Tax Reform: Impact on the service sector

Consumption Tax Reform is underway, and the first implementation phase will begin in a few months. The year 2026 will be a period of testing for both taxpayers and tax authorities, and in this first stage, the companies main challenge will be ensuring that their tax documents are issued correctly, in accordance with the new rules and fields.

For the service sector, this stage is particularly challenging because the Electronic Service Invoice can have different formats depending on the municipality where the taxpayer is located, and in many cases, this does not change in the new scenario. What changes with Tax Reform is that municipalities will have to adapt to integrate their systems into the national environment or join the national issuer, meaning that each municipality must decide which model it will adopt.

Taxpayers need to monitor and ensure that their internal systems are capable of integrating with the system adopted by the municipal government in their location.

Analysis and projections

Although the Tax Reform will not have a financial impact on taxpayers in 2026, it is essential that companies conduct analyses and projections from now on in order to understand the impacts on their business starting in 2027, when the CBS tax will be charged and PIS and Cofins will be extinguished.

Between 2029 and 2032, the ISS tax will be reduced year by year, while IBS tax will be increased in the same proportion. This transition period applies to all taxpayers, regardless of the industry. However, analyses show that the new tax model system will significantly impact the final tax burden in the services sector.

Today, services are taxed by the ISS with rates ranging from 2% to 5%. Its replacement, the IBS, is expected to have a rate of around 18%, according to projections. Currently, PIS and Cofins are taxed at 3.65% for companies under the Presumed Profit regime and 9.25% for companies under the Real Profit regime (with some exceptions), while projections for CBS are around 9%.

One of the pillars of the reform is full non-cumulativity, meaning the allowance for credit utilization for all previous stages that were taxed by IBS and CBS, regardless of the destination of the goods or services. This compensation is expected to mitigate the impact of the increase in rates. However, service-providing companies, unlike the retail and industrial sectors, usually do not make significant purchases of goods and services compared to their revenue. Their main cost is payroll, which will not generate credits.

Considering this peculiarity of the sector, there is a Complementary Law (PLP 63/2025) under discussion that proposes granting the services segment a presumed credit. However, the proposal has been stalled since March of this year, and it is necessary to monitor its progress.

At this point, in addition to projecting the impact of the new tax burden, companies in the service sector must conduct some important analyses to ensure competitiveness and profitability, such as:

• evaluate whether your activity may be classified under a differentiated tax regime that provides for reduced tax rates (for example: legal services, education, healthcare, among others);
• analyze your client portfolio and pricing model, assessing the impact that the new tax burden may have on your clients as well;
• structure contracts, including clauses related to Tax Reform that provide security to relationship with clients;
• conduct a thorough review of your expenses and suppliers to maximize your credits.

We are ready to assist your company during this challenging and uncertain time. Our team can help you better understand the changes, plan the transition to the new tax regime, and ensure that your business goes through this process safely and efficiently, minimizing impacts and taking advantage of the opportunities the Reform may bring. Count on this support: dpc@dpc.com.br.