7 challenges of Tax Reform for companies

Businesses must review processes and prepare to operate under the new tax system

The Tax Reform represents a historic shift in the Brazilian business environment. While it holds the promise of simplification and efficiency that may be realized over the long term, it also imposes several more immediate challenges that companies need to face.

The transition to the new system will take place gradually, beginning in 2026. From now on, businesses must focus on understanding what may impact them so they can prepare for what lies ahead. Here are some of the challenges during this period:

1. Complexity in the transition of the Tax Model

The replacement of current taxes such as PIS/COFINS, ICMS, ISS, and IPI with the CBS (Contribution on Goods and Services), IBS (Tax on Goods and Services), and IS (Selective Tax) will require the coexistence of two systems during the transition phase.

Companies will need to manage these taxes by maintaining records and controls under both the old and the new models, which will increase operational complexity and the risk of tax-related errors.

It is essential to consider the need to handle specific filings for CBS and IBS, reinforcing the importance of a structured tax compliance approach, with investments in team training and control mechanisms.

2. Increased workload

It is not difficult to deduce that tax demands will intensify during the transitional phase. Tax teams will have to deal with the complexity of this period of change, adapting to the new way of working without neglecting their current obligations.

Sharing the company’s tax routine with a tax BPO should be considered, as specialists in the field will be able to lead the planning and transition process in line with the new demands and requirements.

3. Technological adaptation

Tax technology has been an indispensable support for many years, especially considering how well-equipped the tax authorities are to detect inconsistencies in compliance. With the Tax Reform, the demand for technological upgrades intensifies as a critical requirement. Companies will need to adjust ERPs, tax management software, and platforms for issuing and controlling electronic documents to align with the new reality—while still complying with the current tax rules for several more years.

Investing in technology that enables the automation of tax calculations, data cross-checking, and report generation will be vital to ensure compliance and operational efficiency, as well as to provide analytical intelligence to support decision-making.

4. Monitoring legislative changes and rules

The regulation of the Tax Reform is still underway. Supplementary laws and normative acts will be issued to provide more detailed rules. It is worth noting that a series of technical notes are already being published to adjust layouts, validation rules, and the inclusion of fields related to IBS and CBS taxation.

Having support for legislative monitoring will be essential for companies to keep up with the changes and adapt to the new requirements.

5. Updating Tax Processes

CBS and IBS follow the Value-Added Tax (VAT) model, which represents a significant change. In this new format, full non-cumulativity applies: taxes paid throughout the supply chain generate credits that are fully recoverable. Thus, taxation only applies to the final consumption of goods or services.

As a result, companies will need to update their systems to calculate tax credits after the financial settlement of the tax. However, it's important to note that this is not merely a matter of technical software adjustments. It will also involve the need to review tax processes and even reconsider the supply chain.

6. Tax Planning

The Reform changes the logic of tax planning. Strategies such as choosing headquarters and distribution centers based on ICMS tax benefits will need to be revised.

With the gradual elimination of tax incentives, companies will have to rethink their strategies. Those that have benefited from incentives such as presumed credits, exemptions, and reduced tax rates will need to recalculate margins, reassess costs, and review investment decisions.

7. New tax collection model

Another change that is expected to be challenging is the implementation of the split payment mechanism, in which the tax due is automatically separated from the main transaction amount. The tax value is transferred directly to the tax authorities at the time of payment, while the remaining amount, corresponding to the sale value, is credited to the supplier. This may affect cash flow and the availability of working capital.

Read more: Split Payment: Tax Reform brings changes in the way taxes are collected - Domingues e Pinho Contadores

Tax intelligence to meet the changes ahead

Domingues e Pinho Contadores has a qualified team that monitors the progress of the Tax Reform to guide clients on practices that can drive their business during this adaptation phase. Rely on the tax intelligence of the DPC team: dpc@dpc.com.br.