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A major step on the path to Brazil’s national indirect tax reform has been cleared after the pilot implementation phase went live on 1st January 2026.
The introduction of the pilot phase means the new CBS (federal) and IBS (state/municipal) consumption taxes are now embedded into key elements of Brazil’s finance setup – including e-invoicingElectronic invoicing - widely referred to as e-invoicing - is the exchange of a digital document between a supplier and a buyer. E-invoices are issued, transmitted and received in a structured data format that enabled automatic and electronic processing. They contain data in a machine-readable format so that an AP system can read an invoice without manual data entry, leading to faster and more efficient invoicing. and compliance.
New CBS and IBS regulations are due to be published in 2026, at which point a three-month testing period will begin. During this time, businesses will not receive penalties for failure to comply with the new tax systems.
However, companies must populate CBS and IBS fields on invoices throughout the testing period.
Progression to full CBS operation in 2027 will commence thereafter, while IBS is due to be implemented in a phased approach from 2029 to 2032.
Once the new systems are in full operation, tax authorities have pledged that errors in reporting of either tax will not be tolerated. Businesses that fail to prepare for Brazil’s widespread reform in an effective and timely manner will leave themselves exposed to the threat of fines and loss of credits.
Why is Brazil reforming its indirect tax setup?
Brazil is notable for the complexity of its current indirect tax system, making it a considerable challenge for companies trading in the South American nation when it comes to managing, determining, and remitting taxes.
Its current indirect tax regime involves multiple, layered taxes including PIS, Cofins, IPI, ICMS, and ISS.
In December 2023, the Brazilian Congress approved a motion to overhaul the system by introducing a dual-VAT model based on CBS and IBS.
It hopes this will enable the country to simplify compliance, reduce business costs, boost productivity, and improve transparency for both businesses and authorities.
The new dual-VAT model is designed to eliminate fragmented processes that distort product chains and deliver a boost to GDP.
How can businesses prepare?
With scrutiny of tax data and e-invoices set to be higher than ever before, businesses trading in Brazil must have solutions, systems and processes in place to accurately determine the new taxes from Day One.
Tax and finance leaders should also consider the importance of master data for fuelling not only accurate tax determination, but also populating e-invoices with correct, complete details.
For more information on how inFlyte™, our global solution for indirect tax can help your business click here. Or to learn more about our LimeLyte® Entity Manager master data tool, click here.
