Brazil’s tax reform explained for foreign headquarters: CBS, IBS and the road to 2033

Brazil is in the middle of the largest change to its tax system in decades. Five taxes on goods and services are being replaced or reduced, and two new taxes, the CBS and the IBS, are already printed on every invoice in the country. For the headquarters of a foreign group, the reform is not only a compliance topic for the local tax team. It changes prices, margins, cash flow, intercompany charges and the value of tax incentives the Brazilian subsidiary may depend on. This guide explains what is changing, the timeline written into the Constitution, and the decisions headquarters should be part of.

What the reform replaces

Brazil’s consumption tax reform was approved as Constitutional Amendment 132/2023 and regulated mainly by Complementary Law 214/2025, later amended by Complementary Law 227/2026. Its core is a dual value-added tax:

• CBS (Contribution on Goods and Services), federal, which replaces the PIS and Cofins contributions; and
• IBS (Tax on Goods and Services), shared by states and municipalities, which replaces the state ICMS and the municipal ISS.

The federal IPI does not disappear entirely: from 2027 its rates are reduced to zero, except for products whose manufacture is incentivized in the Manaus Free Trade Zone. A new federal Selective Tax (Imposto Seletivo) also starts in 2027 on goods and services considered harmful to health or the environment.

Corporate income taxes (IRPJ and CSLL) are outside this reform. Changes to them, such as the 10% withholding on dividends paid abroad since 2026, came through separate laws.

The timeline

The transition is set in the Constitution itself, in the transitional provisions added by Amendment 132 (articles 125 to 129 of the ADCT):

The reference rates of the CBS and the IBS are to be set by Senate resolution, under the method and limits in the complementary law (ADCT, article 130). Any rate quoted today for the full system is an estimate, not a rule.

2026: a test year that is already mandatory

Since January 1, 2026, invoices must show the CBS and the IBS. Under Complementary Law 214/2025, the CBS is charged at 0.9% (article 346) and the IBS at 0.1% (article 343). The amounts are offset against PIS and Cofins for the same period, and companies that correctly report the new taxes in their ancillary obligations are exempt from actually paying them in 2026 (article 348). Simples Nacional companies are outside the test rates.

In practice, 2026 costs almost nothing in cash but a lot in systems. The subsidiary’s ERP, invoicing software, product and service master data, and tax classification codes all have to be right before the CBS is charged in full in 2027.

How the new taxes work

Broad credits, but tied to payment

The main promise of the reform is a true value-added tax. A company under the regular regime may take CBS and IBS credits on its purchases, except for items of personal use or consumption and the other cases the law lists (Complementary Law 214/2025, article 47). That is a major change from PIS, Cofins and ICMS, whose credit rules are narrow and heavily litigated.

There is a catch that changes procurement. As a rule, the credit depends on the tax on the supplier’s sale having been extinguished, that is, paid through one of the methods the law allows, and on a valid electronic invoice. The supplier’s tax compliance therefore affects the buyer’s cost.

Split payment

The law creates a split payment mechanism: in electronic payment transactions, payment service providers will separate the CBS and IBS amounts and remit them directly to the tax authorities when the payment is settled (article 31). For the subsidiary, this means part of the cash from each sale never reaches its account. Working capital models built on the current system, where taxes are paid weeks after the sale, need to be revised.

Exports are immune

Exports of goods and services are immune from the CBS and the IBS, and the exporter keeps the right to use the credits on its purchases (article 79). For Brazilian subsidiaries that export to the group, this should reduce the tax cost that today builds up in the chain.

Imports of services and intangibles are taxed

This is the point that most directly involves headquarters. The CBS and the IBS apply to imports of goods and of services and intangibles, including rights (article 63). An import of a service or intangible is a supply by a non-resident whose consumption takes place in Brazil, even if supplied from abroad (article 64). Complementary Law 227/2026 clarified the rule: consumption in Brazil includes the cases where the place of supply is in Brazil and, in other cases, where the buyer is resident in Brazil.

Management fees, shared services, software licenses, royalties and other intercompany charges from headquarters to the Brazilian subsidiary are therefore within the scope of the new taxes. A subsidiary under the regular regime will generally be able to take credits on these imports. But the contracts, the invoicing and the documentation of each charge have to support those credits, on top of the transfer pricing and withholding tax rules that already apply.

Governance: who runs the IBS

The IBS belongs to states and municipalities, but it will be administered centrally. Complementary Law 227/2026, published in January 2026, created the IBS Management Committee (CGIBS), which coordinates collection, administrative tax procedures and the distribution of revenue among states and municipalities. For taxpayers, this should mean one set of rules for the IBS instead of 27 state ICMS laws and thousands of municipal ISS laws.

What headquarters should be part of

Most of the work happens in Brazil, but several decisions need headquarters at the table:

1. ERP and systems. Global ERP templates often have to be adapted for Brazil. The changes for CBS, IBS, the Selective Tax and split payment, and the coexistence of the old and new taxes until 2032, need budget and IT priority from the group.
2. Pricing and contracts. Long-term customer and supplier contracts signed now will run through the transition. Tax adjustment clauses, price lists and margin models should be reviewed for the move from PIS and Cofins to CBS in 2027 and from ICMS and ISS to IBS from 2029.
3. Intercompany charges. Review every charge from the group to Brazil for CBS and IBS on imports, credit eligibility, transfer pricing support and withholding taxes, and agree with headquarters how the invoices will be issued.
4. Cash flow. Model split payment and the timing of credit refunds in the subsidiary’s treasury forecast and in any intercompany funding plan.
5. Tax incentives. State ICMS incentives are reduced in the same proportion as the ICMS between 2029 and 2032 and end with the tax. If a business case or a plant location in Brazil relies on them, it should be revisited now.
6. Supplier base. Because credits depend on the supplier’s compliance, procurement policies may need to weigh suppliers’ tax regime and invoicing quality, not only price.
7. Reporting to headquarters. The transition creates new balances, such as credits to recover and taxes withheld through split payment. They should appear clearly in the reporting package, so the group sees their effect on margins and working capital.

How Solidy can help

Solidy already serves subsidiaries of multinational companies in Brazil. Our consultants run tax diagnostics for the transition, review master data, invoicing and intercompany flows, model the effect of CBS and IBS on prices and cash, and keep tax compliance and reporting to headquarters aligned throughout the years when the old and new systems run side by side. Talk to our consultants.