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In force

Consumption tax reform: a dual VAT (CBS and IBS) and a selective tax replace five taxes (Constitutional Amendment 132/2023)

Constitutional Amendment No. 132, promulgated on 20 December 2023, replaces Brazil’s five main consumption taxes (federal PIS, Cofins and IPI, state ICMS, municipal ISS) with a dual value added tax: a federal contribution on goods and services (CBS) and a tax on goods and services (IBS) shared by states and municipalities, plus a selective tax (Imposto Seletivo) on goods and services harmful to health or the environment. Complementary Law No. 214 of 16 January 2025 sets out the rules: reduced rates for listed sectors, a zero-rated national basic food basket and a refund (« cashback ») to low-income families. The transition started in 2026 with test rates of 0.9% (CBS) and 0.1% (IBS), offset against PIS and Cofins; the CBS is due in full and PIS and Cofins end in 2027, while ICMS and ISS are phased down from 2029 and abolished in 2033. The Senate must set the CBS reference rate for 2027 by 15 December 2026; the Federal Court of Accounts (TCU) proposed 11.3%.

Citoyen·Updated: November 11, 2026

This dossier is updated at least once a quarter with the new figures. Follow it to get a notification at each update.

Key points

Test rate in 2026 (CBS 0.9% plus IBS 0.1%)

1%

2026 · Observed

Constitutional Amendment 132, article 125 of the transitional provisions; Complementary Law 214, articles 343 and 346[1][2]

Offset against PIS and Cofins; payment waived for taxpayers who meet their reporting obligations.

CBS reference rate for 2027 proposed by the TCU

11.3%

2027 · Estimate

according to the Federal Court of Accounts (TCU), calculation approved on 28 October 2026 with the Federal Revenue Service[17][19]

The Senate sets the rate by resolution by 15 December 2026; a 9.21% estimate had been considered before.

Combined IBS and CBS reference rate above which the government must propose cuts

26.5%

from the first five-year review (2030 data) · Observed

Complementary Law 214/2025, article 475, paragraph 11[2]

Inflation (CPI)

4.4%

Q3 2026

Instituto Brasileiro de Geografia e EstatísticaSee the card →
  • Status: In force since January 1, 2026. Most provisions of the amendment applied from its publication; the new taxes apply from 1 January 2026 at test rates (CBS 0.9%, IBS 0.1%), offset against PIS and Cofins.[1][2]
  • Next milestone: December 15, 2026, Deadline for the Senate to set the CBS reference rate for 2027

At a glance

Reference text

Emenda Constitucional nº 132, de 20 de dezembro de 2023 (Constitutional Amendment No. 132 amending the National Tax System), regulated by Lei Complementar nº 214, de 16 de janeiro de 2025[1][2]

No. EC nº 132/2023 · December 20, 2023

Read the text ↗

Carried by

  • Baleia Rossi[7][13]Federal deputy (MDB-SP), author of Proposed Constitutional Amendment PEC 45/2019, submitted on 3 April 2019 · 2019-2023 · Initiator
  • Bernard Appy[14][13]One of the designers of PEC 45/2019 at the Centro de Cidadania Fiscal (CCiF), then Extraordinary Secretary for Tax Reform at the Ministry of Finance · 2019-2025 · Initiator
  • Fernando Haddad[14][13]Minister of Finance, steered the amendment through Congress and the regulating bill, PLP 68/2024, submitted by the executive · 2023-2025 · Initiator
  • Luiz Inácio Lula da Silva[8][14]President of the Republic, sent PLP 68/2024 to Congress (25 April 2024) and signed Complementary Law 214 on 16 January 2025, with partial vetoes · 2024-2025 · Initiator
  • Aguinaldo Ribeiro[7][11]Deputy (PP-PB), rapporteur of PEC 45/2019 in the Chamber of Deputies; his final report kept most of the Senate’s changes so that the text could be promulgated · 2019-2023 · Amendment
  • Eduardo Braga[9][10]Senator (MDB-AM), rapporteur of PEC 45/2019 and of PLP 68/2024 in the Senate · 2023-2024 · Amendment
  • Reginaldo Lopes[8]Deputy (PT-MG), rapporteur of PLP 68/2024 in the Chamber of Deputies · 2024 · Amendment

