On December 20, local time, the Brazilian Congress convened to promulgate the Constitutional Amendment No. 132 of 2023 on tax reform, which was attended by many dignitaries such as Lula, Finance Minister Fernando Ada, Senate President Rodrigo Pacheco and Speaker of the Chamber of Deputies Arthur Lilla.
The scene of the meeting of the Brazilian Congress.
The tax reform bill focuses on the establishment of a value-added tax (IVA) and the simplification of Brazil's tax system. Among them, the existing five taxes, including industrial product tax, income tax, social integration tax, goods and services circulation tax, and service tax, will be combined into value-added tax, and will be levied by the federal government and all levels of states and municipalities. From 2026, the Goods and Services Contribution Charge (CBS) will be levied at the federal level**, and the Goods and Services Tax (IBS) will be levied at all levels of states and municipalities**. At the moment, the VAT rate has not yet been determined.
The new law will also significantly reduce tax rates on goods and services related to education, health services, medical devices and medicines, public transport, agricultural products, fisheries, food, arts, and other sectors by up to 60%. The bill also establishes additional taxes on products that affect human health and are harmful to the environment, such as tobacco and alcoholic beverages. In addition, the "basic food basket" related products related to people's livelihood will be exempted from taxes, and the specific types of goods that are included in this scope will be further specified in the supplementary bill.
The tax reform bill also increases import taxes on electric vehicles and gives some tax incentives to manufacturers of gasoline vehicles in the Northeast and Midwest.
According to the plan, the transition period of Brazil's tax reform will begin in 2026 and last until 2032. From 2033, the current tax system will be completely replaced by a new tax system.
In his speech, Lula praised the passage of the tax reform bill, saying that "Congress has fulfilled its promise to the Brazilian people", but said that the tax reform will not "solve all problems".
Brazil's tax reform has been discussed for nearly 40 years, and this tax reform will help the manufacturing industry and enterprises reduce the tax burden, greatly reduce the operating costs of enterprises, and promote the country's economic development. As a result, the tax reform is widely seen as a historic step towards simplifying the country's tax system.
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