This blog was last updated on August 25, 2025
Do you know what Supplementary Law 214 is? Enacted in January of that year, Supplementary Law No. 214 consolidates one of the most important steps in the Brazilian Tax Reform.
The new law details the creation and regulation of these three taxes that will replace most of the current consumption taxes: the Tax on Goods and Services (IBS), the Social Contribution on Goods and Services (CBS), and the Selective Tax (IS). It also establishes the IBS Steering Committee and promotes changes in current tax legislation.
What changes with Supplementary Law 214?
LC 214/2025 regulates the guidelines established by Constitutional Amendment 132/2023, detailing how the Tax Reform will be implemented in practice. With it, Brazil takes a decisive step towards simplifying and modernizing the consumer tax system.
Creation of the IBS (Goods and Services Tax)
The IBS is a tax of shared competence between States, Federal District, and Municipalities. It will replace the ICMS (state) and the ISS (municipal), two of the most complex taxes in the current structure. With a broad impact on goods, services, and rights, IBS will be non-cumulative and will be charged at the destination, that is, at the place where the consumption occurs.
Its objective is to standardize legislation across the country, eliminating state and municipal variations and promoting greater transparency and legal certainty.
CBS: Social Contribution on Goods and Services
CBS, in turn, is under federal jurisdiction and will replace the PIS and Cofins taxes. Like the IBS, it will follow the VAT (Value Added Tax) model, widely adopted internationally. CBS will also be non-cumulative and will focus on the consumption of goods and services.
IS: the new Selective Tax
Aimed at products that cause negative impacts on health or the environment, the Selective Tax (IS) will function as a regulatory instrument. It will be applied, for example, to cigarettes, alcoholic beverages and fossil fuels. It will be levied only once on the good or service, and it is not possible to take advantage of credit from previous transactions or to generate credits for subsequent operations.
The IBS Steering Committee
One of the central points of LC 214 is the creation of the IBS Steering Committee, the body that will be responsible for administering this new tax on behalf of States and Municipalities. It will have tasks such as defining operating rules, managing collection, and ensuring the correct distribution of revenue among federal entities.
This committee will consist of technical representatives appointed by subnational governments, with a balance between States and Municipalities. The proposal is to ensure efficient, transparent management free of political disputes.
Transition and changes in legislation
Supplementary Law 214 also defines what the transition period between the current model and the new tax system will be like. From 2026 to 2032, there will be a coexistence between old and new taxes (IBS and CBS), with a progressive reduction of the former.
In addition, the law promotes a series of updates to the legislation, such as:
- Unification of ancillary obligations;
- Establishment of rules for national electronic invoices;
- Definition of criteria for comprehensive and transparent tax credits;
- Preparation for an integrated digital collection and inspection platform.
Why is LC 214 so important?
Rather than instituting new taxes, this law marks the beginning of a profound change in the way in which Brazil taxes consumption. It seeks to solve historical problems in the current system, such as the fiscal war between States, the cumulativity of taxes, and the high compliance costs for companies.
With clearer rules, uniform rates, and greater transparency, Supplementary Law 214 has the potential to make the tax system fairer, more predictable, and efficient, benefiting both taxpayers and the country’s economic development.
How can Sovos support your company in the transition?
The adoption of the new taxes will require a complete transformation in the companies’ fiscal, technological and operational processes. That’s where Sovos makes the difference.
With robust tax compliance and tax automation solutions, Sovos is prepared to help your company adapt to IBS, CBS and IS, ensuring:
- Compliance with the new legislation in real time;
- Integration with the main ERP and management platforms;
- Constant monitoring of legal updates;
- Technical support from local experts throughout the transition.
Alongside Sovos, your company will be ready to navigate the Tax Reform with security, efficiency, and tax intelligence. Do you want to know more? Talk to us!