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Approval of PEC 45 in the Senate

This week, the Brazilian Senate approved the text of PEC 45, which promises to simplify the country's current tax system. The Constitutional Amendment Proposal must still be approved by the Chamber of Deputies.

In this article, you can check the current situation of the changes introduced by the tax reform.

The Brazilian Senate approved on November 8, 2023, the Proposal for Constitutional Amendment No. 45 ("PEC 45"). The approved text maintained most of the points presented at the end of October by the rapporteur of the proposal, Senator Eduardo Braga. However, the changes introduced by the Senate to the text need to be reanalyzed and approved by the House of Deputies.

The main objective of PEC 45 is the simplification of the current tax system, in order to ensure full non-cumulativeness, reduce litigation rates and compliance costs. The proposal also aims at aligning the tax system with broader objectives, such as tax justice and environmental preservation.

In summary, with regard to taxes levied on consumption, PEC 45 proposes the replacement of 5 taxes: ICMS, PIS, COFINS and ISS, by the so-called "Dual VAT", represented by the Contribution on Goods and Services ("CBS") and Tax on Goods and Services ("IBS"). In addition, it also provides for the creation of the Selective Tax ("IS") to replace the IPI.

There are other changes introduced by the reform that affect taxes levied on the ownership of goods, assets and also on the transfer of assets and rights over gifts and inheritances.

Below, we summarize the main aspects of the tax reform considering the changes approved in the Senate.


1. IBS and CBS


  • IBS and CBS will apply to all transactions involving the acquisition of tangible and intangible goods and services, including imports.
  • The IBS and CBS will follow the same rules regarding the definition of taxable events, taxable person, immunities, calculation basis, rates, and credit registration rules.
  • The reform will implement a system of non-cumulative taxation. Thus, as a general rule, a tax credit will be granted on all purchases of goods and services associated with the effective payment of taxes.
  • The law guarantees the possibility of reimbursement in case of accumulation of credits. Exception for goods and services for personal use and transactions subject to exemption or non-taxation.
  • Taxes due based on the place of consumption, based on the destination principle. Criteria yet to be defined by laws.
  • Considering that consumption taxes are ultimately payable by the final consumer, the reform introduced a cashback mechanism available to qualified persons according to requirements that will consider income levels and other elements. This system serves as an instrument for the implementation of a more progressive tax system.
  • The possibility of cashback was approved in the case of products of the expanded basic food items, on the consumption of electricity and liquefied petroleum gas by low-income consumers.
  • The two taxes will be instituted by complementary law. The CBS rate may be set by ordinary law. The IBS rate will be determined by states and municipalities. It is estimated that the final combined rate, considering the two taxes, is around 27.5%.
  • The IBS and CBS rates will have a limit based on the average collection of taxes that will be extinguished (ICMS, ISS, PIS and COFINS) in relation to GDP between 2012 and 2021. In the event that this ceiling is exceeded, the reference rate shall be reduced. The mechanism aims at avoiding the increase in taxes with the tax reform.
  • The complementary law should define the foods of the National Basic Food List, which will be subject to the zero rate of CBS and IBS, considering the regional distinctions existing in the country.
  • It was also foreseen the creation of an extended Basic Food List with the incidence of IBS and CBS at a reduced rate. The complementary law should regulate the extended Basic Food List.


Differentiated regimes

The tax reform provided for the reduction of CBS and IBS rates for certain products, services, or sectors. The table below summarizes the differentiated regimes applicable according to the changes promoted by the new text of PEC 45 (differentiated regimes should be subject to a complementary law):


Authorization for 30% reduction

60% reduction

Authorization of reduction from 60% to 100% or exemption

Provision of services of an intellectual profession, of a scientific, literary or artistic nature, provided that they are subject to supervision by a professional council.




Education and health services.



National Basic Food Basket (to be defined).



Food intended for human consumption.


Vegetables, fruit and eggs.


Agricultural and aquaculture inputs.

Health services, medical devices, medicines, accessibility devices for people with disabilities, medicines, basic menstrual health care products.



Agricultural, aquaculture, fishery, forestry and plant extractive products in natura

Purchase of medicines and medical devices by the direct administration, autarchies and public foundations of the Union, the states, the Federal District and the municipalities, as well as by social assistance entities.



Cleaning products: personal hygiene products (only for products mostly consumed by low-income families).

Cars for people with disabilities and autism spectrum disorder or professional drivers who are intended for use in the rental category (taxi)



Artistic, cultural, event, journalistic, literary and audiovisual productions

national sports activities, institutional communication services


Services provided by non-profit innovation, science and technology (ICT) entities.


Goods and services related to sovereignty and security

national, information security and cybersecurity;and  goods and services that promote the circular economy and sustainability in the use of natural resources.




Urban assistance and rehabilitation activities in historic areas and critical areas of urban recovery and reconversion.


Collective passenger transport services by road and

urban, semi-urban and metropolitan subway


Education Services – PROUNI (CBS only)


Automotive industry

For the automotive industry, the proposed approved provided for the maintenance of existing tax benefits, by means of granting presumed credit from CBS. These benefits apply to projects in existing manufacturing plants or that take advantage of existing plants, limited to electric or hybrid vehicles with combustion engines, as long as they use fuel alcohol.

The presumed CBS credits can only be offset against tax debts due to the Federal Revenue Service of Brazil, and it is not possible to transfer credits to other establishments of the legal entity. CBS presumed credits may be held until December 31, 2032.

The law also foreseen the extension until December 31, 2032 of tax incentives granted to automakers located in the North, Northeast and Midwest. However, the benefit would only apply to projects approved until December 31, 2024. There was a change, since the initial version of the report provided a benefit only for the production of electric cars.

