Tax reform: find out how the lock on the maximum rate of new taxes will work

The 26.5% cap on the CBS and IBS rates – taxes created by the tax reform – is among the main new features of the bill (PLP 68/2024) that regulates the new system, approved last Wednesday (10). The limit for the Brazilian Value Added Tax (VAT) was not foreseen in the text that the government sent to Congress in April, although the Ministry of Finance itself was responsible for the calculation that estimated the percentage.

Establishing a ceiling for the reference rate — which will apply to products and services that did not receive differentiated treatment in the text — was the alternative found by the deputies of the working group to limit the weight of taxes on consumption.

For tax lawyer Mariana Valença, the lock included in the bill is positive. “I believe it is pertinent to include the lock to keep the rate at 26.5%. This provides security that the rate percentage, which is already quite high, will not be even higher, forcing the government to reduce the tax burden in the future,” she says.

Federal deputy Erika Hilton, leader of the federation formed by PSOL and Rede in the Chamber of Deputies, also agrees with establishing a ceiling for the reference rate.

“I think that otherwise we will go too far. We already have a high rate, one of the highest in relation to VAT. Within what we have today, in terms of progress with this agenda, this is the text that was possible, the values, the rates, the possible inclusions.”

How the lock will work

According to the complementary bill, the federal government and the IBS Management Committee (formed by states and municipalities) will have to evaluate the functioning of the new system every five years. Since the transition from the current to the future tax regime is scheduled to begin in 2026, the first evaluation should take place in 2030.

In 2030, the reference rates for CBS and IBS that will be applied from 2033 onwards will be estimated — the year in which all current taxes will be extinguished and the new ones will come into full operation.

If the sum of the CBS and IBS rates exceeds 26.5%, the Executive will have to listen to the committee of states and municipalities, and present a complementary bill to the National Congress proposing that the tax percentage on sectors that have different treatment be increased.

Under the reform approved last year, health services, education, medical devices, agricultural products, among other items, will have a 60% discount on the VAT reference rate. This means that, if the Treasury’s estimate of 26.5% is confirmed, the tax on these products and services will be 10.6%.

Services provided by independent professionals, such as lawyers, economists and engineers, will receive a 30% discount, resulting in a rate of 18.6%.

In practice, according to the PLP, the percentage of those who pay less tax should increase, if the rate that everyone else pays threatens to exceed the ceiling of 26.5%.

Exemption for meat

Approved through an amendment by Congressman Rodolfo Nogueira (PL-MS), the inclusion of meat in the basic food basket, which will be exempt from federal, state and municipal taxes, was a controversial topic during the bill’s processing in the Chamber.

This is because the Ministry of Finance, responsible for the initial text, included animal proteins in the list of foods that will benefit from a 60% reduction in the reference rate, claiming that eliminating taxes on meat could increase VAT by around half a percentage point, bringing it to 27%.

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