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The enactment of Supplementary Law No. 214/2025 (LC 214/2025) marks the beginning of a new era for the Brazilian tax system. For those operating in foreign trade, these changes are more than just nominal; they profoundly alter cost structures, cash flow, and pricing strategies for imported goods.

While the focus was previously on managing the complexities of PIS, COFINS, and varying ICMS-Import rates, the landscape is now converging toward a Dual VAT system: the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS).

In this article, we detail what changes in practice and how your company should prepare for this new scenario.

The End of PIS/COFINS and ICMS-Import

The primary structural shift is the replacement of current taxes with new consumption taxes. Although the Import Tax (II) and AFRMM remain, the dynamics of other taxes change drastically:

Strategic Note: The Selective Tax (IS), also known as the "Sin Tax," may apply to the import of specific products (such as cigarettes, alcoholic beverages, and polluting vehicles), further increasing the tax burden on these items.

The Controversial Expansion of the Calculation Base

This is perhaps the most critical point for importers. Article 69 of LC 214/2025 defines the calculation base for IBS and CBS on imports as the customs value plus various other costs and taxes.

Unlike the previous model, which faced legal disputes regarding the exclusion of fees like handling charges (THC) and other port expenses, the new law seeks to "shield" revenue by explicitly including the following in the base:

• Import Tax (II)

• Selective Tax (IS)

• Siscomex Fee

• AFRMM;

• CIDE-Fuels

• Any other taxes, fees, or duties incurred until the goods are released

The Practical Impact

Including handling and port fees in the calculation base creates a "cascade effect". Since IBS and CBS are levied on an amount already burdened by these fees, the final cost of goods tends to rise, requiring an immediate review of price formation.

Credits and Cash Flow: The End of Deferment?

A major draw for certain ports and airports was the ICMS deferment on imports, which allowed companies to postpone tax payments until the moment of internal sale.

With the Reform, the IBS (which replaces ICMS) follows the destination principle. This means the tax belongs to the state where consumption occurs, which tends to end "Tax Wars" and, consequently, many deferment benefits.

Conversely, the credit system will be fully non-cumulative. While IBS/CBS credits paid during import can be used more quickly to offset future output debts, the financial outlay at the time of customs clearance may be higher than under the old model.

Transition Timeline: Prepare for 2026 and 2027

The Reform does not happen overnight. There is a coexistence period between the old and new systems:

• 2026: Start of the "testing period" with CBS at 0.9% and IBS at 0.1%. Paid amounts can be offset against due PIS/COFINS.

• 2027: CBS comes into full effect, extinguishing PIS and COFINS. IPI is also abolished for most products (except those produced in the Manaus Free Trade Zone).

• 2029 a 2032: Gradual reduction of ICMS and ISS rates with a proportional increase in IBS.

• 2033: Total extinction of the old system and full implementation of Dual VAT (IBS and CBS).

Preparation Checklist for Importers

To protect margins and ensure compliance, companies should act on three main fronts:

• Review Fiscal Classification (NCM): With the arrival of the Selective Tax and new IBS/CBS rates, a classification error can be costly.

• Recalculate Cost Spreadsheets: Include the new components of the calculation base (port fees and handling) to understand the real impact on acquisition costs.

• Cash Flow Planning: Prepare for the end of state tax benefits (deferments) and a potential increase in immediate customs clearance outlays.

Conclusion

Tax Reform promises simplification, but the transition period and the new calculation base demand caution. Tax planning and review are no longer just "bureaucracy"—they have become strategic for competitive survival in foreign trade.

Has your company mapped the impact of LC 214/2025 on its operations? The time to review is now.

Avoid mistakes when importing!

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• Sourcing your product to find the best value for your product.
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