Brazil’s Tax Reform has entered a new phase of implementation. Following the enactment of Constitutional Amendment No. 132/2023 and the publication of Complementary Law No. 214/2025, companies are already preparing for a transition period that will fundamentally transform how consumption taxes are assessed, reported, and collected.

Although many of the changes will be implemented gradually through 2033, several strategic decisions need to be made now. For Brazilian companies expanding internationally and foreign groups operating in Brazil, the Tax Reform represents much more than a legislative change: it requires a review of processes, corporate structure, technology, compliance, and tax planning.

In this article, we explain the key updates introduced by Brazil’s Tax Reform and how they impact companies operating globally.

What Changed Under Brazil’s Tax Reform?

The main objective of the reform is to simplify Brazil’s consumption tax system by replacing several existing taxes with a model similar to the Value-Added Tax (VAT) used in many countries.

The main changes include:

  • the gradual replacement of PIS, Cofins, ICMS, ISS, and part of IPI;
  • the creation of the Contribution on Goods and Services (CBS), a federal tax;
  • the creation of the Tax on Goods and Services (IBS), administered by states and municipalities;
  • the introduction of the Selective Tax (IS), levied on products considered harmful to health or the environment;
  • the adoption of destination-based taxation, reducing tax disputes between states.

For multinational companies, this new model brings Brazil closer to international tax practices, but it also requires adjustments to new tax assessment and compliance rules.

Implementation Timeline: What Happens Over the Next Few Years?

The reform will be implemented gradually.

Key milestones include:

2026: Testing Begins

Companies will enter a testing period for CBS and IBS, allowing them to make operational adjustments before effective collection begins.

2027: CBS Takes Effect

CBS begins replacing PIS and Cofins, requiring adjustments to systems, billing processes, and internal controls.

2029 to 2032: ICMS and ISS Transition

IBS will gradually replace state and municipal taxes, progressively reducing the application of ICMS and ISS.

2033: New System Fully Implemented

At the end of the transition period, CBS and IBS will form the core of Brazil’s new consumption tax system.

How Does the Tax Reform Impact International Companies?

Foreign companies often focus on corporate and labor considerations when entering Brazil. However, indirect taxation can represent one of the biggest operational challenges.

Under the reform, several changes deserve particular attention.

Greater Alignment With International Standards

Companies accustomed to operating in countries that use VAT-based systems will encounter a system that is more closely aligned with international practices.

This could facilitate:

  • integration of global processes;
  • accounting consolidation;
  • comparison of financial indicators;
  • international tax planning.

Supply Chain Review

Destination-based taxation changes the dynamics of many commercial operations.

Companies will need to review:

  • distribution centers;
  • interstate operations;
  • logistics agreements;
  • pricing strategies.

This analysis may generate significant operational efficiency gains.

Technology Adaptation

The reform will require updates to ERP systems, tax platforms, and tax document issuance systems.

Companies operating across multiple countries will need to ensure that their systems can simultaneously comply with Brazilian requirements and international reporting standards.

New Compliance Requirements

The transition will temporarily increase operational complexity.

For several years, companies will need to manage two tax regimes simultaneously.

This will require:

  • robust internal controls;
  • ongoing monitoring of legislation;
  • employee training;
  • integration among tax, accounting, finance, and legal teams.
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The Impact on Brazilian Companies Going International

Brazil’s Tax Reform also affects Brazilian companies planning to expand their operations abroad.

International investors tend to assess factors such as:

  • tax predictability;
  • quality of corporate governance;
  • operational efficiency;
  • regulatory risks.

Companies that begin adapting to the new model now may demonstrate greater management maturity during due diligence processes, fundraising, and international expansion.

How Does the Tax Reform Affect M&A Transactions?

Mergers and acquisitions will also require additional analysis.

During due diligence processes, it will become increasingly important to assess:

  • tax contingencies related to the transition period;
  • adaptation of tax systems;
  • existing tax credits;
  • contractual impacts resulting from the change in tax regime.

Companies that anticipate this planning may reduce risks during future negotiations.

Technology Will Be a Competitive Advantage

The implementation of the reform reinforces the importance of digital transformation in tax management.

Tax automation tools, artificial intelligence, and data integration will play an increasingly strategic role in tax management.

Key benefits include:

  • reduced operational errors;
  • greater data traceability;
  • automated generation of ancillary tax obligations;
  • continuous monitoring of legislative changes;
  • improved corporate governance.

For multinational groups, integration between Brazilian systems and global platforms will be a decisive factor in ensuring compliance.

How Drummond Advisors Can Support Your Company

The Tax Reform requires a multidisciplinary approach that goes beyond interpreting legislation.

Domestic and international companies will need to align tax, corporate, accounting, technology, and regulatory considerations to navigate the transition safely.

Drummond Advisors provides integrated support to organizations operating in Brazil and the United States, assisting clients with areas such as:

  • assessing the impacts of the Tax Reform;
  • reviewing corporate and tax structures;
  • planning for international operations;
  • adapting accounting and tax processes;
  • tax compliance;
  • support for international expansion projects;
  • advisory services for M&A transactions and corporate reorganizations.

This integrated approach allows companies to transform a complex regulatory change into an opportunity to increase efficiency, reduce risks, and strengthen their global competitiveness.

Conclusion

Brazil’s Tax Reform represents one of the most significant transformations of the country’s business environment in recent decades. Although implementation will be gradual, its effects are already influencing strategic decisions related to international expansion, investments, corporate governance, and tax planning.

Companies that begin preparing now will be better positioned to take advantage of the new system, reduce compliance risks, and increase their competitiveness in an increasingly globalized market.

For organizations operating between Brazil and the United States, or planning to internationalize their businesses, understanding the changes brought by the Tax Reform is no longer simply a tax matter: it has become a strategic advantage.

Written by Marcos Ferreira*, Content Analyst at Drummond Advisors*

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