- Passage of VAT Reform Legislation: On July 10, 2024, Brazil’s Chamber of Deputies approved draft legislation (PLP No. 68/2024) to refine the VAT reform initiated in December 2023, establishing a dual VAT structure to begin in 2026 with a seven-year transition period.
- Key Features of the Legislation: The reform introduces a federal VAT (CBS), a state and municipal VAT (IBS), and a new federal excise tax (IS), aiming to enhance the tax system while addressing economic concerns.
- Significant Amendments Made: The internal committee modified the proposal to include zero-rate VAT on essential food items, reduced VAT rates for agricultural inputs and medicines, cashback for low-income families on essential services, and a lower excise tax rate on mineral extraction.
- Additional Benefits and Provisions: The legislation also allows for VAT recovery on employee-related expenses and provides VAT reimbursement for tourists, enhancing the overall tax benefits for various stakeholders.
- Next Steps and Ongoing Monitoring: The approved legislation will move to the Senate for further review in the second half of 2024, with tax professionals and industry stakeholders closely watching its implications on Brazil’s tax landscape and economic growth.
Source TPA
