The implementation of the Brazilian Tax Reform, set to begin in early 2026, marks a pivotal moment in the country’s fiscal landscape. The reform, introduced by Constitutional Amendment No. 132/2023 and detailed in Complementary Law No. 214/2025, aims to simplify and modernize the tax system by replacing several existing taxes (PIS, Cofins, IPI, ICMS, ISS) with a dual VAT structure: the Contribution of Goods and Services (CBS), at the federal level, and the Tax of Goods and Services (IBS), at the state and municipal levels. Additionally, a Selective Tax (IS) will be introduced for specific goods and services. While the reform promises greater transparency and efficiency, its initial implementation phase in 2026 presents significant legal, operational, and financial challenges for companies operating in Brazil.
A critical step in the transition has been the publication of the Technical Note (Nota Técnica) for the Electronic Invoice (Nota Fiscal Eletrônica – NF), which outlines the new requirements for fiscal documentation under the reformed system. The Technical Note mandates the adaptation of all electronic invoicing systems to include specific fields for CBS, IBS, and the Selective Tax. These changes are not merely cosmetics: they require substantial updates to enterprise resource planning (ERP) systems, integration of new tax codes, and implementation of new validation and reporting protocols.
From January 2026, all taxpayers must issue electronic invoices that comply with the new layout, including the correct classification of goods and services, application of the appropriate tax codes, and explicit identification of CBS and IBS amounts. The Technical Note also introduces new events and validation rules, such as the requirement to report the effective payment of taxes to enable appropriation of credits, and the need to reference items from other fiscal documents for credit control purposes. Failure to comply with these requirements will result in the rejection of invoices and potential penalties, making compliance a top priority for legal and tax departments. In June 2025, the companies can test the new invoice layout.
One of the most immediate obligations for companies in 2026 is the requirement to collect CBS and IBS at transitional rates: 0.9% for CBS and 0.1% for IBS, totaling 1% on taxable operations. This obligation applies to all transactions, unless the taxpayer is fully compliant with the new accessory obligations. The law provides that, if all accessory obligations are duly fulfilled, there may be no need for the actual payment of the transitional VAT, as the amounts can be offset against existing PIS/Cofins credits. However, any failure or delay in meeting these obligations will trigger the mandatory payment of the 1% combined rate, with no possibility of offset.
This transitional regime is designed as a “test phase,” allowing both the tax authorities and taxpayers to adapt to the new system while maintaining fiscal control. Nevertheless, it imposes a dual compliance burden: companies must continue to operate under the old tax regime (with all its complexities and uncertainties) while simultaneously implementing and complying with the new VAT-based system. This scenario demands significant investments in technology, process redesign, and staff training, as well as close coordination between tax, legal, IT, and operational teams.
The introduction of the new tax structure and the associated compliance costs will have a direct and immediate impact on the pricing of goods and services. The need to update ERP systems, review contracts, and ensure the correct application of the new tax rates will increase administrative and operational expenses. Moreover, the transitional 1% tax, if not properly managed, will represent an additional cost that may need to be passed on to consumers.
From a legal perspective, the transition to the new tax regime requires careful review and adjustment of commercial contracts, particularly with respect to tax clauses and price adjustment mechanisms. Companies must ensure that their contracts allow for the pass-through of new tax costs and that they are protected against potential disputes arising from misapplication of the new rules.
Strategically, companies should establish multidisciplinary committees to oversee the transition, invest in staff training, and engage external advisors to navigate the evolving regulatory landscape. Early preparation is essential to minimize risks, avoid unnecessary tax payments, and maintain competitiveness during the transition.
The implementation of the Brazilian Tax Reform in 2026 is a complex and multifaceted process that will test the resilience and adaptability of companies across all sectors. The publication of the Technical Note for electronic invoicing marks the beginning of a new era of tax compliance, with strict obligations and significant operational impacts. The transitional 1% tax on CBS and IBS, coupled with the need for full compliance with accessory obligations, will affect pricing strategies and require robust legal and operational responses. Companies that invest in preparation, technology, and legal compliance will be best positioned to navigate the challenges and seize the opportunities presented by the new tax system.