Implementation

  • Federal Revenue Service (Receita Federal do Brasil): CBS and selective tax
  • Management Committee of the IBS (CGIBS), created by Complementary Law 227/2026, on behalf of states, the Federal District and municipalities
  • Ministry of Finance, Extraordinary Secretariat for Tax Reform
  • Federal Senate (reference rates by resolution) and Federal Court of Accounts (TCU, rate calculations)

Stated objective

Replace PIS, Cofins, IPI, ICMS and ISS with two taxes of the value added tax type, as adopted by almost every country: simplify paying and collecting taxes, increase legal certainty by reducing litigation, improve the business climate by removing tax from investment and exports through full crediting along the production chain, and make the system fairer by raising its progressivity, whereas consumption taxation is today mainly regressive.[14]

according to the Ministry of Finance, at the signing of Complementary Law 214 (January 2025)

Estimated tax rate of current consumption taxes (ICMS and PIS/Cofins)

34.4%

current system, estimate published in 2024 · according to the Ministry of Finance’s Extraordinary Secretariat for Tax Reform, technical note of 1 July 2024[15]

The note compares it with a simulated standard rate of about 26.5% for the IBS and CBS together, and warns that this figure is not the rate that will be set.

Simulated standard rate of IBS plus CBS under the bill as submitted

26.47%

after the transition (simulation of July 2024) · according to the Ministry of Finance’s Extraordinary Secretariat for Tax Reform, technical note of 1 July 2024 (range 25.65% to 27.29%)[15][16]

A later note (23 August 2024) estimated that the Chamber of Deputies’ changes added about 1.47 points to the reference rate.

Main measures

  • Two taxes of the value added tax type replace five: the CBS (federal) replaces PIS and Cofins, the IBS (shared by states, the Federal District and municipalities) replaces the state ICMS and the municipal ISS, and the IPI is cut to zero from 2027 except for products with incentivised manufacturing in the Manaus Free Trade Zone. Both taxes share the same rules: a broad base covering goods, services and rights, taxation at destination, full crediting of tax paid on purchases, and exports exempt.[1]
  • Rates: each state and municipality sets its own IBS rate by law, the same for all goods and services; reference rates are set by Senate resolution and apply when an entity sets none. From 2027 to 2033 they must keep revenue equivalent to that of the taxes being replaced.[1]
  • Reduced rates: a 60% rate reduction for a closed list (education and health services, medicines, medical devices, food, urban public transport, agricultural inputs, national cultural productions, among others), 100% reductions for some items (fruit, vegetables and eggs, certain medical devices), and a zero rate on the products of the National Basic Food Basket listed in Annex I of Complementary Law 214.[1][2]
  • Cashback: low-income families registered in the CadÚnico social register are refunded part of the tax they pay: 100% of the CBS and 20% of the IBS on cooking gas cylinders of up to 13 kg, household electricity, water, sewerage, piped gas and telecommunications, and 20% of both taxes on other purchases.[2]
  • Selective tax (Imposto Seletivo), administered by the Federal Revenue Service: levied once on vehicles, boats and aircraft, tobacco products, alcoholic drinks, sugary drinks, mineral goods, and lotteries and fantasy sports; it does not apply to electricity, telecommunications or goods and services with reduced rates.[2][1]
  • Transition: CBS at 0.9% and IBS at 0.1% in 2026 (offset against PIS and Cofins); full CBS in 2027 with PIS and Cofins abolished; IBS at 0.1% in 2027 and 2028; ICMS and ISS rates reduced to 9/10 in 2029, 8/10 in 2030, 7/10 in 2031 and 6/10 in 2032, then abolished in 2033. The distribution of IBS revenue to states and municipalities moves to the destination principle gradually from 2029 to 2077.[1][2]
  • Federal funds: a fund to compensate holders of ICMS tax incentives granted for a set term and under conditions, financed by the Union from 2025 to 2032 (R$ 8 billion in 2025, up to R$ 32 billion in 2028 and 2029, then down to R$ 8 billion in 2032, at 2023 prices); and a National Regional Development Fund for states, from R$ 8 billion in 2029 to R$ 60 billion a year from 2043 (at 2023 prices, updated by the IPCA).[1]
  • Safeguards on the rate: every five years, starting with 2030 data, the government and the CGIBS evaluate the reduced rates, the cashback and the basic food basket; if the estimated combined reference rate of the IBS and CBS exceeds 26.5%, the government must send Congress a bill to bring it down to 26.5% or less.[2]

