Short answer: yes. Brazil now operates a dual VAT made of CBS (federal) and IBS (states and municipalities), introduced by the consumption-tax reform and replacing PIS, Cofins, IPI, ICMS and ISS — alongside a new Selective Tax. The structure is enacted; the rates and several details are phased in across 2026–2033. Selling digital services into Brazil from abroad? The reform now makes foreign digital suppliers register for and collect CBS/IBS.
What “dual VAT” means in Brazil
Brazil did not adopt a single national VAT. It adopted two coordinated value-added taxes that share the same base but belong to different levels of government:
- CBS — Contribution on Goods and Services is a federal tax. [Source: CF/1988 art. 195, V, added by EC 132/2023; LC 214/2025 — Planalto]
- IBS — Tax on Goods and Services is a tax of shared competence among states, the Federal District and municipalities. [Source: CF/1988 art. 156-A, added by EC 132/2023 — Planalto]
CBS sits where the old federal consumption taxes were; IBS sits where the old subnational ones were. The model uses standard VAT logic — tax along the chain with broad, non-cumulative credits for input tax, a meaningful change from the fragmented legacy regime.
What the dual VAT replaces
The reform consolidates five legacy consumption taxes into two:
- CBS replaces the federal contributions PIS and Cofins. And collection itself is changing: see split payment, which peels IBS/CBS off at settlement. IPI is not replaced by CBS: it drops to a zero rate from 2027 (kept only to preserve Manaus Free Trade Zone competitiveness), with its excise role passing to the Selective Tax.
- IBS replaces the subnational taxes — ICMS (states) and ISS (municipalities).
One nuance worth keeping: IPI is not simply deleted — it is retained specifically for goods manufactured in the Manaus Free Trade Zone, a mechanism that protects the zone’s competitiveness as IPI is phased out elsewhere. [Source: LC 214/2025 — Planalto]
The Selective Tax (Imposto Seletivo)
Beyond the dual VAT, the reform created a federal Selective Tax on goods and services considered harmful to health or the environment (e.g., tobacco, alcohol). For most foreign companies it matters only in specific sectors, but if your product line touches regulated categories, model it alongside IBS and CBS. [Source: CF/1988 art. 153, VIII, added by EC 132/2023; LC 214/2025 — Planalto]
The 2026–2033 transition
The new system phases in rather than switching on at once:
- 2026 — test phase: companies report CBS and IBS on invoices, without effective collection.
- 2027 — CBS and the Selective Tax begin to be charged.
- 2029 — IBS enters its transition ramp.
- 2033 — ICMS and ISS are fully extinguished.
During the overlap years, a business may face legacy and new taxes in parallel, with reporting starting before collection — a systems and compliance workload, not just a rate change. [Source: Senado Federal; Câmara dos Deputados — Agência Câmara]
August 2026 operational update: reporting dates are not the same as invoice rejection
The official implementation calendar now assigns different 2026 start dates by electronic document. Several documents — including NF-e, NFC-e, CT-e and related transport documents — entered the calendar on 3 August 2026, while the general NFS-e and NFCom milestones are 1 October 2026. Other documents follow later dates. See the Receita Federal and CGIBS implementation calendar.
That calendar does not currently mean that every listed invoice is automatically rejected when IBS/CBS fields are absent. On 31 July 2026, the authorities approved a technical act suspending the validation rules that would cause rejection for missing IBS/CBS information in the listed electronic documents. Receita Federal subsequently confirmed that those documents will not be rejected solely because the fields are absent.
This is operational flexibility, not a blanket cancellation of the 2026 reporting and implementation framework. Companies should continue adapting layouts, tax classifications and reconciliation controls, and monitor the official portals for a future activation date. For the practical systems and contract checklist, see IBS and CBS in 2026: What Foreign Companies Should Prepare Now.
What about the headline rate?
A reference rate of around 26.5% is widely cited in official studies and debate, but the definitive rate is not yet legally fixed — it will be set through later regulation and a Senate resolution. The Ministry of Finance hosts a rate simulator, but it is an estimation tool, not a fixed legal rate. The disciplined planning posture is to model ranges, not a single number, and update when the Senate resolution lands. [Source: gov.br/fazenda — Reforma Tributária]
Cash-flow mechanics
Two features matter for working capital: a split-payment mechanism that separates the tax portion at the moment of payment (changing when tax leaves your cash cycle), and the Comitê Gestor do IBS, the committee that administers the shared IBS across subnational entities. Both are still maturing in implementation. [Source: LC 214/2025; gov.br/fazenda]
FAQ
Does Brazil have VAT? Yes — a dual VAT of IBS (states/municipalities) and CBS (federal), plus a Selective Tax.
What do IBS and CBS replace? IBS replaces ICMS and ISS; CBS replaces PIS and Cofins. IPI is zeroed from 2027 (retained only for Manaus Free Trade Zone competitiveness), with its excise function moving to the Selective Tax.
When does it take effect? Phased in: 2026 is the test and reporting year, 2027 begins CBS and Selective Tax collection, 2029 starts the IBS transition ramp, and 2033 completes the replacement of ICMS/ISS. In 2026, dates vary by electronic document, and the authorities have suspended automatic rejection for missing IBS/CBS fields in the listed DF-e until a future activation date.
What is the rate? A reference of ~26.5% circulates, but no final legal rate is fixed yet — plan in ranges.
Sources
Official sources reviewed for this brief: the constitutional amendment of the reform (EC 132/2023) and its general law (Lei Complementar 214/2025), together with the Ministry of Finance’s tax-reform portal, the Receita Federal/CGIBS 2026 electronic-document calendar, the later validation-rule flexibility notice, and the transition explanations of the Senado Federal and the Câmara dos Deputados.