Brazil tax reform: 1 key update — 5 mins
Hey, I’m Douglas, Editor-in-Chief of the Brazilian Tax Reform Portal 🇧🇷.
1) Lula signs second bill regulating the tax reform
Photo: Ricardo Stuckert / PR
President Luiz Inácio Lula da Silva (PT) signed on Tuesday (Jan. 13, 2026) Supplementary Law No. 227 of 2026, which formalizes the second stage of regulation of the tax reform. The text is based on Supplementary Bill 108 of 2024 (read more)
The main purpose of the legislation is to create the IBS (Goods and Services Tax) Management Committee. Formed by states and municipalities, the body is responsible for governing the new tax.
State and municipal technical staff had been waiting for the enactment in order to hold elections for the committee.
With the members defined, the sub-legal regulations of the IBS and the CBS (Contribution on Goods and Services) may be published by the federative entities. The Portal had previously reported that publication would only take place in January.
These are the set of administrative acts that detail and operationalize the application of the tax reform laws. They are essential for the implementation of the new rules.
The bill began moving through Congress in June 2024 as a legislative proposal (PLP 108 of 2024). The text was approved only in December 2025. There were nearly one and a half years of negotiations and votes.
Understanding the IBS Management Committee
After more than one year of proceedings, the body is now officially established.
The Committee has seven organizational bodies:
Superior Council.
Presidency and Vice-Presidency.
Executive Board and its directorates.
Secretariat-General.
Office of Institutional and Intergovernmental Relations.
Internal Affairs Office.
Internal Audit.
The most relevant body is the Superior Council. It will have 54 members: 27 from the states and 27 from the municipalities.
The names appointed by the governors will be the Secretaries of Finance, Treasury, or Economy of each federative unit.
For municipalities, elections will be held to define the representatives. The slates must be formed by the FNP (National Front of Mayors) and the CNM (National Confederation of Municipalities).
The criteria to join the Superior Council as a municipal representative are broader. It is necessary to meet at least one of the requirements below:
Hold the position of Secretary of Finance, Treasury, Taxation, or a similar role corresponding to the highest authority of the municipal tax administration.
Have at least 10 years of experience in a permanent position as a tax authority within the city’s tax administration.
Have at least 4 years of experience holding senior management, leadership, or advisory positions in the tax administration.
Lula’s vetoes
Lula vetoed some provisions of PLP 108/2024 approved by the National Congress. See below (read more)
SAFs (Football Corporations):
The text approved in December by the Chamber of Deputies established that revenues from player sales would be excluded from the tax base of the new taxes during the first five years of operation of Football Corporations (SAFs). They are now included again. This was a veto to the wording proposed for paragraph 8 of article 293 of the already enacted tax reform law (LC 214 of 2025).
Another change concerns the tax burden. Lawmakers had determined that the burden for SAFs would be 5%, composed of:
3% from taxes not changed by the reform.
1% IBS (Goods and Services Tax).
1% CBS (Contribution on Goods and Services).
However, Lula vetoed what was provided in item I, paragraph 4 of article 293. The burden will now be 6%:
4% from taxes not changed by the reform.
1% CBS (Contribution on Goods and Services).
1% IBS (Goods and Services Tax).
Loyalty programs:
The Ministry of Finance wanted non-onerous points from loyalty programs to remain outside the tax base of the IBS (Goods and Services Tax) and the CBS (Contribution on Goods and Services).
To that end, technical staff recommended vetoing the amendment to article 12 of LC 214, which provided for inclusion in the calculation of the “value of the transaction not represented in money, including when consideration is given through points from the company’s own loyalty program.”
Lula agreed. Non-onerous points remain outside the tax base. This includes, for example, miles granted for registration, promotions, or compensation for flight delays by an airline. Learn more in this report.
Liquid foods:
PLP 108 included “natural liquid foods produced from vegetables, cereals, fruits, legumes, oilseeds, and tubers” in the list of products eligible for a 60% reduction in the tax burden.
Congress’s idea in adding the provision was to grant reductions to plant-based milks, for example. However, the Ministry of Finance understood that the wording was too broad. Therefore, it requested a veto of item 2 of Annex VII of LC 214.
ITBI:
The bill that gave rise to the supplementary law (PLP 108 of 2024) provided for the possibility of anticipating payment of the ITBI (Real Estate Transfer Tax) so that the tax would be levied upon formalization of the transfer title.
However, each municipality has its own method for collecting the tax. As a result, it would be difficult for all to adapt in a unified manner. Therefore, Lula vetoed the inclusion of article 35-A in the CTN (National Tax Code).
João Nobre, an advisor to the Executive Secretariat of the Ministry of Finance, explained in an interview with journalists that the veto was requested by the FNP (National Front of Mayors).
“Mayors understood that, given how it is done today, with a great divergence and distinction among municipalities, it would be better for this rule not to exist,” the technical advisor explained.
Manaus Free Trade Zone:
PLP 108 provided that the Board of Administration of the Superintendence of the Manaus Free Trade Zone would be responsible for regulating a local verification incident—i.e., defining the rules for inspections and audits.
Now, regulation has been removed from the superintendence’s authority and will have a broader scope. The veto applied to paragraph 3 of article 327-A of LC 214 of 2025.
Simulation:
Congress had defined in PLP 108 that the practice of simulation (a type of tax fraud) would apply to taxpayers who:
Pretend to grant or transfer rights to persons other than those who should actually receive them.
Make declarations, confessions, conditions, or clauses that are not true.
Declare a false date, meaning the act is dated before or after the day it was actually carried out (backdated or postdated).
João Nobre, of the Ministry of Finance, stated that the veto of the provision above occurred because there are differing interpretations of the issue within the Judiciary.
“There was an understanding that the definition currently recognized by the Judiciary and by tax litigation is different from the one being introduced by the supplementary law,” the advisor said.
The definition was contained in article 341-F, paragraph 2, item III of the proposed wording for LC 214 of 2025.
Cashback in single-phase taxation
The veto struck down a rule that allowed cashback to be granted at a different moment than tax payment in one specific situation: when the supply of piped gas was taxed under a single-phase regime, meaning the tax is charged at only one point in the supply chain.
The economic team assessed that this would create incompatibility with the rest of the cashback system, which operates as an immediate tax discount.
The removed provision was paragraph 5 of article 116, drafted for LC 214.
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