Unprecedented. Landmark. Monumental. These are just some of the adjectives being used to describe Brazil’s recent tax reform. No matter how you describe it, it’s truly a significant development.

Brazil has one of the most complicated tax systems in the world. In the last edition of its Doing Business Report, the World Bank stated that companies spend an average of 1,500 hours preparing, filing, and paying their corporate taxes each year. Reform is long overdue, but achieving it has been a challenge. Until now...

The reform addresses Brazil’s consumption tax (or should we say consumption taxes). There are actually five, but soon there’ll be no more ISS, ICMS, Cofins, PIS, or IPI. It’ll just be IBS (a tax on goods and services shared by states and municipalities) and CBS (a federal contribution on goods and services).

One of the greatest benefits to taxpayers is that IBS will be shared by states and municipalities. In the past, taxpayers often found themselves stuck in disputes between states and municipalities over who should be paid and how much.

Another significant change is the point of tax generation. Previously, taxes were based on the origin of the sale - that is, where the service provider or seller was headquartered. Now, taxes will be collected where the buyer is located or the destination point.

While the excitement is real, it’ll take some time to make the changes. Full implementation isn’t expected until 2033. Stay tuned as you can expect more changes and clarifications to come.