal portion within the IBS, and the extinction of PIS/Cofins. The IPI rates would also be zeroed, with the exception of what impacts the Manaus Free Trade Zone.

The gradual entry of states and municipalities into the new system would take place from 2029, with completion in 2033, when the current taxes would be completely extinguished.

The tax will be collected where consumption takes place (destination), replacing the current model of incidence at the place of production (origin).

In addition to the dual system, the text also provides for the setting of a standard rate and a reduced rate (equivalent to 50% of the standard charge) for specific sectors, such as medicines, medical devices and health services, education services, collective public transport, agricultural products, basic basket items and national artistic and cultural activities.

Some specific drugs, such as those used for cancer treatments, will be exempt. There will also be a 100% reduction in the CBS rate levied on higher education education services (ProUni).