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Brazil’s historic tax reform is facing a turbulent rollout as taxpayers struggle with the transition to the new Dual VAT system. With the testing phase for the Imposto sobre Bens e Serviços (IBS) and Contribuição sobre Bens e Serviços (CBS) set to begin in 2026, a fierce debate has erupted over the “calculation base” for the transition period.
Legal experts and corporate tax directors are seeking urgent clarification from the Federal Revenue of Brazil (RFB) on whether the new levies must be included in the calculation base of the legacy ICMS and ISS taxes. If confirmed, this “tax-on-tax” scenario could temporarily skyrocket the effective tax burden for service providers and retailers during the transition years.
“The lack of a clear ruling is paralyzing investment decisions for 2026,” said Maria Silva, a tax partner at a leading São Paulo firm.
Adding to the complexity, the rollout of the new electronic invoicing standard for the airline industry (BP-e TA) has begun this week. Airlines are reporting significant integration challenges, further highlighting the IT gap many sectors face before the new system goes live.
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