After its enactment in December 2023, the Tax Reform has reached a new stage. The Chamber of Deputies approved the reform regulation bill, establishing the guidelines for the operation of the new Brazilian tax system. It is important to clarify that the proposal will still be analyzed by the Federal Senate and sanctioned by the President.
The approved bill will bring profound changes to the consumption tax system, directly affecting commercial activities.
In this material, we explore the impacts of the Tax Reform on the services sector, 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 text approved by Congress added a “brake” to the single national rate, set at 26.5%. The IBS and CBS rates will be set individually by each entity (Union, States and Municipalities), by means of specific laws.
In addition, the proposal states that an assessment will be made in 2031, to check whether the sum of the CBS and IBS rates, which will come into force in full in 2033, will result in a value higher than 26.5%. In the event that the figure is higher than estimated, a new bill will have to be sent by the Executive Branch, in conjunction with the Management Committee, in order to propose a reduction in benefits for sectors or products.
Impact of the Tax Reform on the services sector
The unification of taxes and the simplification of the tax collection system are positive steps.
In addition, the Tax Reform seeks to create less distortion of the economic effects of the production chain by adopting the Value Added Tax – VAT system, i.e. taxpayers will have the full right to use credits and taxation at destination.
The adoption of Value Added Tax (VAT) allows companies to benefit from the right to a tax credit for 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 provision of services.
How does the Reform affect the tax burden in the service sector?
There is concern about the increase in the tax burden for the services sector. Currently, taxes on consumption in the service sector amount to 8.65% of turnover, made up of Service Tax (ISS) of up to 5% and PIS/COFINS of 3.65%.
With the approval of the basic text of PLP 68/2024, the services sector will pay a VAT rate of 26.5%. This is because it will pay 17.7% IBS and a further 8.8% for CBS, totaling 26.5%.
However, some segments of the service sector will benefit from a differentiated regime with reduced rates, which can reach a percentage of 30% or 60% reduction, depending on the activity carried out.
Some examples of activities that fall into this situation are education and health services.
In addition, regulated professions, such as lawyers and accountants, were covered by the rate reduction of up to 30%.
The text also addresses the segments that will adopt specific tax regimes: hotel services, amusement and/or theme parks, bars, tourist agencies, activities carried out by Sociedade Anônima do Futebol (SAF), among others.
It is important to mention that, with the Tax Reform, service providers will be able to use credits arising from goods acquired that are necessary to carry out their activity in a more comprehensive way, depending on the calculation system chosen, which could reduce the impact of the new taxation.
Another interesting novelty is in relation to credits conditional on payment. The borrower and/or buyer will be able to appropriate the credits from the transaction, even if the supplier has not effectively proven payment of the tax, a measure that favors the payment/cash flow of borrowers and buyers.
This measure applies until the borrower/buyer implements split payment or other automatic payment methods. However, the effects of this non-cumulative tax on the services sector will be reduced, since the biggest cost in the provision of services is labor, which does not generate the right to tax credits.
Opportunities and challenges
The reform offers the service sector a number of opportunities, including tax simplification and efficiency.
Some segments, such as education and health, can benefit from differentiated tax regimes with reduced rates.
On the other hand, the increase in taxation represents a significant challenge, especially for companies whose main costs are not eligible for tax credits.
Conclusion
The Tax Reform brings a new panorama to the service sector in Brazil. While it simplifies some tax aspects, it also presents challenges, especially in the form of a potential increase in the tax burden.
It is crucial for entrepreneurs and professionals in the sector to understand these changes in order to adapt effectively to the new scenario.
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