After its enactment in December 2023, the tax reform has reached a new stage. The Chamber of Deputies has approved the reform regulation bill, establishing further guidelines on 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 document we explore the impacts of the Tax Reform on commerce, 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.
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.
Impacts of the Tax Reform on trade
The reform is expected to simplify the tax system by unifying the system for calculating taxes and ancillary obligations, as well as achieving tax neutrality in the production chain for goods and services.
These points can help develop the commercial sector.
The trade sector often operates on a national and dispersed basis and has to deal with the complexity of the tax legislation of 27 federal entities, each with its own rules on rates, special regimes, tax substitution, etc.
This complexity brings with it a very high compliance cost and constant legal uncertainty.
In addition to unifying various taxes and reducing bureaucracy in the tax collection system, the tax reform seeks to create less distortion in the tax burden calculated along the production chain.
How does the reform affect the tax burden on commerce?
Companies whose activity is the resale of goods at wholesale or retail end up having a major limitation on the use of tax credits.
Essential expenses for this sector such as: marketing, advertising and publicity, fees paid to credit card companies, among others, end up being considered by the tax authorities as not eligible for tax credits, increasing the final cost of products.
The approved proposal provides for the adoption of a Value Added Tax (VAT) tax model, whereby only the wealth added at each stage of the chain is taxed, eliminating the impossibility of the purchaser of goods and services taking full advantage of the taxes levied at the previous stage of the chain.
Another important aspect of the Reform that impacts the trade sector is that the new taxes will be calculated “externally”, which means that they will not be included in their own calculation bases.
In the current system there is an overlap of taxes, where one tax is levied on itself and on several others, which in addition to masking the real tax burden on the operation causes endless judicial and administrative discussions, bringing constant legal uncertainty.
Opportunities and challenges
It is worth highlighting as a positive point the “reference lock”, i.e. the limitation on tax collection included in the reform text. According to the rule, new taxes may not result in a collection higher than the average of what has been collected in the last 10 years by the taxes that will be abolished.
The aim is to maintain the current average tax burden on consumption, which is already not low. However, many points of the Reform have been delegated to regulation by complementary law, which still makes it uncertain in many respects.
It would be preferable, in the search for legal certainty, for the Amendment to the Constitution itself to address some issues, but it is hoped that the new system will be an advance on the previous one, attracting more investors due to the proposed simplification.
Several points need to be analyzed, such as: the extinction of the ICMS tax benefits that currently exist, which have sometimes impacted the definition of the company’s geographical location; the way in which the accumulated credits resulting from the taxes that will be extinguished will be used; the impact of the new rules on pricing with clients and suppliers; among others.
Conclusion
The most important thing at the moment is for businesses to be prepared for the changes to come and to plan strategically to deal with them.
A detailed analysis of all these points in advance will certainly contribute to gaining a competitive advantage, as it will enable the taxpayer to anticipate the changes to come.
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