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Brazilian Tax Reform

This overview examines the October 2019 Brazilian Tax Reform, focusing on challenges like conflict of competence between states and municipalities, disputes of interpretation, bureaucracy, and court litigation. It delves into proposed changes under PEC 45/2019, PEC 110/2019, and PEC 128/2019, covering various taxes like CIDE-Fuel, COFINS, IPI, PIS, IOF, CSLL, ISS, and ICMS, suggesting a shift towards a simpler, centralized tax regime for uniformity and reduced litigation. The analysis highlights the potential impact on different sectors and the need for tax simplification for a more efficient and effective tax system.

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Brazilian Tax Reform

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  1. Brazilian Tax Reform October, 2019

  2. Current Brazilian Tax System • Brazilian Tax Reform Challenges • Conflict of competence (states x municipalities) • Disputesof interpretation • Bureaucracy • Litigation in Brazilian courts

  3. PEC 45/2019 • PEC 110/2019 • PEC 128/2019 Proposals - Overview • CIDE-Fuel • COFINS • COFINS • IPI • IPI • PIS • IOF • CSLL • ISS • COFINS • ICMS • PIS • ISS • IOF • ICMS • ICMS • ISS • IBS • IPI • Federal IBS • Corporate Income Tax • Federal Selective Tax • IVA Federal • IMF • IPI • State IBS • PIS • IVA State/ Municipal • Ed. Salary • 6 extinctions • 5 extinctions • 9 extinctions • and 2 changes • Non-cumulative VAT • Federal Selective Tax for specific products considered negative externalities (e.g cigars and alcohol) • Non-cumulative StateVAT • Federal VAT for specific sectors • (e.g., fuel, oil, telecommunication) • Corporate Income Tax (CIT+CSLL) • Two changes: • ITCMD to be charged by Federal Government • IPVAencompassing aircraft and vessels • Non-cumulative VAT Federal • Non-cumulative VATState/Municipal • IMF: Tax over cash flow • IPI: only for specific products considered negative externalities • Taxation on profits and dividends • Digital and financial services/goods taxed exclusively by the Federal Government Brazilian Tax Reform

  4. General Opportunities and Challenges • Opportunities • Challenges • Broader tax basis: all types of goods, services intangible and other activities will be taxed, imposing taxes in activities which are not currently taxed (such as rental) • Potential taxation onevery transaction • Potential litigation on definition of destination • Potential accumulation or distortion of IVA credits depending on the companies’ activity • Lack of special regime to given sectors • Tax simplification • Uniform tax regime • Centralized collection • Non-cumulative tax (IBS or IVA): all credits • Simpler tax reporting • Relief of tax litigation Brazilian Tax Reform

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