By Guilherme Martins and João Pedro Riccioppo Cerqueira Gimenes
Last week, on a historic day (12/20/2023), after 40 years of discussions (and waiting), Constitutional Amendment No. 132, the Tax Reform, was enacted. There will be a profound change in the current tax system, specifically in relation to taxation on consumption.
The solution sought by the Reform consists, in short, of the conversion/unification of 5 taxes existing in our tax system, namely: PIS, COFINS, IPI, ICMS and ISS, into 3 new taxes. They will be replaced by a “Dual VAT”, which will be composed of the Contribution on Goods and Services (“CBS”), under the jurisdiction of the Union, and the Tax on Goods and Services (“IBS”), managed by the Federative Council, which is composed of the States and Municipalities, in addition to a Selective Tax (“IS”), which will be levied on goods and services that are harmful to health and the environment.
The new taxes will be levied on transactions and imports involving tangible or intangible goods, including rights, or services, and their main characteristics are full non-cumulativeness, a broad tax base and collection at the destination. The following are explained:
Full non-cumulativity consists of the possibility of offsetting the tax through unrestricted crediting, with the exception of acquisitions for personal use or consumption, as well as for exempt transactions or transactions subject to immunity.
It is broadly based on the principle that includes all material and immaterial goods, including rights and services, and that it will be calculated “extra”. The destination principle advocates collection on consumption, or rather, focused on the final consumer, rather than at the place of origin of the product or service.
As expected, the Federal Government intended – and planned accordingly – to definitively approve the Reform in 2023. Now, it will be necessary to monitor, throughout 2024, the complementary laws that will bring the definitions and details of the tax reform.
Our team will continue to closely monitor the development of the topic and is at your disposal.
willingness to provide any clarifications.