Preliminary Tax Reform Approved

Preliminary Tax Reform Approved

On July 7, 2023 was approved the Preliminary Opinion 3 of PEC 45-A/2019, which now goes to the Senate and is subject to further modifications and analyses. 

In case the Senate changes the project, it will return to the Chamber since the EC cannot have a divergence between the Chamber and the Senate. 

The Preliminary Opinion 3 about Tax Reform proposes the creation of: 

  • a dual VAT – IBS (States and Municipalities VAT) and CBS (Federal Government VAT) with gradual extinction of PIS/COFINS (Social Contributions on Revenue), IPI (Industrialized Products Tax), ICMS (State Sales Tax) and ISS (Counties Services Tax)
  • and Selective Tax on goods or services harmful to health and the environment. 

Controversial Topics 

  • Legal Certainty x Constitutional Scope x Convenience (PLC conditioned to PEC).
  • Up to 180 days from the publication of the EC to send the IR reform proposal – What if this IR (Income Tax) proposal is not approved?
  • ITCD in the donation of movable property in Brazil, when the donor and the donee reside abroad? Traceability?
  • Will there be an increase in the tax burden? Impossibility of forecast given the lack of synchrony with the IR reform. 
  • Can or should any additional income tax be offset against payroll and consumption taxes? 

Voting forecast: August 2023 

The Tax team of Azevedo Sette Advogados is available to provide clarification on the subject. 

For more information about the Tax Reform in Brazil click here.