Regulatory updates - Brazil

On 31 July 2024, the NFS-e Management Committee released the DFe Technical Note 2024.001 IBS/ CBS version 1.00. This note introduces critical updates to the layouts of electronic fiscal documents (DFes) to incorporate the new consumption taxes — Contribution on Goods and Services (CBS), Tax on Goods and Services (IBS), and Selective Tax (IS) — established by Constitutional Amendment No. 132/2023.

New information groups are introduced

The technical note introduces new information groups and fields designed to handle the new taxes. This update is part of broader efforts to ensure that electronic tax documents comply with the latest tax system mandated by the ongoing reform. The changes will affect several electronic invoice types, including those related to transportation and communication services.

The main updates are:

• New Information Groups: These include optional fields for recording IBS/CBS taxation details, such as tax rates, calculation bases, and specific tax codes.
• Totalization Groups: New fields have been added to summarize the total amounts for IBS and CBS, ensuring clarity in tax reporting.

These updates are essential for complying with Brazil’s new tax requirements. Businesses should familiarize themselves with these changes to prepare for the latest reporting obligations.

Implementation timelines

• Approval environment (company testing environment): 1 September 2025;
• Production Environment: 31 October 2025;
• Operational Deadline: The new groups and fields must be operational by 1 January 2026.

The processing deadlines, with the urgency requested by the President of the Republic, of 45 days, begin to count from when the PLP 68/2024 is read in the Plenary, which should occur in August.

The Brazilian government is working to meet deadlines and implement tax reform by 2033. The schedule foresees that the reform will be regulated between 2024 and 2025. After this phase, the transition from current taxes to the VAT model will begin in 2026.

The reform simplifies the tax system, replacing multiple taxes with new consumption taxes, aiming for a more efficient and equitable system. This regulation is essential to promote business growth and ensure sustainable economic development.

The new rules will be implemented gradually, with full effects becoming apparent over time.

Key Highlights:

• Beef and chicken have been added to the list of tax-exempt products in the basic food.
• The project sets rules for three new consumption taxes (IBS, CBS, and Selective Tax), replacing five current taxes (PIS, Cofins, IPI, ICMS, and ISS).
• Significant changes include tax adjustments on various products, including medicines, electricity, and food.

Goals:

• The reform aims to maintain the current tax burden, capping the new model at 26.5% of product prices;
• Taxes will no longer be cumulative, meaning they will only be charged once between production and the final sale;
• This change should reduce production costs and increase efficiency, potentially lowering consumer prices.

Main Discussion Points:

• The standard VAT rate is 26.5% (Estimated average VAT rate of 26.5%, with potential variation between 25.7% and 27.3%).
• Addition of beef and salt to the basic food list (The reform exempts several essential food items from taxes, benefiting low-income families).
• The establishment of rules for a cashback system for domestic expenses like electricity and gas beginning in January 2027 for CBS and in 2029 for IBS.
• Functioning of the Selective Tax on products harmful to health and the environment like coal, lotteries, and certain games.
• Professions that are eligible for reduced tax rates.

Other Key Points:

• Significant tax reductions for medicines, veterinary items, health products, real estate transactions, and digital platform purchases.
• New tax categories and exemptions are introduced, such as nano entrepreneurs.

Lists of taxpayers and items affected are available here.

New taxes:

• CBS: Contribution on Goods and Services
• IBS: Tax on Goods and Services
• IS: Selective Tax

Current taxes:

• COFINS: Contribution to Social Security Financing
• ICMS: Tax on the Circulation of Goods and Services
• IPI: Tax on Industrialized Products
• ISS: Tax on Services
• PIS: Social Integration Program

Following SINIEF Adjustment 49/23, Tax on Circulation of Goods and Services (ICMS), taxpayers must adopt an Electronic Invoice for Communication Services (NFCom) starting 1 April 2025, with all service charges incorporated into the electronic document.

Who should issue the NFCom?

NFCom electronic invoices must be used to charge communication services of any nature, such as:

• Radio and television stations (including pay TV);
• News portals;
• Printed newspapers and magazines;
• Internet providers;
• Fixed or mobile telephony, among others.

