The Tax Reform has been approved and will be a game changer, especially for the industrial sector.
In this document, we explore its impacts on the industry, as well as the implications of these changes and the opportunities that arise for businesses in the sector.
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Understanding the Reform
The main change in the Tax Reform is the consolidation of five taxes into two.
According to the text, the new tax system foresees that the federal taxes IPI, PIS and COFINS will be transformed into the Contribution on Goods and Services (CBS), while the state tax ICMS and the municipal tax ISS will be unified into the Tax on Goods and Services (IBS).
There will also be a Selective Tax (IS), which will be levied on goods and services that are harmful to health or the environment, with the aim of discouraging the production and consumption of these items.
The Supplementary Bill, PLP 68/2024, which regulates the Tax Reform, provides for a rate of 26.5%.
It is hoped that the unification of taxes and the simplification of ancillary obligations will help the industrial sector.
Impacts of the Tax Reform on the industrial sector
With regard to the impacts of the Tax Reform on Industry, in addition to unifying taxes and reducing bureaucracy in the collection system, the reform seeks to create less distortion in the economic effects of the production chain by adopting the Value Added Tax – VAT system.
In practice, this means that companies will have the full right to use credits for products and services purchased.
The adoption of VAT will allow industries to appropriate, in the form of a book credit, all the taxes (IBS and CBS) levied in the previous chain, with the right to offset these amounts against the taxes (IBS and CBS) levied on the sale of industrialized products.
How does the Reform affect the tax burden of the industrial sector?
The application of this new tax model may provide some benefits to the industrial sector, mainly due to the fact that the rates set for IBS (17.7%) and CBS (8.8%) will result in a total tax burden of 26.5%.
In theory, this will reduce the tax burden on industries, since currently this percentage, on average, is equivalent to approximately 30% of turnover.
In a hypothetical case where the company has a turnover of R$ 500,000.00. The situation would be as follows:
It is worth remembering that the industry sector suffers from cascading taxation and with VAT this financial loss will also decrease.
Opportunities and challenges
A vital aspect of the Reform is the change in the system for calculating credits. The expectation is that there will be a broadening of the credit base, including expenditure on innovation and research and development. This change could encourage practices that increase the competitiveness and modernization of the sector.
Currently, many companies face challenges in using their accumulated credits due to numerous legal restrictions. With the Reform, greater financial flexibility is expected, allowing faster and more strategic use of these credits.
According to the text approved so far, only consumer goods are not eligible to generate credits, which will obviously bring greater financial balance for industries, as well as certainty as to which credits can be used.
The simplification of credit recovery and more balanced tax rates could result in substantial savings, allowing companies to reinvest resources strategically.
This will make it possible to offer products at more competitive prices, as well as attracting foreign investment and promoting the sector’s expansion on the international stage.
Companies that adopt a strategic approach, preparing for challenges and capitalizing on opportunities, will be at the forefront of a new industrial era in Brazil.
Conclusion
It is possible to state that the Tax Reform, in addition to providing a more predictable and legally secure environment, could encourage the adoption of new technologies and efficient practices, potentially shaping the future of the industrial sector in Brazil.
However, it is important to recognize that, despite the expected benefits, the Reform may initially generate apprehensions related to the tax burden. However, in the medium and long term, the simplification and reduction of operating costs may offset any adjustments to the tax burden.
Thus, companies that prepare strategically for the Reform, anticipating challenges and capitalizing on opportunities, will be able to lead a new industrial era in Brazil.
The Tax Reform offers a unique chance for the sector to reinvent itself, becoming more competitive both domestically and internationally.
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