Brazil’s Tax Reform is not a future event. It is already under way, and the CFOs and Controllers of companies with international operations in Brazil need to understand exactly what this means for their tax structure, their cash flow and their reporting to headquarters.

In 2026, the testing year for IBS and CBS began. In 2027, effective collection starts. The window to structure your operation without pressure is closing. 

This article offers a technical, applied reading of what changes, and of what your company needs to do now. 

What IBS, CBS and the Selective Tax are

The Tax Reform, approved by Constitutional Amendment No. 132/2023 and regulated by Complementary Law No. 214/2025, replaces five existing taxes with three new ones:

IBS (Tax on Goods and Services): jurisdiction shared between states and municipalities. Replaces ICMS and ISS. Managed by the IBS Steering Committee (CGIBS). 

CBS (Contribution on Goods and Services): federal jurisdiction. Replaces PIS and COFINS. Regulated by the Federal Revenue Service. 

Selective Tax (IS): federal jurisdiction. Levied on products harmful to health or to the environment: cigarettes, alcoholic beverages, high-emission vehicles, sugary products. Its purpose is to discourage the consumption of specific categories. 

Together, IBS and CBS form Brazil’s Dual VAT, a model inspired by value-added tax systems adopted in dozens of countries, but with particularities that require specific technical attention. 

It is worth noting that the Tax on Industrialized Products (IPI) will not be fully extinguished by the Tax Reform. From 2027, its rates will be reduced to zero for most products. However, the tax will continue to apply to items that compete with products benefiting from the tax incentives of the Manaus Free Trade Zone, preserving the region’s economic development model. 

The real timeline: what happens in each phase

The transition is gradual, but the operational process has already begun. Understanding the calendar is the first step to sizing the adaptation effort.

2026: Testing year (phase under way)

In 2026, companies must issue tax documents reporting the IBS and CBS amounts, but the assessment is purely informational, with no tax effects and no payment due. 

The rates in force during the testing year are: 

• CBS: 0.9% 

• IBS: 0.1% 

In practice, this means the system must be configured, invoicing processes must be adapted, and the tax team must know how to assess correctly, even without actual collection.

On April 29, 2026, Decree No. 12,955/2026 was published, regulating CBS. On April 30, CGIBS Resolution No. 6/2026 regulated IBS. The operational rules are in force. 

2027: Effective collection begins 

From 2027, IBS, CBS and the Selective Tax begin to be effectively collected. IBS comes into force, but still at a reduced rate of 0.1%, used as a transition mechanism, and CBS at its full rate, reduced by 0.1%. Your company’s tax structure changes concretely. 

2029–2032: Progressive transition

Between 2029 and 2032, the IBS rates are gradually increased, while ICMS and ISS are reduced until their extinction. CBS will already be operating in its definitive model, replacing PIS and COFINS. 

Although the migration happens gradually, the impacts on assessment, credit utilization, system parameterization and financial reporting will already be significant for companies. 

2033: Full regime

The transition will be complete. ICMS, ISS, PIS and COFINS will be extinguished. The IBS/CBS system operates at the full rate, estimated at a total of 28% (9.3% CBS + 18.7% IBS).

Why this matters especially for companies with international operations in Brazil

For subsidiaries and foreign-controlled companies, the Tax Reform has layers of complexity that go beyond local operational adaptation. There are four critical dimensions:

1. Import of services and intangibles

IBS and CBS are levied on imports of goods, services, intangibles and rights, regardless of whether the importer is an individual or a legal entity, and regardless of the tax regime adopted (under Article 63 of CL 214/2025). 

This directly affects: 

• Software licensing agreements with headquarters 

• Royalties paid abroad 

• Intercompany service provision 

• Acquisitions of intangibles from foreign suppliers 

The tax treatment of these transactions must be reviewed in light of the new legislation, especially in structures where headquarters provides services or licenses to the Brazilian subsidiary. 

2. Export of services and immunity

Companies that export services have a structural piece of good news: EC 132/2023 granted immunity from IBS and CBS on exports. This rule applies to exports of both goods and services. 

But there is a relevant trap for technology and digital service companies: the definition of “result outside national territory” can give rise to litigation when the service is enjoyed in Brazil, even if the contracting party is foreign. 