In data

Phasing out of ICMS and ISS: rates as a share of those set in each state’s and municipality’s law[1]

2029-2033, as set by the constitutional amendment

  • Share of the legislated rate applied
2029
90%
2030
80%
2031
70%
2032
60%
2033ICMS and ISS abolished.
0%
Phasing out of ICMS and ISS: rates as a share of those set in each state’s and municipality’s law: chart values
YearShare of the legislated rate applied
202990%
203080%
203170%
203260%
2033 (ICMS and ISS abolished.)0%

Scale starts at 0% · ICMS and ISS tax incentives are reduced in the same proportion; the IBS rises to replace the lost revenue.

Inflation (CPI)

4.4%

Q3 2026

A change in consumption taxes can show up in consumer prices; the government states that the new taxes are meant to keep revenue unchanged.

Instituto Brasileiro de Geografia e EstatísticaSee the card →

Mandatory levies

15.4% GDP

2024

The reference rates are designed to keep revenue equivalent to that of the taxes they replace; the opposition argued the reform would raise the tax burden.

World BankSee the card →

Food prices

3.84index

Q3 2026

Products of the National Basic Food Basket are zero-rated; other foods listed in the law get a 60% rate reduction.

Banco Central do BrasilSee the card →

Timeline

  1. April 3, 2019Under debate

    PEC 45/2019 submitted to the Chamber of Deputies[7]

    Proposed by Deputy Baleia Rossi; the Chamber passed it in July 2023, the Senate with changes in November 2023.

  2. July 6, 2023 – July 7, 2023

    Chamber of Deputies passes PEC 45/2019 in two rounds[7]

    First round: 382 votes to 118 (3 abstentions) on the special committee’s substitute text; second round: 375 to 113 (3 abstentions). The final wording signed by rapporteur Aguinaldo Ribeiro is approved on 7 July and the text is sent to the Senate.

  3. November 8, 2023

    Senate passes the amendment with changes (53 votes to 24)[9][12]

    After the Constitution and Justice Committee approved Eduardo Braga’s report (20 votes to 6), the plenary adopts the text in both rounds by 53 votes to 24; it returns to the Chamber of Deputies.

  4. December 15, 2023

    Chamber of Deputies approves the final text[11][13]

    The Chamber votes on the Senate’s changes in two rounds on the same day; an amendment to keep weapons and ammunition under the selective tax fails to reach the 308 votes required.

  5. December 20, 2023Adopted

    Constitutional Amendment 132 promulgated by Congress[1][13][2]

    Published in the Diário Oficial da União on 21 December 2023; regulated by Complementary Law 214 of 16 January 2025.

  6. April 25, 2024

    Government submits the main regulating bill, PLP 68/2024[8][10]

    The bill sets up the IBS, the CBS and the selective tax. The Chamber passes it on 10 July 2024 (336 votes to 142 on the global substitute text), the Senate on 12 December 2024 (49 to 19), and the Chamber approves the Senate’s changes on 17 December 2024 (324 to 123).

  7. January 16, 2025

    Complementary Law 214/2025 signed, with partial vetoes[14][3][8]

    The 544-article law is published in an extra edition of the Diário Oficial da União the same day. According to the Ministry of Finance, the President vetoed 14 items spread over 17 provisions. Congress later overturned part of the vetoes; the restored provisions were published on 2 July 2025.

  8. January 1, 2026In force

    IBS and CBS start: test year 2026[1][2]

    Most provisions of the amendment applied from its publication; the new taxes apply from 1 January 2026 at test rates (CBS 0.9%, IBS 0.1%), offset against PIS and Cofins.

  9. January 1, 2026 – December 31, 2026Current step

    Test year: CBS at 0.9% and IBS at 0.1%[1][2][4]

    Amounts paid are offset against PIS and Cofins (or against any other federal tax, or refunded within 60 days). Taxpayers who meet their reporting obligations are exempt from paying them; Simples Nacional firms are not covered. Complementary Law 227 (13 January 2026) adds that, in 2026, a penalty for a reporting failure is cancelled if the taxpayer corrects it within 60 days of notice.

