Brazil’s tax reform is no longer on paper. In 2026, invoices in Brazil already show the two new taxes on a test basis, and the calendar through 2033 is set in law. For people living in Canada, the reform matters for two reasons: it changes prices and costs for anyone who still has a business, property or family in Brazil, and it came with income tax changes that reach people living abroad.
This guide summarizes what changes, when, and what to keep an eye on.
- Five taxes become three: PIS, Cofins, IPI, ICMS and ISS give way to the CBS, the IBS and the Selective Tax.
- 2026 is a test year: CBS at 0.9% and IBS at 0.1%, offset against taxes already paid. The real switch starts in 2027 and ends in 2033.
- Basics get relief: a zero rate for the national food basket, a 60% reduction for health, education and medicines, and tax refunds for low-income families.
What changes
Brazil had five consumption taxes, with different rules in each state and municipality. The reform creates a value-added tax split in two, charged at destination and without cascading:
New tax | Levied by | Replaces |
CBS | Federal government | PIS and Cofins |
IBS | States and municipalities | ICMS and ISS |
Selective Tax | Federal government | Nothing: it is new, and applies to items harmful to health or the environment |
The timeline
Year | What happens |
2026 | Test: CBS at 0.9% and IBS at 0.1% shown on invoices and offset against PIS and Cofins |
2027 and 2028 | The CBS takes full effect. PIS and Cofins end, the IPI drops to zero except for Manaus Free Trade Zone products, and the Selective Tax begins |
2029 to 2032 | The IBS grows as ICMS and ISS shrink: 90% in 2029, 80% in 2030, 70% in 2031 and 60% in 2032 |
2033 | ICMS and ISS are abolished and the new model applies in full |
In January 2026, Complementary Law 227 permanently established the IBS Management Committee, the body that will run the state and municipal tax.
What gets cheaper
- National Basic Food Basket: a zero IBS and CBS rate on the foods listed in the law, such as rice, beans, milk, meat, flour and bread.
- 60% reduction: for 13 groups, including education and health services, medicines, medical devices, food, hygiene products used by low-income families, farm inputs and cultural productions.
- Cashback: families registered in CadÚnico with income of up to half a minimum wage per person get part of the tax back: 100% of the CBS and 20% of the IBS on cooking gas, electricity, water, sewage and telecom, and 20% in other cases.
What gets more expensive
The Selective Tax applies to vehicles, boats and aircraft, cigarettes and other tobacco products, alcoholic drinks, sugary drinks, minerals and betting, including fantasy sports. Electricity and telecommunications are excluded.
A new routine: split payment
The law provides that, for electronic payments such as cards and Pix, the payment system itself will separate and collect the IBS and CBS at settlement. Sellers will receive the amount net of tax. It is a major change to business cash flow, and it will be phased in.
What about income tax?
The consumption reform came with income tax changes in effect since January 2026: an effective exemption up to R$5,000 a month, a minimum tax on incomes above R$600,000 a year, and 10% withholding on dividends above R$50,000 a month. Dividends sent to people living abroad now also have 10% withheld.
What this means if you live in Canada
- Own a business in Brazil? It must already issue invoices with the new fields in 2026 and review prices and contracts for 2027.
- Receive dividends from a Brazilian company? Expect the 10% withheld there. In Canada, that tax can become a foreign tax credit.
- Own property in Brazil? See our guide to property in Brazil while living in Canada.
Frequently Asked Questions (FAQ)
PIS, Cofins, IPI, ICMS and ISS. They are replaced by the federal CBS, the state and municipal IBS, and the Selective Tax.
2026 is a test year, with CBS at 0.9% and IBS at 0.1%. The CBS takes full effect in 2027, ICMS and ISS shrink from 2029 to 2032 and are abolished in 2033.
The foods in the National Basic Food Basket listed in Complementary Law 214/2025, such as rice, beans, milk, meat and bread.
A refund of part of the tax to CadÚnico families with income up to half a minimum wage per person: 100% of the CBS and 20% of the IBS on gas, electricity, water, sewage and telecom, and 20% in other cases.
It does if you have a business, property or investments in Brazil. And alongside it, dividends sent abroad have had 10% withheld since January 2026.