Which states already comply with the regulation?

Several states have proactively adopted the new requirements of NFCom despite the initial deadline extension to 1 July 2025:

• Acre – Decree 11,133/2022
• Alagoas – SEF Normative Instruction 48/2023
• Amazonas – Resolution 0027/2023
• Ceará – Decree 34,732/2022
• Federal District – Decree 44,223/2023
• Goiás – Decree 10,192/2023
• Mato Grosso – Decree 352/2023
• Mato Grosso do Sul – Decree 16,290/2023
• Minas Gerais - Decree 48,737/2023
• Paraíba – Decree 42,560/2022
• Piauí – Decree 21,737/2022
• Rio Grande do Norte – Decree 31,825/2022
• Rondônia – Decree 27,613/2022
• Santa Catarina – Decree 2,364/2022
• Sergipe – Decree 401/2023

The new events created by Technical Note 2023.005 version 1.00 are:

• NF-e Delivery Failure and
• Cancellation of the NF-e Delivery Failure

They are applicable in scenarios where goods delivery is directly tied to an NF-e, excluding situations involving an Electronic Freight Document (CT-e).

These events replace the current practice of annotating undelivered goods on the back of the DANFE (graphical representation of the NF-e), however the implementation of these events is optional.

Implementation timelines

• Approval environment: 13 May 2024
• Production environment: 24 June 2024

The tax reform PEC45/2019 (Proposed Amendment to the Constitution), which is expected to be signed into law in a joint session of Congress during Week 51, is a key component of the government's strategy to boost growth and enhance productivity in the country. However, the successful implementation of this tax reform depends on a long transition period and subsequent bills.

As previously reported, it seeks to simplify Brazil's complex tax system by consolidating five existing taxes into a value-added tax (VAT) with distinct federal and regional rates (Dual VAT).

The transition period for unifying taxes will last seven years, between 2026 and 2032, and the current taxes are planned to be abolished in 2033.

Tax reform goals

These include:

• Simplification - Reduce the number of taxes and unify taxes that have the same tax base;
• Transparency - Make the tax system more transparent and understandable for the population;
• Encouraging the Economy - A simpler and more efficient tax system is expected to attract more investment and stimulate economic growth.

Proposed schedule

• 2026: Test rate of 0.9% for CBS (federal VAT) and 0.1% for IBS (VAT shared between states and municipalities) coexisting with ICMS and ISS with no rate changes;
• 2027: PIS and COFINS will cease to exist, and CBS will be fully implemented (IBS rate remains at 1%);
• 2029 - 2032: Gradual reduction in ICMS and ISS rates and a gradual increase in IBS until the new model comes into full effect in 2033.

Additionally, the reform introduces a selective tax targeting environmentally and health-harmful products. Another important aspect is that it changes tax collection from origin to destination and is expected to take place over 50 years, starting in 2029.

In NT 2021.003, only standard GTIN barcodes duly registered in the GS1 (Barcode System) database will be accepted for the cEAN (barcode of the product) and cEANTrib (barcode of the taxable unit) fields. A validation rule is also provided in this technical note by crossing the tax document's product information with GS1's registration information for the aforementioned GTIN.

When the marketed product has a barcode with GTIN, the SINIEF Adjustments 07/05 and 19/16 require the cEAN and cEANTrib fields to be filled out on the Electronic Invoice (NF-e) and the Electronic Consumer Invoice (NFC-e).

Changes introduced by the new version of NT 2023.001

According to version 1.30 of this Technical Note, manufacturing industries must verify the existence of GTINs in the CCG Registry.

Which products does group 3 cover?

The products which are in the scope of group III can be consulted on pages 15 and 16 of the Technical Note.

The full version 1.30 of NT 2023.001 is available here.

Implementation timelines

• Approval environment: 1 April 2024
• Production environment: 2 September 2024

Although the CT-e 4.0 version has already been released, it is not yet mandatory, so version 3.0 can still be used for issuing Bills of Lading.

