This blog was last updated on August 26, 2025

What is the tax reform schedule for companies and the requirements they must comply with at each stage? With a progressive implementation until the beginning of 2033, this change introduces quite radical structural modifications to the country’s tax system.

In this guide, we explain the most relevant phases of the reform and the steps that companies must take to adapt properly.

1. Approval and planning phase (2023-2024)

The tax reform was approved in December 2023 after intense debates in Congress. This is one of the most ambitious tax reforms in Brazilian history, seeking to simplify the current system, reduce red tape and increase economic competitiveness. In January 2025, complementary regulations (Supplementary Law No. 214/2025) were enacted, which defines how the new taxation model will be applied. This period is essential for the preparation of companies, as they must begin to evaluate the changes that will impact their operations.

Actions for companies:

Assess fiscal impact:

• Analyze current taxes and how they will be replaced by the new system.
• Consult tax advisors to understand how the reform will impact the company.

Identify accounting and billing changes:

• Review current systems and their compatibility with dual VAT.
• Explore technological solutions that facilitate adaptation.
• Seek technological advisors who can provide guidance in the face of technological challenges and tax compliance.

Follow the regulations:

• Follow the publication of complementary laws as well as other regulations of all Federated Entities regarding the rates that detail the application of the reform.

2. Transition period (2026-2032)

Starting in 2026, Brazil will begin to replace its current complex tax system with a dual VAT model. During this transition period, a phased schedule will be implemented for the gradual elimination of existing taxes, such as PIS, COFINS, ICMS and ISS, giving way to CBS (Contribution on Goods and Services) and IBS (Tax on Goods and Services) and IS (Selective Tax). This period will be crucial for companies, as they will have to operate under a hybrid system while the migration to the new tax regime is completed.

Between 2029 and 2032, the transition from ICMS and ISS to IBS will take place, with a gradual reduction in tax rates. In parallel, the IBS rate will be increased progressively as follows: 10% (2029) — 20% (2030) — 30% (2031) — 40% (2032).

Actions for companies:

Update accounting and billing systems:

• Implement systems that support the calculation of dual VAT.
• Adapt the electronic invoicing software to the new requirements.

Optimize the tax burden:

• Review the tax benefits available for specific sectors.
• Plan strategies to optimize taxation during the transition.

Perform tests and simulations:

• Compare the financial impact of the new taxes with the current ones.
• Adjust prices and cost strategies as changes.

Train suppliers and customers:

• Explain changes to the pricing and billing structure.
• Adjust contracts to reflect the new tax burden.

Monitor regulation:

• Review resolutions that define how to apply dual VAT in each sector.

3.  Full implementation (2033 onwards)

In January 2033, the new tax system will be fully implemented in Brazil, ending the seven-year transition. As of that date, the old tributes will be eliminated, and CBS and IBS will be fully operational. This new model is expected to reduce administrative costs for companies and make the tax system more transparent and efficient.

However, it will also represent new challenges, such as the definitive adaptation of financial systems and the need for adjustments to the organizations’ fiscal strategy.

Actions for companies:

Ensure full compliance:

• Audit the accounting system to ensure that it is aligned with the new regulations.
• Implement internal controls to verify the correct calculation and payment of taxes.

Evaluation and continuous improvement:

• Periodically review tax practices to identify optimization opportunities.
• Stay up to date on potential future regulatory changes.

Adopt long-term tax strategies:

• Plan investments and financial decisions considering the new tax structure.
• Continue to take advantage of tax incentives and sector benefits.

Special Considerations

Selective Tax (IS): It will be applied to products harmful to health and the environment, such as sugary drinks and tobacco.

Exemptions and Benefits: Basic products will be exempt from taxes, and there will be reductions for sectors such as health and education.

Differences between CBS and IBS: CBS will have a uniform rate across the country, while IBS may vary by state or municipality.

Tax reform in Brazil represents an important structural change that requires preparation and adaptation on the part of companies. To minimize risks and ensure a successful transition to the new tax system, organizations must not only plan, but also rely on a trusted partner that simplifies the path.

With over 40 years of experience in taxation and being the first company in the world to develop and issue an electronic invoice, Sovos offers an ecosystem of world-class global  and local solutions and has a team of more than 40 regulatory specialists to support companies in adopting the new tax reform.

Do you want to know more? Let’s talk!