The Brazilian tax reform, set to take effect in 2026, will be one of the largest fiscal changes in Brazil in recent decades.
What is the current tax system like?
Currently, Brazilian consumption taxation is fragmented, with taxes collected at different levels of government. According to the infographic below:
At each stage of the production chain, taxation occurs, which accumulates for the next stage; taxes are collected in a hybrid manner, both at the origin and at the destination, and companies do not always have the means to recover all the credits from the taxes paid, increasing the selling price.
The new reform aims to:
- Simplify the Brazilian tax system.
- Reduce complexity for businesses and consumers.
- Make taxation more transparent.
What are the main changes?
The tax reform introduces a new taxation model based on the concept of Dual VAT (Value Added Tax of Dual Incidence). This model replaces five taxes with two new taxes: CBS (Contribution on Goods and Services) and IBS (Tax on Goods and Services). Both will be collected at the destination, eliminating the current fragmentation:
With the creation of IBS and CBS and the gradual elimination of taxes such as PIS, Cofins, and ICMS, the calculation and reporting model will require a new logic.
When will it take effect?
The Constitutional Amendment 132/123 of the reform was approved on December 20, 2023, and establishes a transition period that extends from 2026 to 2033, with some important stages:
As a result, companies need to prepare for the adaptations and tests that need to be made in the ERP.
What is the impact of this on my ERP?
The change in the taxation model directly impacts how ERP systems calculate taxes, perform tax assessments, and comply with accessory obligations. The new model requires a completely different logic for accounting and reporting taxes.
For those using JD Edwards, it is essential to be on version 9.2, as Oracle will only provide update packages compatible with the new legislation in this latest version. Go On is already closely monitoring all updates with Oracle and regulatory bodies, ensuring that our clients are always one step ahead of the changes.
More than just a simple software update, migration requires planning, knowledge of the Brazilian tax environment, and mastery of JD Edwards technology.
Go On has expertise in update and tax compliance projects in JD Edwards. We have several successful cases that illustrate our business knowledge and understanding of tax processes. We work alongside your team to ensure that your system is ready for the new legislation.
Learn more about how we update JD Edwards.