On January 16, 2025, Supplementary Law Bill (PLP) No. 68/2024 was sanctioned, with vetoes, converted into Supplementary Law 214/2025, which regulates the Tax Reform on consumption, instituting the Tax on Goods and Services (IBS), the Social Contribution on Goods and Services (CBS), and the Selective Tax (IS), in addition to creating the IBS Steering Committee.
Constitutional Amendment (EC) No. 132/2023
The Tax Reform was instituted by Constitutional Amendment (EC) No. 132/2023, establishing a new model of taxation on consumption. This model provides for the gradual discontinuance of ICMS, ISS, PIS, and COFINS, and the creation of IBS, CBS, and IS to replace the former taxes.
As concerns IPI, this tax will have its rates reduced to zero throughout the domestic territory, with the exception of products that have industrialization subsidized in the Manaus Free Trade Zone (ZFM), pursuant to criteria established in the supplementary law, with a view to protecting the competitiveness of ZFM.
This new model of taxation on consumption is classified as a Dual Value Added Tax (VAT). This is because it is made up of two main taxes: a) CBS, of federal jurisdiction (Federal Government); b) IBS, of subnational jurisdiction (States, Federal District, and Municipalities).
The Selective Tax (IS) is also a novelty. Being under the jurisdiction of the Federal Government, this tax was designed to perform an eminently extrafiscal role, providing that it will be levied on the production, extraction, marketing or import of goods and services harmful to health or the environment.
All these new rules will be effective as of 2026, with full effect in 2033.
The President’s Vetoes
When sanctioning Supplementary Law 214/2025, the Presidency of the Republic vetoed 18 provisions of its wording presented by the National Congress.
The main vetoes are as follows:
– Article 26, V and X, Paragraph 1, III, Paragraphs 5, 6, and 8:Real Estate Investment Funds (FII), Investment Funds in Agribusiness Production Chains (Fiagro) and Equity Funds (Law 13800/19) were excluded from the list of non-taxpayers;
– Article 36, Paragraph 2:The acquiror’s joint and several liability in the payment of IBS and CBS in commercial transactions without separation of taxes was vetoed.
– Article 231, Paragraph 1, III: The zero rate and maintenance of the right to deduct expenses from the IBS and CBS tax base to the importer of financial services was vetoed;
– Article 413, I: The non-levy of the Selective Tax on exports of goods and services was vetoed;
– Article 444, Paragraph 5:The possibility of appropriating IBS credit in the Manaus Free Trade Zone in operations that entail the need to pay the tax was vetoed.
Return to National Congress
Vetoes were sent to the National Congress, which will have 30 days to analyze them, and even reject them, after the resumption of legislative activities this February.
In any case, with the regulation approved, companies have until the end of 2025 to prepare for the changes, which start in January 2026.
Our Tax Law team is available to review the impacts of Supplementary Law 214/2025 on your company’s operations.
Autor: Sandro Miguel Siqueira da Silva Junior • email: sandro.junior@ernestoborges.com.br
