By Luísa Fernandes Pereira and Gabriela Marungal Munhoz Rodrigues
The Consumption Tax Reform, established by Constitutional Amendment No. 132/2023 and regulated by Complementary Law No. 214/2025, creates the Tax on Goods and Services (IBS), the Social Contribution on Goods and Services (CBS), and the Selective Tax (IS).
With the implementation of the Tax Reform, the most significant changes relate to the replacement of current taxes: ICMS and ISS will be replaced by IBS, while PIS and COFINS will be replaced by CBS. The IPI will have its rate reduced to zero in almost all of the national territory, except for transactions involving the Manaus Free Trade Zone, in order to preserve the region’s competitive advantage.
The transition between the current system and the new collection model will occur gradually, from 2026 (start of the IBS and CBS test rate) to 2033 (full implementation of the new structure), allowing companies and taxpayers to progressively adapt to the new tax rules.
This reconfiguration will have significant effects on various sectors of the economy, with the service sector being one of the most impacted, requiring careful analysis of its legal and economic repercussions.
Tax Rates
Service professionals organized as legal entities will generally experience an increase in tax burden, with an estimated IBS/CBS rate of approximately 26.5%. Under the new system, certain service activities may benefit from specific reductions in the general rate, depending on the nature of the activity performed:
30% Reduction:
For services provided by professionals engaged in intellectual activities of a scientific, literary, or artistic nature, subject to oversight by professional councils, such as lawyers, administrators, accountants, engineers, industrial technicians, among others.
60% Reduction:
For the provision of services in education, healthcare, goods and services related to national sovereignty and security, information security and cybersecurity, among others.
100% Reduction:
For services provided by non-profit Scientific, Technological, and Innovation Institutions (ICTs).
Place of Taxation
Another relevant change concerns the place where the service provision is considered to occur for tax purposes. Before the Tax Reform, the general rule determined that the tax was owed at the location of the service provider’s establishment, or, in its absence, the provider’s domicile.
Under the new system, Complementary Law 214/2025 adopts destination-based taxation as one of its main principles, replacing the previous model. However, for service provision, the determination of the place of operation varies according to the type of service. The main rules are as follows:
- For services involving the planning, organization, and management of fairs, conferences, and similar events, the place of taxation is the location of the event.
- For passenger transportation services, the place of taxation is the point of departure.
- For cargo transportation, the place of delivery or availability.
- For fixed-line telephone services and other communication services provided via cables, wires, fibers, or similar means, the place of installation of the terminal is considered.
For all other unspecified services, the place of taxation is the main domicile of the purchaser in the case of onerous transactions, or the recipient in the case of non-onerous transactions.
Another highlighted point concerns remotely performed transactions, in which delivery or availability does not occur in the presence of the purchaser or recipient at the supplier’s establishment. In such cases, the place of taxation is the final destination indicated by the purchaser to the supplier or a responsible third party.
Impacts on Tax Burden and Credits
The expectation is that service providers will face an increase in tax burden, given that the new rate may reach approximately 26.5%.
Additionally, the new system is based on full non-cumulativity, meaning it will grant full credit for taxes paid in previous stages. This change will significantly alter the dynamics of the sector, which is currently known for low generation of tax credits. It is therefore essential to analyze how credit offsets will operate for companies under each tax regime.
Service Providers Under the Simples Nacional Regime
They may choose to remain under the Simples Nacional regime without opting into the regular IBS/CBS regime or migrate to the Hybrid Simples Nacional system.
- Simples Nacional without opting into the regular IBS/CBS regime:
The service provider maintains the same tax burden. However, the generation of tax credits for the service recipient will be reduced, as credit will only be passed through in proportion to the amount paid under the Simples Nacional regime. - Hybrid Simples Nacional:
Companies may collect IBS/CBS separately from the unified Simples (DAS) payment, resulting in greater credit pass-through compared to the previous option. However, this also means a significant increase in tax burden for the service provider. This model may make the provider more competitive in the market for other legal entities that will be able to fully offset the credit.
Service Providers Under the Normal Regime (Actual Profit or Presumed Profit)
Although tax burden on service provision will increase, the provider will pass through full credit to the service recipient, which may make the transaction more advantageous from a competitive standpoint.
Conclusion
Given that the service sector will be strongly impacted by increased rates across many of its activities, it is essential to conduct a careful analysis of necessary organizational adjustments. It is crucial to review all service agreements, supplier relationships, and pricing models to ensure alignment with the new tax environment.
The Tax Law Team at Marins Bertoldi Advogados is available to assist its clients in interpreting the new rules, developing appropriate tax planning strategies, and implementing measures that ensure legal certainty and tax efficiency in this new scenario.