  10. January 13, 2026

    Complementary Law 227/2026 creates the IBS Management Committee (CGIBS)[4][3]

    The second regulating law sets up the CGIBS, a public body with technical, administrative and financial independence that administers the IBS for states and municipalities, and lays down the IBS administrative tax procedure and the distribution of its revenue; it also amends Complementary Law 214.

  11. April 29, 2026

    Decree 12.955/2026 regulates the CBS[5]

    The federal government issues the implementing regulation of the CBS, published on 30 April 2026.

  12. October 28, 2026

    Federal Court of Accounts (TCU) calculates the CBS reference rate at 11.3% for 2027[17][19]

    The rate, worked out with the Federal Revenue Service over eight months, is above the 9.21% estimate considered before. The TCU President delivered the ruling to the Senate President on 10 November 2026. Senate rapporteur Eduardo Braga said the senators were « caught by surprise » and called for an in-depth review.

  13. November 4, 2026

    Provisional Measure 1.399/2026 sets the selective tax rates for 2027[6][18]

    For vehicles, aircraft, boats, tobacco, alcoholic and sugary drinks, the 2027 rates start from the current IPI rates multiplied by conversion factors; mineral goods are zero-rated until the end of 2027 and lotteries taxed at 0.5%. The government must send a bill on the rates from 2028 by 31 May 2027.

  14. December 15, 2026Upcoming: the outcome is not known

    Deadline for the Senate to set the CBS reference rate for 2027[17][19]

    The Economic Affairs Committee prepares the resolution; according to Agência Senado, the TCU rate applies if the Senate does not adopt it by then.

  15. January 1, 2027Upcoming: the outcome is not known

    CBS due in full; PIS and Cofins abolished; IPI cut to zero except for the Manaus Free Trade Zone[1][2][6]

    In 2027 and 2028 the IBS is charged at 0.05% (state) plus 0.05% (municipal) and the CBS rate is lowered by 0.1 point. The selective tax applies from 2 February 2027 under Provisional Measure 1.399/2026.

  16. 2029 – 2032Upcoming: the outcome is not known

    ICMS and ISS phased down: 90%, 80%, 70% then 60% of their rates[1]

    Each year the rates of the state ICMS and the municipal ISS are set at a fraction of those in force (9/10 in 2029 down to 6/10 in 2032), and the IBS rises to replace them; ICMS tax incentives are cut in the same proportion, with a federal compensation fund for incentives granted under conditions.

  17. March 2031Upcoming: the outcome is not known

    First five-year review of reduced rates, cashback and basic food basket[2]

    Based on 2030 data, the government and the CGIBS assess the special regimes; a bill may be sent by the last working day of March 2031. If the estimated combined reference rate exceeds 26.5%, the government must propose measures to bring it back to 26.5% or less.

  18. January 1, 2033Upcoming: the outcome is not known

    ICMS and ISS abolished: end of the transition[1][2]

    The new system (CBS, IBS, selective tax) fully replaces the former consumption taxes; the ICMS and ISS framework laws are repealed.

The debate

Citoyen takes no position: arguments are reported as their authors put them.

According to its supporters

  • The Ministry of Finance argues that the value added tax model aligns Brazil with almost every other country, simplifies paying and collecting taxes, reduces litigation and removes tax from investment and exports thanks to full crediting along the chain.[14]
  • According to the Ministry of Finance, the reform makes consumption taxation more progressive, while today it is mainly regressive; the cashback for low-income families and the zero-rated basic food basket serve this aim.[14][2]
  • Senate rapporteur Eduardo Braga stated that the reform would not raise the overall tax burden, pointing to the cap mechanism added by the Senate, and called it a step towards simplification, transparency and legal certainty.[12][13]
  • Government leaders in Congress, such as Senator Randolfe Rodrigues, claimed the reform could create 7 to 12 million jobs and bring Brazil among the countries with the most modern tax systems.[12]