The change to the new version of CT-e 4.0 affects some commonly used events in the program, such as:

• CT-e of cancellation;
• CT-e of disuse;
• CT-e of Replacement; and
• CT-e with denied status.

The new CT-e Taxpayer Guidance Manual can be found on the website of the CT-e (Portal do Conhecimento de Transporte).

The main change in this new version is the elimination of the cancellation procedure. To change the policyholder or amend the excess value, taxpayers can perform the event, “provision of service in disagreement” (event carried out by the policyholder), and the issuer issues a replacement CT-e.

The transporting taxpayer must contact the issuing software company and check if the application update to version 4.0 is already available.

With the creation of the ICMS single-phase taxation regime for fuels, some guidelines have been published establishing procedures for the control, calculation, transfer, and deduction of the single-phase tax.

The following validation rules are related to single-phase taxation on fuels that were updated in the Technical Note NT2023.001 version 1.40 published on the NF-e Portal on 27 September 2023:

– Rule N12-70: amended to provide for CST 02 (Own single-phase taxation on fuels) in exception 8, thus permitting the issuance of fuel NF-e to non-taxpayers;

– Rules LA17-20, LA18-10, and LA18-20: changed to remove the exception condition that checks dates in referenced keys.

Implementation of the changes to the validation rules is due by:

– Authorization environment: until 16 October 2023;

– Production Environment: 30 October 2023 and 1 April 2024 (for RV N43a-10).

The new Complementary Law Number 199 from 1 August 2023 has been introduced to reduce bureaucracy, unify electronic tax documents' issuance, and standardize legislation and systems to fulfil supplementary obligations.

Tax administrations from the three spheres of government (Union, States, Municipalities and the Federal District) will be able to share tax and registration data whenever necessary to decrease extra obligations and increase inspection efficiency.

Which challenges is the National Statute aimed at?

Currently, e-invoice formats vary widely across the country, raising business maintenance costs and impacting company budgets. The new statute incorporates guidelines for issuing electronic invoices and achieving supplementary obligations.

Furthermore, this statute aims to reduce tax obligation compliance costs and encourage conformity from taxpayers by addressing the following:

• Unified issuance of electronic tax documents;
• Use of data from tax documents to calculate taxes and provide pre-filled declarations and respective tax collection guides;
• The unification of tax and contribution collections to facilitate the payment of taxes and contributions; and
• Harmonization of tax records and sharing according to legal competence.

Who ensures the execution of simplification measures?

The simplification measures will be managed by the National Committee for the Simplification of Additional Tax Obligations (CNSOA), linked to the Ministry of Finance. Representatives of the tax authorities of the Union, States and Municipalities, and the Federal District will form the committee.

Adjustment SINIEF 21/2023 and Adjustment SINIEF 25/2023 change the Adjustment SINIEF (National Tax Economic Information System) 36/19 and 09/07. These SINIEF Adjustments refer to:

• Adjustment SINIEF 36/19: establishes the Electronic Bill of Lading for Other Services (CT-e OS) and the Auxiliary Document of the Electronic Bill of Lading for Other Services;
• Adjustment SINIEF 09/07: establishes the Electronic Bill of Loading and the Auxiliary Document of the Electronic Bill of Lading.

Events impacted by the Adjustments

The amendments refer to the inclusion of this event:

• Cancellation of non-compliant service provision, record that the service provider cancelled the non-compliant service.

These new regulations also revoke the following events:

• IX - GTV information, registration of information contained in the Cash Transport Guides – GTV;
• XVIII - Authorized Redispatch records that a CT-e of redispatch has been referenced in a CT-e with normal service type;
• XIX - Intermediate Redispatch Authorized records that an intermediate redispatch CT-e has been referenced in a CT-e with normal service type;
• XX - Authorized Subcontracting records that a subcontracting CT-e has been referenced in a CT-e with normal service type.

Entry into force

Adjustment SINIEF 21/2023 entered into force on 9 August 2023, as per its publication date in the Federal Official Gazette.

Adjustment SINIEF 25/2023 was published on 9 August 2023 in the Official Gazette of the Union. It becomes effective from the first day of the second month following the publication, i.e., from 1 October 2023.