Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷 — and I’m here to raise another red flags. 🟥

The exemption on meat, the so-called “sin tax,” and the standard VAT rate have dominated Brazil’s national debate around tax reform in recent months. However, the approval of Constitutional Amendment 132/2023 and its accompanying regulatory bills will have far-reaching impacts on businesses—affecting everything from procurement processes to contract management and enterprise systems.

In this edition, we interviewed ROIT’s CFO, Caroline Souza, and outlined 12 critical points that demand your attention and can help your business stay ahead of the curve in the coming months:

With the shift to a new tax system, companies must assess whether they’ll need more cash on hand over the coming years and where additional investments will be necessary.

Preparing working capital becomes critical to securing credit at the lowest possible cost. The new tax structure will impact purchase prices and increase upfront cash requirements on acquisitions. Proactively planning for this cash need can help avoid unpleasant surprises. This also means considering new credit lines, adjusting financial reserves, and rethinking your cash conversion cycle—possibly extending payment terms with suppliers while reducing collection periods from customers.

It’s crucial to reassess your entire cost structure—including all existing contracts and procurement plans. Strategic decisions might include locking in prices for long-term contracts, deciding whether to purchase equipment or vehicles now or after 2027, and evaluating raw material purchases based on the differences between the current and future tax regimes.

The definition of the final VAT rate is one of the main pillars of the reform and will directly affect companies’ tax burdens, purchase costs, and ultimately, pricing strategies. While the final rate is still under discussion, current estimates suggest it will land between 25% and 33%—ROIT’s forecast is 30.3%.

Adapting sale prices to this new landscape will be a significant challenge. Your sales team must be well-prepared to communicate these changes to customers and adjust strategies accordingly. Internal training sessions or workshops are highly recommended.

Given the likely tax shifts, reviewing your pricing strategy is essential. In some cases, adjusting production margins will be more effective than continuing with negative margins. An effective approach is to apply the ABC analysis—if your company sells 300 products, identify the top 30 that generate 80% of your profits. Focus your efforts on ensuring these remain profitable.

Investment decisions must now be reevaluated through the lens of the tax reform. Should you purchase a fleet of trucks now or wait until 2027? Should you continue leasing or consider switching to financing or outright purchases? Every decision requires careful tax impact analysis.

It may be time to reconsider whether your current distribution model still makes sense. Would it be more efficient to pivot towards e-commerce? Understanding your customer base and market trends will help determine which model offers better profitability under the new tax landscape.

It’s essential to review your supply chain—specifically, which suppliers will generate tax credits under the new system. Distributors and intermediaries should also be evaluated, as optimizing the chain may lead to significant cost savings.

Long-term contracts are particularly vulnerable to the reform’s impacts. It’s vital to revise terms to reflect the new tax structure. While renegotiating may seem burdensome, it’s an opportunity to strengthen business relationships and realign pricing to the new reality.

A key factor going forward will be understanding the tax status of your suppliers. Businesses under Brazil’s simplified tax regimes (such as Simples Nacional or MEI, equivalent to microbusiness regimes) won’t generate VAT credits (IBS and CBS). This means you may need to encourage some suppliers to formalize and professionalize—implement ERP systems, improve accounting practices—or consider replacing them with more structured providers.

Each company must map out which products and services will be most impacted. Is it still viable to sell certain items considering VAT exemptions, zero-rated categories, eligible tax credits, or the end of tax incentives? Also, evaluate how the Selective Tax (Brazil’s equivalent of a “sin tax”) might apply to certain raw materials. What will happen to the IPI (a federal excise tax)—will it be zeroed out or maintained due to exceptions like the Manaus Free Trade Zone?

Many industries in Brazil have long used tax-driven supply chain structures—adding intermediaries to reduce tax burdens. The reform will likely neutralize these strategies. As a result, companies must reassess the role of distributors, dealers, and other intermediaries to determine whether they remain economically viable.

The reform will require significant updates to ERP systems and other management tools. Businesses will need solutions capable of handling complex tax calculations, ensuring compliance, and managing dual tax regimes that will coexist between 2026 and 2033. This includes everything from accounting and procurement to risk management and supply chain operations.

🇧🇷🔍 Brazil is changing. Are you watching closely?

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