Brazilian Tax Reforms

Practical Effects Felt as Transition Begins

With the transition phase of Brazil’s long-awaited tax reforms beginning in 2026, its practical effects are already being felt. This initial stage ushers in a new reality for businesses operating in Brazil, demanding close attention to operational organization, tax management and pricing strategies.

During this period, taxpayers must carefully assess how the new tax framework affects their costs, margins, and commercial relationships, particularly with suppliers and customers. Shifts in the tax burden and the way taxes are calculated may require reviews of internal policies and operational adjustments.

Contracts signed under the previous regime warrant particular attention. Many economic and tax pass-through clauses were drafted based on rules that are gradually being replaced. As a result, it may be necessary to reassess the economic and financial equilibrium of these arrangements and potentially negotiate adjustments to reflect the new landscape.

There are also important considerations in relation to issuing invoices and adapting systems. Companies will need to keep pace with changes to tax documentation models, ensuring that their processes comply with the new legal requirements and the established transition periods.

Impacts on Tax Litigation

In moments of sweeping systemic change, tax authorities typically expect taxpayers to take action to regularize pending issues from prior periods and tend to ramp up efforts to collect older tax debts. Moreover, the coexistence of the current regime and the new model compounds the uncertainty inherent in any transition, and may likely trigger new questions and tax disputes at both the administrative and judicial levels.

Against this backdrop, tax litigation increasingly reflects not just interpretative disagreements but also a broader effort to accommodate the existing system into a new framework that seeks, precisely, to provide greater predictability and legal certainty. For this reason, adopting a preventive stance, reviewing contingent liabilities and defining clear litigation strategies becomes essential.

One of the stated purposes of Brazil’s tax reforms is to reduce litigation and simplify the tax system. At this early stage, however, an increase in disputes is expected due to the new calculation and crediting rules, newly introduced special regimes, and practical challenges in relation to meeting ancillary obligations

Gabriela Lemos

Partner – Tax

Companies should analyze their current tax burden against the tax burden applicable in each year of the transition, considering the effects of the tax credits available to buyers. Pricing stands out as one of the most significant challenges at this stage