- Introduction of Dual VAT System: Brazil’s tax reform under Constitutional Amendment 132 consolidates five existing taxes (PIS, Cofins, IPI, ICMS, and ISS) into two new taxes: the Goods and Services Tax (IBS) for states and municipalities and the Contribution to Goods and Services (CBS) for the federal level, creating a dual VAT system aimed at simplifying the tax structure.
- Key Features and Transition: The reform introduces a broad tax base, destination-based taxation, non-cumulative structures for tax credits, and uniform legislation across the country. A seven-year transition period will phase out existing consumption taxes, with gradual reductions in ICMS and ISS rates, aiming for full implementation by 2033.
- Objectives and Impacts: The reform seeks to promote economic growth, reduce inequality through a more equitable tax distribution, and simplify the tax system for businesses and citizens, ultimately fostering a more efficient and transparent tax environment in Brazil.
Source Comarch
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