Companies face critical deadlines between August and December, while court decisions challenge the improper collection of the Tax on Services (ISS) in connection with the issuance of tax invoices.
By Larissa Moreira
Legale Overseas, no. 988.
Starting in August 2026, Brazil’s Consumption Tax Reform enters a more demanding stage of its transition period. After an initial phase marked by greater flexibility, the Brazilian Federal Revenue Service and the Management Committee of the Tax on Goods and Services (IBS) will begin systematically enforcing the correct completion of IBS-related fields in electronic tax documents. Throughout the second half of the year, companies under the Simples Nacional regime will also need to make important decisions regarding their tax framework. At the same time, the Social Integration Program (PIS) and the Contribution for the Financing of Social Security (Cofins) are moving toward extinction, while the Judiciary is already addressing the limits of the collection of the Tax on Services (ISS) during the transition period.
Tax Documents Without IBS and CBS Information Will Be Rejected
As of August 3, 2026, electronic tax documents issued by companies under the regular tax regime without the required IBS and Contribution on Goods and Services (CBS) fields duly completed will be automatically rejected by the system. The requirement to report the new taxes will no longer be merely a legal obligation but an actual operational barrier, making it essential for tax issuance systems to be properly updated before that date.
Simples Nacional: Deadline to Choose the IBS and CBS Assessment Regime
In September 2026, companies opting for the Simples Nacional regime must, between September 1 and 30, formally select the tax treatment that will apply in the 2027 calendar year and decide whether IBS and CBS will be collected through the Simples Nacional single payment slip or under the regular assessment regime. Companies that fail to make a selection within the deadline will automatically remain under the standard model, in which both taxes are included in the unified payment slip. Either choice may still be revoked until the last business day of November 2026. From December onward, however, the decision becomes final for the first half of 2027.
End of PIS and Cofins
On December 31, 2026, PIS and Cofins will be fully extinguished and replaced by CBS. The good news is that accumulated tax credits will not be lost: they may still be used to offset CBS liabilities, refunded in cash, or offset against other federal taxes. For this reason, companies are advised to review and properly record their tax credits during 2026 to avoid potential losses when the new system comes fully into effect.
Judiciary Debates ISS Collection During the Transition Period
While the federal transition schedule moves forward, court decisions have suspended the collection of ISS in situations related to the issuance of tax documents for IBS and CBS purposes. The Consumption Tax Reform provides for the incidence of IBS and CBS on the lease of movable assets, a transaction currently not subject to ISS.
With the beginning of the transition phase, taxpayers who were previously not required to issue tax invoices for such transactions have been surprised by demands to collect ISS. In one case, a court in the State of São Paulo considered it abusive to require ISS payment as a condition for issuing tax invoices related to the lease of movable assets—an activity that the Brazilian Supreme Federal Court (STF) has already recognized as falling outside the scope of ISS taxation. This scenario requires particular attention from companies seeking to avoid improper taxation.
Vaz de Almeida Advogados closely monitors developments related to the Tax Reform and the evolving case law on the subject, helping companies across different industries understand the practical implications of each stage of the transition process.
Translation Disclaimer
This document was originally drafted in Portuguese and subsequently translated into English using artificial intelligence (AI).
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