Brazil's consumption-tax reform took effect on January 1, 2026, and the first year is a trial run. The rates are symbolic, but the transactions are real and the new invoice fields are already mandatory — which means a "year of adjustment" does not mean a year without obligations.
What changes now
The new model is a dual VAT (value-added tax): two taxes on value added, one federal and the other shared between states and municipalities.
- CBS (the federal contribution on goods and services), with a test rate of 0.9%
- IBS (the state and municipal tax on goods and services), with a test rate of 0.1%
Five taxes will be phased out over the transition: PIS, Cofins and IPI, at the federal level (two social contributions on revenue and the tax on industrialized products); ICMS, the state tax on the circulation of goods and services; and ISS, the municipal tax on services.
What companies need to do
Update their systems, review their tax classifications and issue invoices with the new fields. The Receita Federal (Brazil's federal tax authority) has suspended the automatic application of penalties for omitting CBS and IBS until the fourth month after the regulations are published — but it recommends that companies comply with the rules from January, so problems do not pile up.
The advice makes practical sense: anyone who leaves the system update for later will be doing it with a full year's volume of transactions ahead of them, not a single month's.
What comes in 2027
Split payment starts next year. It is the automatic separation of the tax at the moment of payment: the tax amount never passes through the company's account and goes straight to the tax authorities.
The change affects cash flow, not the tax burden. Today a company receives the full amount and pays the tax later; once split payment begins, the tax money never comes in at all. For businesses running on tight working capital, that calls for planning before 2027, not in 2027.
The sensitive point: agribusiness
The estimated VAT rate for rural producers is around 28%, compared with something close to 5% under the current tax burden. The gap is large enough to change the math for anyone who farms.
There is an exemption for operations below R$3.6 million a year, which protects small producers — but the threshold also creates a cliff: crossing that line means going from zero to the full regime.
With information from Agência Brasil. Original report by Wellton Máximo, published on January 1, 2026.
