Brazil Begins Phased Transition to Federal VAT (CBS) and State VAT (IBS) Taxes

Brazil is moving forward with its major indirect tax reform, which will gradually replace PIS, Cofins, ICMS and ISS with two new VAT-style taxes: the federal VAT (CBS) and the state/municipal VAT (IBS).

New regulations were published on April 30, 2026, including Decree No. 12,955/2026 and Resolution No. 6/2026. These rules support the implementation of the wider tax reform and provide further guidance on how the new system will be introduced.

The transition will take place gradually between 2026 and 2033. During the first phase, Brazil is testing the new federal VAT (CBS) and state VAT (IBS) framework through a 2026 pilot period. Between January 1, and April 30, 2026, most penalties were waived for businesses that failed to correctly include CBS and IBS information in e-invoices.

From August 1, 2026, penalties may start to apply if taxable transactions are not properly reported under the new rules. Another important change is the introduction of split payments, expected to begin in 2027, initially on a voluntary basis for B2B transactions.

A public consultation on the new regulations is open until May 31, 2026. Further consolidation rules are expected from the Federal Revenue Service for CBS and from the IBS Steering Committee.

In summary: Brazil has started the practical implementation of its new VAT-style tax system. Businesses should prepare for CBS and IBS reporting, the end of penalty relief, and the first voluntary split payment rules for B2B transactions from 2027.