Brazil’s consumption tax reform still leaves uncertainty

Brazil’s consumption tax reform provided for an overhaul of the national tax system, implementing a VAT system with a federal contribution on goods and services (CBS) and a state and municipal shared tax on goods and services (IBS).

The implementation will continue until 2033, during which period the current taxes will be gradually substituted by CBS and IBS. As previously discussed, 2026 is a test phase, under which taxpayers are obliged to issue invoices stating CBS and IBS at a combined rate of 1% (0.9% for CBS and 0.1% for IBS) but are exempt from paying these taxes if the ancillary tax obligations are complied with.

However, at the end of 2025, there was still much uncertainty, as several highly relevant regulations were yet to be enacted and doubts clarified, and, at that time, Supplementary Bill of Law 108/2024 (which resulted in Supplementary Law 227/2026) was under discussion, aiming to establish an IBS Management Committee (CGIBS) and provide for IBS administrative litigation proceedings, tax penalties, and rules related to the distribution of the IBS collection proceeds to federal entities, among other related matters.

Due to the uncertainties regarding compliance under the tax reform, on December 23 2025, the Federal Revenue Service (RFB) and CGIBS issued Joint Act 01/2025, to address the ancillary tax obligations necessary for IBS and CBS tax compliance in 2026. The act provides that, until the first day of the fourth month following the publication of the common part of the IBS and CBS regulations, no penalties will be applied for failure to register the IBS and CBS fields in tax documents, and the requirement for a waiver of the IBS and CBS collection will be considered fulfilled.

On April 29 2026, the much-anticipated regulations were published under Decree 12,955/2026 (the CBS Regulation) and CGIBS Resolution 06/2026 (the IBS Regulation). Both regulations share common rules applicable to CBS and IBS, while having specific provisions for each tax. Considering this, the obligation to state CBS and IBS in invoices begins as of August 3 2026.

Taxpayers have still raised several concerns as, contrary to expectations, the CBS and IBS regulations mostly reproduce the wording of Supplementary Law 214/2025, leave several matters pending further regulation, and present rules with unclear applicability.

Among the unclear matters, the regulations make 175 references to a Joint Act of the RFB and CGIBS to be enacted to further regulate matters or provide further rules. This is very concerning as it was expected that the regulations would be issued in a single act, or two, thus achieving the simplification intended by the consumption tax reform.

Also, several types of transactions that are regulated in detail for state VAT (ICMS) purposes are not even mentioned in the CBS and IBS regulations, such as toll manufacturing, indirect exports, sales in consignment, and warehousing. Accordingly, at this point, it is not possible to precisely determine the CBS and IBS treatment and compliance in these (and other) transactions.

Most likely, the regulations were issued to comply with RFB/CGIBS Joint Act 01/2025, thus providing some time for a test phase, which was partially suspended. To this end, the RFB and CGIBS allowed national sector entities to present suggestions for amendments to the regulations.

As an illustration of the uncertainties, the Federal Accounting Council presented 133 amendment suggestions.

In summary, the long-awaited CBS and IBS regulations ended up being overly simple in view of the necessary regulations demanded by Supplementary Law 214/2025, thus perpetuating undesired uncertainty at the beginning of the consumption tax reform’s implementation.

Furthermore, the clear need for additional regulation frustrated expectations that the reform would deliver simplicity and legal security, as a door has been left open for numerous other tax regulations and interpretations, which is one of the major causes of controversies under the current tax system.

Unfortunately, taxpayers must organise themselves according to the current rules, and prepare for the full levy of CBS in 2027, even though its tax rate has not been issued yet.