Brazil's Tax Reform Legislation Advances with IBS and Income Tax Proposals
Brazil moves forward with tax reform legislation, including the IBS and income tax proposals.
- • Senate approved bill regulating the Goods and Services Tax (IBS)
- • Income tax reform plans discussed, focusing on exemptions and higher rates for high earners
- • Senator Braga emphasizes economic recovery and job creation through tax reform
- • President Lula advocates for progressive tax system and educational funding
Key details
As of October 1, 2025, Brazil is making significant strides in its ongoing tax reform journey. The Senate recently approved a substitute bill regulating the new Goods and Services Tax (IBS) system and other key tax alterations. Passed with a vote of 51 in favor and 10 against, the bill, PLP 108/2024, aims to modernize Brazil's tax framework and stimulate economic growth by replacing outdated taxes such as the state ICMS and municipal ISS with the IBS. This new system will share revenue between states and municipalities, introducing a federal Contribution on Goods and Services (CBS) as well.
Key amendments to the reform include selective taxes on unhealthy products and requirements for digital platforms to report transactions. Notably, a selective tax will be imposed on unhealthy goods at a low maximum rate of 2%. Senator Eduardo Braga (MDB-AM), who led the reform, underscored its potential in creating jobs and aiding economic recovery. He also pointed out the establishment of a national governance committee to oversee the new tax regime and enforce compliance education during the transitional phase.
In parallel, President Luiz Inácio Lula da Silva is pushing for income tax reforms, aiming to exempt individuals earning up to R$ 5,000 and implementing higher taxes on top earners. Finance Minister Fernando Haddad stated that these plans include progressive rates up to 10% for those making over R$ 600,000 and a 10% tax on dividends sent abroad.
These legislative actions signify a crucial turning point for Brazil as it seeks to revamp its tax structure and improve fiscal stability.