Brazilian Tax Reform: substitute text read in House of Representatives plenary session

On Wednesday, July 5, 2023, the rapporteur of Brazil’s proposed tax reforms, Representative Aguinaldo Ribeiro (Progressistas-Paraíba), presented a new preliminary version of Constitutional Amendment Bill (PEC) No. 45/2019 in a plenary session in Brazil’s House of Representatives. If passed, the bill will implement wide reforms of consumption taxation and certain specific reforms regarding the taxation of wealth and property.

The preliminary text maintains many previously disclosed aspects of the proposed reforms. In particular, it proposes merging five existing indirect taxes ISS, ICMS, IPI, PIS and Cofins into two value-added taxes – a state/municipal goods and services tax (IBS) and a federal goods and services contribution tax (CBS) – as well as a federal selective tax.

However, as Representative Ribeiro noted while reading the text in the House, the document is yet to be finalized due to ongoing political negotiations. The definitive version of the bill will be made available before the first round of voting, which according to House of Representatives Speaker Arthur Lira (Progressistas-Alagoas), will take place no later than June 7, 2023.

Aspects potentially subject to change

Representative Ribeiro expressly highlighted that the following matters may be subject to change (among others):

• The structure of a proposed National Council that would manage IBS revenues and how these revenues would be distributed among Brazil’s states and municipalities;
• Provisions regarding the Manaus Free-Trade Zone (ZFM) in Brazil’s north;
• Taxation on staple food packages (Cestas básicas);
• Provisions regarding the proposed Regional Development Fund (FDR); and
• Certain demands from the agribusiness sector.

For further information on tax-related measures and new legislative developments, please contact Mattos Filho’s Tax and Government Relations practice areas.