If the Brazilian subsidiary exports services to headquarters or to clients abroad, it is essential to map whether these operations correctly fall under the immunity, or whether there is a risk of assessment.

3. Accumulated credits: recovery and offsetting

CL 214/2025 ensures that, even in immune transactions (such as exports), the IBS and CBS credits generated on acquisitions may be retained and used. The options are: 

• Offsetting against future IBS and CBS liabilities on domestic operations 

• Cash refund, in accordance with the regulations of the Steering Committee and the Federal Revenue Service 

For companies with high export volumes or input purchases, correctly mapping these credits is a real asset, and a process that needs to be structured before 2027.

4. Reporting to headquarters and scenario modeling

The change in the tax model directly affects the effective burden on margins, transfer pricing calculations and the subsidiary’s financial modeling. What is assessed today as ICMS, PIS and COFINS will tomorrow be IBS and CBS, with different logics for credit, assessment and offsetting. 

CFOs who have not yet modeled the 2027–2032 scenarios for the Brazilian operation have an urgent task: quantify the impact before it shows up in the budget. This is not a task for the tax department in isolation, it is a board-level decision. 

What changes in day-to-day tax operations

Beyond the strategic tax impact, there are concrete operational changes that the finance team needs to absorb: 

Issuing tax documents: since January 2026, tax documents must report the IBS and CBS amounts. ERP systems, integration with the Federal Revenue Service and invoicing processes must be adapted. 

Assessment and bookkeeping: the assessment logic changes. The IBS and CBS credit regime follows the principle of full non-cumulativity, broader than the current PIS/COFINS model. What can be credited and how that credit is recognized requires a process review. 

Managing rates per transaction: during the transition period, the old system (PIS, COFINS, ICMS, ISS) and the new one (IBS, CBS) coexist. The risk of assessment error is high, especially for companies with mixed operations (services and products) or with suppliers under different regimes. 

Contracts with suppliers and clients: the change in the tax model may trigger adjustment clauses in existing contracts. Intercompany contracts with headquarters and foreign suppliers must be reviewed. 

Three questions every CFO should be answering now

1. How much will the Tax Reform cost (or save) on your margin in 2027?

Not as an estimate, as a modeled number. The answer requires simulation with the actual rates, applied to your revenue mix and your credit profile.

2. Is your structure for importing services and licenses mapped to the new model?

The incidence of IBS and CBS on imports of intangibles and intercompany services is one of the highest-risk areas for subsidiaries of international groups. Without reviewing the contracts and flows, the liability accumulates silently.

3. Are your ERP and your tax-invoicing processes configured for 2026 and prepared for 2027?

The testing year is the opportunity to correct errors with no tax consequence. Companies that leave it to 2027 will discover the problems with actual collection already in force.

What is not worth doing

Waiting for regulatory stabilization before acting. CL 214/2025 is published. The 2026 operational regulations are published. The legal basis is established, and the companies that waited for the picture to become clearer in previous reforms paid the price in rework and accumulated liabilities. 

Treating the Reform as an IT project. Adapting the ERP is necessary, but not sufficient. The Reform requires contract review, financial scenario modeling, credit analysis and process adaptation. It is a business project, not just a systems one. 

Leaving it to your current accounting firm to solve without a structured mapping. If your accounting partner has not yet brought you a quantified impact analysis for your operation, that is a warning sign. 

How Bernhoeft structures the transition for international companies

We have worked with subsidiaries and foreign-controlled companies since the start of our operation. The Tax Reform transition is nothing new: it has been handled in a structured and proactive way, with scenario modeling and support for our clients’ operational, tax and accounting adaptation since 2023. 

What we deliver in this process: 

• Impact mapping by operation: we quantify the real effect on margins, cash and the effective tax burden, with scenarios for 2027, 2029 and 2033 

• Review of intercompany contracts: we identify clauses that need adjustment before effective collection begins 

• Tax process adaptation: we configure assessment, bookkeeping and document issuance within the new model 

• International reporting: we translate the impacts into the standard headquarters needs, in English, with the clarity a board or external auditor requires 

If you do not yet have the impact number for your operation, that is the first step.

Bernhoeft is a strategic accounting BPO specialized in companies with international operations in Brazil. We work with CFOs, Controllers and financial decision-makers who need fiscal predictability and accounting clarity to operate and grow in Brazil. 

Talk to a specialist.