Brazil’s Lower House recently approved key legislation to regulate the country’s tax reform, endorsing most of the Senate’s amendments. These changes expanded preferential taxation to more sectors, raising the reference tax rate to 28%, higher than the government’s original target of 26.5%.
The new system introduces a consumption tax model with three main taxes: CBS, IBS, and IS. This Value Added Tax (VAT)-like system will go through a trial phase in 2026 before full implementation begins in 2027.
While most Senate exemptions were kept, some provisions were rejected, including tax cuts for the basic sanitation sector. Items such as cookies, football corporations, and parking lots were also excluded from the preferential tax system.
Significant changes were made to the real estate sector, with new VAT rules for property owners. The social rent discount increased to R$600, and tax rates for real estate transactions were reduced, benefiting both property owners and renters.
The House also finalized operational guidelines for the tax system, using 2024-2025 as the base for tax estimates. The “split payment” mechanism rules were adjusted, ensuring automatic distribution of taxes, with further fiscal discussions expected in the coming months.