The incentive extends to manufacturers of biodiesel-powered vehicles and hybrid vehicles powered by biodiesel and gasoline.


Other exemptions

In addition, the report brought the possibility of exemption from the acquisition of capital goods through full and immediate tax credit; Deferral; or a 100% reduction in tax rates. The complementary law will define the form of exemption.

The possibility of exemption from the tax applicable to special customs procedures and export processing areas has been authorized.

Finally, the exemption of IBS and CBS was provided for rural producers (individuals or legal entities), as long as they do not exceed the annual revenue limit of BRL 3.6 million.

The benefits may be re-evaluated every 5 years, considering the applicable cost-benefit.


Specific regimes

A complementary law may provide for specific tax regimes for certain sectors and products. Such a forecast does not necessarily mean that there will be a reduction in the tax burden. The sectors and activities included are:

  • Fuels and lubricants.
  • Financial services, real estate transactions, health care plans and lottery contests.
  • Cooperative societies.
  • Inclusion of travel and tourism agencies in the specific regime of hotel services, amusement parks and theme parks, bars and restaurants and regional aviation. In addition, the possibility of the complementary law establishing a calculation basis different from the general rule in the case of travel and tourism agencies was included, as well as a specific regime for sports activities developed by Sociedade Anônima de Futebol (SAF).
  • Creation of a specific regime for sanitation services and highway concessions, with permission to exempt IBS and CBS in the acquisition of capital goods and changes in the rates and rules for the recognition of credits.
  • Creation of a specific regime for operations involving the provision of the shared structure of telecommunications services, with permission to change the rates and rules for the recognition of credits.
  • Inclusion of operations covered by international treaties or conventions, including those related to diplomatic missions, consular offices, and representations of international organizations.
  • Inclusion of intercity and interstate road, rail, waterway, and air public passenger transport sectors in the specific regimes.
  • Regional aviation.
  • Operations with microgeneration and minigeneration of distributed energy of electricity.
  • Goods and services that promote the circular economy and sustainability in the use of natural resources.
  • Complementary law may define the taxpayer on transactions occurring on digital platforms as the person who contributes to the execution, or payment of the operation, even if resident or domiciled abroad.


2. Selective Tax (IS)


Triggering event

  • It will focus on the production, extraction, marketing or importation of goods and services that are harmful to health or the environment. The text innovates by bringing the extraction activity to the field of incidence of the IS.
  • The new text expressly determines that the IS must be regulated by a complementary law.
  • In the wording approved by the Chamber of Deputies, there was an opening for the levy of IS on electricity and telecommunication services. The new text removes the levy on electricity and telecommunications services.
  • In addition, the text expressly provides for the levy of IS on transactions with weapons and ammunition, except when intended for public administration. The possibility of incidence on fuels was also maintained.

Basis of calculation

  • The IS tax is not included in its own calculation basis (grossed-up calculation).

Tax rate

  • The rates may be changed by means of an ordinary law, including by means of a provisional measure. It was forbidden to change tax rates by means of decrees.
  • The provisional measure amending the IS shall take effect only in the following financial year, subject to its conversion into law until the last day of the fiscal year in which it was issued.
  • The IS must respect the annual anteriority principle.
  • In the case of the extraction activity, it was included the possibility of establishing ad rem rates, which are levied on the quantity of the product extracted, regardless of sales revenues. In this case, the maximum tax rate will be 1% of the merchant value of the extracted products.


  • It is expressly established that the incidence of IS will apply on a single-phase basis, that is, it will be levied only once on the good or service.


  • IS can only be charged from 2027, with the exemption of IPI.


3. Contribution for Intervention in the Economic Domain (CIDE)


  • Creation of a CIDE with the possibility of collection from 2027 that should ensure the competitiveness of goods produced in the Free Trade Zone in relation to goods produced in the rest of the country.


4. Miscellaneous Provisions


  • Express provision for offsetting credit balances of PIS, COFINS and IPI with other federal taxes or cash reimbursement.
  • It excluded the creation of a new contribution linked to investment in infrastructure and housing works.
  • Maintenance of contributions to all state funds in operation on April 30, 2023 that have been instituted as a counterpart for the favored treatment related to ICMS, and the rules and payment limits provided for in state legislation until said date must be observed.
  • It maintains the disbursements planned until 2033, when the Union should transfer up to R$ 40 billion to the National Fund for Regional Development (FNDR). From then on, there will be an increase of R$ 2 billion per year, until reaching the amount of R$ 60 billion in 2043.
  • It applies to holders of onerous ICMS benefits regularly granted until May 31, 2023, including subsequent extensions or renewals, as well as to holders of projects covered by the benefits referred to in the article that deals with the automotive sector.
  • The new text provides that the ITCMD will levy at progressive rates, variable according to the amount transmitted by inheritance or donation. The progressivity of the tax rate is linked to the value transmitted to the recipient and not to the total value of the assets in the transfer.
  • In addition, the text approved by the Senate authorizes the collection of ITCMD on inheritances and donations to nonresidents without the need for a complementary law.
  • IPVA: provision for the levy of the Motor Vehicle Property Tax (IPVA) on vessels and aircraft, with the possibility of progressive IPVA due to the environmental impact of the vehicle.
  • IPTU: authorization for the Municipal Executive to update the tax calculation basis by means of a decree, based on general criteria established by municipal law.


We will keep monitoring the developments of PEC 45 and remain available in case of questions that may arise.



Leo Lopes de Oliveira Neto
Leo Lopes de Oliveira Neto
São Paulo
Juliana Porchat de Assis
Juliana Porchat de Assis
São Paulo
Eric Hissashi Nagamine
Eric Nagamine
São Paulo

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