On the evening of April 24, 2024, the Ministry of Finance (“MF”) presented the Bill of Supplementary Law No. 68/24 (“PLP 68/24”) to Congress, aiming to regulate the Tax Reform introduced by the Constitutional Amendment No. 132, enacted by the National Congress on 20 December 2023 (“EC 132”), which will result in significant changes to the rules of taxation of goods and services in Brazil.
The PLP 68/24 was already expected, since EC 132 assigned the Federal Executive Branch the task of presenting a Supplementary Bill to the National Congress within 180 days in order to regulate the new system of taxation on consumption. The PLP 68/24 details the characteristics of the new taxes created in tax reform, the Tax on Goods and Services (“IBS”), to be charged by the states and municipalities, and the Contribution on Goods and Services (“CBS”), to be charged by the Federal Union. Both taxes will replace four other taxes currently levied on consumption in Brazil – the State Value-Added Tax (“ICMS”), the Tax on Services (“ISS”) and the Gross Revenue Social Contributions (“PIS/Cofins”). In addition, the EC 132 provides for a Federal Excise Tax (“IS”) and a new contribution to be charged by certain states to replace the funds for infrastructure works and housing financed by contributions on primary and semi-produced products.
In general, the proposal presented by the Federal Executive Branch deals with:
- the general IBS and CBS rules of those taxes, including the credit system that makes them “value added taxes” (“VATs”), the operating model for calculating and paying IBS and CBS, the rules for reimbursement of accumulated credits, the taxation on imports and the immunity on exports;
- the special customs regimes, export processing zones and capital goods regimes;
- the tax refund rules for low-income individuals (“cashback”) and the National “Basic Food Basket”, a list of items that will have reduced taxation;
- the differentiated regimes involving the levying of IBS and CBS with rates reduced by 30 per cent, 60 per cent or 100 per cent (total reduction) applicable to certain goods and services;
- the specific regimes applicable to fuels, financial services, health care plans, lotteries, real estate transactions, cooperatives, bars, restaurants, hotels, amusement parks, theme parks, intercity and interstate road, rail, waterway and regional air passenger transport, travel agencies and tourist agencies, Limited Liability Football Company (“SAF”), as well rules related to Prouni (special regime applicable to universities), automotive companies, Manaus Free-Trade Zone (“ZFM”) and Free Trade Areas and transactions covered by international treaty or convention;
- the transition rules from the current regime to the new IBS and CBS regime, including rules for calculating rates in this period, rebalancing long-term contracts and using remaining credit balances related to the current tax regime; and
- the incidence of IS – taxable event, immunities, calculation basis, rates and liability.
According to information released by the Federal Government, a second PLP will be presented shortly with proposed regulations about the IBS management and tax audit, including rules on the IBS Management Committee – “Comitê Gestor” – , formed by representatives of states, municipalities and the federal district, the distribution of the IBS revenues among them, administrative tax litigation, and reimbursement to taxpayers of accumulated ICMS credit balances.
In addition to the PLP 68/24, there are also other bills presented at the House of Representatives by a group of representatives in recent weeks with the same object of PLP 68/24. PLP 68/24 and those bills will be distributed to a reporting representative that will be in charge of consolidating them and presenting a proposed bill to the Committees of the House of Representatives. The bill needs to be voted in the House of Representatives’ Committees and in the Plenary of the House of Representatives.
If approved (by an super majority of votes¹), the bill will follow the same procedures in the Senate² and, once approved, sent for sanction or veto of the president. Potential veto may be rejected by a super majority of deputies and senators³ – by the President of the Republic.
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¹ I.e., 257 votes out of 513 votes in the House of Representatives.
² I.e., approved by the favourable vote of 41 Senate members out of 81 votes therein.
³ I.e., 298 votes out of 594 votes by Congress members.
Our team specialized in Tax Law is closely monitoring the changes impacting the Brazilian market and, in the coming days, will publish specific material dealing with the sectoral impacts of PLP 68/24.