According to its opponents

  • Opposition leader in the Senate Rogério Marinho (PL) criticised an estimated maximum rate of 27.5% for the new tax, which in his view would put Brazil at the top of the world ranking for this kind of tax, and argued that the claim of an unchanged tax burden would be contradicted in practice.[12]
  • Senator Oriovisto Guimarães (Podemos), author of a rival proposal, judged the text technically poor: the exceptions multiply, the long period in which old and new taxes coexist will weigh on firms, and the balance between the Union, states and municipalities is broken.[12]
  • Senator Izalci Lucas (PSDB) argued that the reform « simplifies nothing », lacks neutrality and will sharply raise the tax burden; Senator Astronauta Marcos Pontes (PL) also said it does not simplify tax collection and increases the burden.[12]
  • After the TCU set the CBS reference rate at 11.3%, above the earlier 9.21% estimate, Senator Esperidião Amin (PP) warned in November 2026 that the CBS and IBS rates together could exceed 30%; the Senate rapporteur asked for a close review of the calculation.[17]

Indicators to watch

  • Consumer price inflation · IBGESee the card →
  • Core inflation · Banco Central do BrasilSee the card →
  • Food prices · Banco Central do BrasilSee the card →
  • Tax revenue, % of GDP · Banque mondialeSee the card →
  • Government revenue, % of GDP · OCDEno Citoyen card yet
  • CBS and IBS reference rates set each year by Senate resolution · Senado Federalno Citoyen card yet
  • CBS, IBS and selective tax revenue · Receita Federalno Citoyen card yet

Stay up to date

This dossier is updated at least once a quarter with the new figures. Follow it to get a notification at each update.

Sources

  1. [1]Emenda Constitucional nº 132, de 20 de dezembro de 2023 (publicação original, DOU de 21/12/2023) –Senado Federal, Legislação Federal, December 20, 2023
  2. [2]Lei Complementar nº 214, de 16 de janeiro de 2025 (texto) –Senado Federal, Legislação Federal, January 16, 2025
  3. [3]Lei Complementar nº 214 de 16/01/2025: publicações, vetos e normas posteriores –Senado Federal, Legislação Federal
  4. [4]Lei Complementar nº 227, de 13 de janeiro de 2026 (texto) –Senado Federal, Legislação Federal, January 13, 2026
  5. [5]Decreto nº 12.955, de 29 de abril de 2026: regulamenta a Contribuição Social sobre Bens e Serviços (CBS) –Senado Federal, Legislação Federal, April 29, 2026
  6. [6]Medida Provisória nº 1.399, de 4 de novembro de 2026: alíquotas do Imposto Seletivo para 2027 –Senado Federal, Legislação Federal, November 4, 2026
  7. [7]PEC 45/2019: ficha de tramitação –Câmara dos Deputados
  8. [8]PLP 68/2024: ficha de tramitação –Câmara dos Deputados
  9. [9]PEC 45/2019: processo legislativo no Senado Federal (dados abertos) –Senado Federal
  10. [10]PLP 68/2024: processo legislativo no Senado Federal (dados abertos) –Senado Federal
  11. [11]Câmara conclui votação da reforma tributária em segundo turno –Agência Câmara de Notícias, December 15, 2023
  12. [12]Reforma tributária: oposição resiste, mas texto obtém apoio necessário –Agência Senado, November 8, 2023
  13. [13]Congresso promulga reforma tributária –Agência Senado, December 20, 2023
  14. [14]Sancionado o primeiro projeto de regulamentação do novo sistema de tributação do consumo –Ministério da Fazenda, January 17, 2025
  15. [15]Alíquotas de referência do IBS e da CBS: estimativas atualizadas após o envio da proposta de regulamentação da reforma tributária (nota técnica) –Ministério da Fazenda, Secretaria Extraordinária da Reforma Tributária, July 1, 2024
  16. [16]Estimativa de impacto sobre a alíquota de referência do IBS e da CBS das mudanças aprovadas na Câmara (nota técnica) –Ministério da Fazenda, Secretaria Extraordinária da Reforma Tributária, August 23, 2024
  17. [17]Senado deve receber cálculo da CBS na próxima terça para definir alíquota –Agência Senado, November 3, 2026
  18. [18]MP define as alíquotas do Imposto Seletivo para 2027 –Agência Senado, November 5, 2026
  19. [19]Senado recebe acórdão do TCU que propõe alíquota de 11,3% para a CBS –Agência Senado, November 10, 2026