Tax Reform 2025: Practical Guide for Entrepreneurs, Directors and Controllers

EC 132/2023 establishes the new Brazilian tax system. Understand how the reform works, what changes for your company, and what to do now.

What is the Tax Reform?

Constitutional Amendment 132/2023, approved in December 2023, is the most comprehensive restructuring of Brazilian taxation in decades. Main change: Replacement of five current taxes with two new value-added taxes (VAT): CBS (federal) and IBS (state/municipal).

Fundamental Principles

• Non-cumulative: Tax only on value added at each stage
• Destination: Tax collected where consumed, not produced
• Transparency: Clear, unified rate visible to consumer
• Simplification: Two taxes instead of five
• Progressiveness: Social mechanisms (cashback, reduced rates)

Implementation Timeline

Impacts by Sector

Commerce

• Higher effective rate: PIS/Cofins (3.65%) + ICMS (7-18%) vs. CBS+IBS (26.5%)
• Credit management critical: Rigorous control needed
• Interstate operations: New destination principle

Services

• Significant increase: PIS/Cofins (3.65%) + ISS (2-5%) vs. CBS+IBS (26.5%)
• Healthcare/education: 50% reduction benefit
• Pricing review essential

Industry

• Benefit from full non-cumulative model
• Service input credits allowed
• IPI replacement dynamics change

Strategic Decisions for Business Owners

What to Do Now?

• Calculate current effective tax burden
• Simulate CBS + IBS with and without credits
• Identify creditable inputs and expenses
• Review systems and integration capacity
• Plan pricing adjustments
• Consider tax study for regime optimization

Conclusion

Tax Reform is inevitable and will change the game for all Brazilian companies. Those who prepare early will adapt smoothly and may even benefit. Those who wait will face crisis in 2026. Start planning now.