Brazil: Simplified Tax Regime Businesses Must Choose Their Dual VAT Model by September 30, 2026

Brazilian micro and small businesses have until September 30, 2026 to make important tax choices for 2027, including joining the Simplified Tax Regime and deciding whether the new dual VAT taxes will be paid within the simplified regime or separately.

Brazil’s Federal Tax Authority announced on September 1, 2026, that micro and small businesses have until September 30, 2026 to make tax elections that will determine their treatment from January 1, 2027. For the first time, businesses entering the Simplified Tax Regime must make their election in September of the preceding year rather than in January.

At the same time, businesses already participating in the Simplified Tax Regime, as well as those applying to enter it, must consider how they want to collect the new State VAT (IBS) and Federal VAT (CBS) during the first half of 2027.

The changes form part of Brazil’s Consumption Tax Reform and are based principally on Complementary Law No. 214/2025 and Simplified Tax Regime Management Committee Resolutions No. 186, No. 190 and No. 191 of 2026.

Under the pure model, the business remains fully within the Simplified Tax Regime. The State VAT and Federal VAT are included together with the other taxes collected through the unified Simplified Tax Regime payment document.

Importantly, this is the default treatment. If an eligible business does not specifically elect to calculate the dual VAT taxes under the regular regime during September 2026, the two taxes will remain within the unified Simplified Tax system for the first half of 2027.

Under the hybrid model, the business remains a Simplified Tax Regime taxpayer for the other taxes covered by the regime, but the dual VAT taxes are removed from the unified payment and calculated according to the regular rules applicable to these two taxes.

The election made in September 2026 applies from January 1 through June 30, 2027. Businesses that do not choose the hybrid model for this period will have another opportunity in March 2027 to elect regular State VAT and Federal VAT collection for the second half of 2027.

Businesses that apply for the Simplified Tax Regime in September may cancel that application until November 30, 2026.

Impact on retailers and retail systems

For retailers participating in the Simplified Tax Regime, the most important practical issue is that the choice affects more than the method used to pay tax.

From January 2027, the selected model can influence how the dual VAT taxes are calculated, how tax credits operate in B2B transactions and how the amounts are handled in accounting and tax systems. Retailers using ERP, invoicing or other tax-calculation solutions should therefore make sure their systems can apply the model selected for the relevant six-month period.

What should affected businesses do?

Businesses should first confirm whether they are already registered for the Simplified Tax Regime and whether any future exclusion has been recorded. Companies intending to enter the regime for 2027 must submit their application no later than September 30, 2026.

Existing and prospective Simplified Tax Regime businesses should separately assess whether the dual VAT taxes should remain within the unified payment or be calculated under the regular regime. For retailers, this assessment should consider the proportion of B2B and B2C transactions, the importance of tax credits for business customers, cash-flow effects and the necessary accounting or system configuration.

From a retail compliance perspective, businesses should avoid treating the September election as merely an administrative registration. The choice determines how two central taxes under Brazil’s new consumption tax system will be handled for the first six months of 2027 and may affect both tax calculation and commercial relationships with B2B customers.

The source for this article is the official Federal Tax Authority website. Source

Ivana Picajkić, Medior Legal Consultant at Fiscal Solutions

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