Brazil VAT – A Long Way Off but Still in Sight

The march to tax sanity in Brazil is still on the way, although a 2030 target date is a long way off! A VAT based design penned as Imposto Único sobre Bens e Serviços, or ‘IBS’ for short, follows the likes of China and India in the simplification of the determination of VAT/GST.

It’s taken a step forward as the bill to implement IBS has now been passed by the Justice and Commission of Deputies and now heads to the Chamber of Deputies and Senate for the next round.

The level of complexity of indirect taxes in Brazil is well known to anyone that has ever tried to implement tax automation in the country. The current list of indirect taxes are:

  1. COFINS – federal tax, funding social security
  2. ICMS – state tax on the movement of goods; also levied on communication supplies
  3. IPI – federal tax on industrial goods
  4. ISS – municipal tax on services
  5. PIS – federal levy for social integration

Once implemented – and it could be in phases – it will make life a lot easier to determine the VAT. However, the question is whether the goal is to begin with a simplification aim with a view to then increase automation. This might be in much the same way that Portugal said it would scrap the submitted VAT return, in favour of tax authority-led automation via SAF-T reporting?

We’ll let you know as details emerge…

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