BRAZIL Law and Practice Contributed by: Roberta Bilotti Demange and Marina Bertucci Ferreira, Pinheiro Neto Advogados
The reform created the Contribution on Goods and Services (CBS), to be collected by the federal gov - ernment; the Tax on Goods and Services (IBS), to be jointly collected by states and municipalities; and an Excise Tax (IS), to be collected by the federal govern - ment on certain goods and services that are harm - ful to health or the environment, all of them replacing the current consumption taxes (ie, IPI, PIS, COFINS, ICMS and ISS). CBS and IBS are characterised by three key fea - tures: (i) broad tax base, encompassing transactions involving tangible and intangible goods (and any rights linked to them) or transactions involving services; (ii) a non-cumulative structure, allowing taxpayers to calculate credits on virtually all expenses; and (iii) a limited number of tax rate bands. Regarding item (iii) above, while each federative entity will be empowered to set its specific tax rate through legislation, this rate will be uniform for all transactions involving tangible or intangible goods, including rights, or services. However, certain goods and services may be eligible for lower or zero tax rates under IBS and CBS. Moreover, the Senate will hold the authority to establish reference rates for IBS and CBS at the fed - eral, state and municipal levels. Transition period The transition period will last eight years. During this period, CBS and IBS will be gradually implemented, while current consumption taxes and correspondent tax incentives will be gradually reduced, until the new system is fully implemented in 2033. Starting in 2026, CBS and IBS will be implemented with a trial rate of 0.9% for CBS and 0.1% for IBS. In 2027, PIS/COFINS will be extinguished, and the CBS rate will be raised to a reference rate (to be determined later by the Ministry of Finance). Simultaneously, the IPI rate will be reduced to zero in 2027, with an excep - tion for items manufactured in the Manaus Free Trade Zone. From 2029 to 2032, a gradual phase-out of ICMS and ISS is anticipated, with rates decreasing to 90% in 2029, 80% in 2030, 70% in 2031, and 60% in 2032. In 2033, the new system will be fully implemented,
leading to the complete extinction of the old taxes and legislation. Moreover, from 2029 to 2078, there will be a gradual 50-year shift from origin-based (production location) to destination-based (consumption location) tax collection. Mining and exploration The tax reform introduced by Constitutional Amend - ment No 132/2023 also created a 1% Excise Tax to levy on activities that are deemed harmful to the health of the environment. Supplementary Law No 214/2025 regulates the tax and expressly includes the extraction of certain natural resources within its scope, notably iron ore, oil and natural gas. The inclusion of mineral extraction within the scope of the Excise Tax has raised legal and economic con - cerns. The legislation provides that the tax may apply to extraction activities irrespective of the destination of the output, which creates uncertainty as to its com - patibility with the constitutional immunity applicable to exports. In addition, the imposition of an excise tax on mineral extraction adds to an already complex set of fiscal and regulatory obligations applicable to mining activities, reinforcing the importance of careful inter - pretation and further regulatory clarification to ensure legal certainty and proportionality. 4.2 Tax Incentives for Mining Investors and Projects There are no tax stabilisation agreements in Brazil. Tax exemptions, breaks and incentives are granted or cancelled via agreements ( convênios ) entered into between the relevant Brazilian governmental authori - ties. More commonly, they are granted at the state level and with reference to the ICMS taxes. However, states that usually grant ICMS tax breaks and incen - tives to attract investment, but without the consent of other states, may generate a so-called tax war. The tax reform provides for the gradual elimination of sector-specific and subnational special tax regimes, particularly such state-level ICMS incentives. While the suppression of such incentives may initially be perceived as increasing the tax burden, the reform’s architecture assumes that full non-cumulativity will
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