For foreign entrepreneurs and investors, Brazil is often seen as a land of opportunity, the origin of one of the world’s largest consumer markets. However, the complex and ever-changing tax system from the accounting in Brazil creates more difficulties than entrepreneurs are used to.

For decades, the complex web of federal, state, and municipal taxes has presented a significant challenge, making tax compliance a major hurdle for international companies operating in the country.

Now, a historic tax reform is set to change this scenario. Approved after years of debate, this constitutional amendment aims to simplify the tax structure, reduce bureaucracy, and, in doing so, make Brazil a more attractive destination for foreign investment. 

This article will serve as your essential guide to understanding the main impacts of this tax reform on the accounting and financial operations of international companies, highlighting the changes you need to be aware of to ensure your business remains compliant and competitive.

Accounting in Brazil: what is the tax reform and its goals

The Brazilian tax reform, officially known as Constitutional Amendment No. 132/2023, is a major overhaul of the country’s consumption tax system. 

Its primary goal is to simplify a system that has long been considered one of the most complicated in the world. This is achieved by unifying five existing taxes—PIS, COFINS, IPI (federal), ICMS (state), and ISS (municipal)—into a single, Value-Added Tax (VAT) model.

The new system is based on two main taxes:

• CBS (Contribuição sobre Bens e Serviços – Contribution on Goods and Services): A federal tax.
• IBS (Imposto sobre Bens e Serviços – Tax on Goods and Services): A tax shared by states and municipalities.

This unification is designed to eliminate the “tax war” among states and cities and create a more transparent and simplified tax framework. By centralizing these taxes, the reform aims to reduce the “Brazil Cost”—the set of structural and bureaucratic difficulties that hinder business growth—and create a fairer and more efficient economic environment. 

For international companies, this means a shift in how transactions are taxed, moving from a complex system to a more straightforward, internationally recognized model. 

The goal is to make cross-border trade and investment in Brazil simpler and more predictable.

Read: Brazil tax reform – the complete guide

Tax reform: impacts on legal and administrative representation in Brazil

With the tax reform, the role of legal and administrative representation in Brazil becomes more critical than ever. The reform, by its very nature, is a profound legal change. 

For a foreign company, having a reliable legal representative is strategically mandatory. This individual or firm acts as the company’s local face, an important link to the Brazilian authorities, and an important component in ensuring compliance with the new legal and tax framework.

The legal representative’s role will evolve to include new responsibilities, such as:

• Interpreting new regulations: The reform is a large-scale project that will continue to be refined with complementary laws and decrees. A legal representative with deep expertise will be essential to interpret these changes and their impact on the company’s operations.
• Ensuring compliance during the transition: The ten-year transition period, where the old and new systems coexist, requires meticulous management. The legal representative will be key to understand this complex dual system, ensuring the company avoids penalties and maintains its legal standing.
• Representing the company before the new tax authorities: The reform introduces new tax bodies and a new model of tax assessment. A local legal representative will be vital to manage communications and represent the company in all tax-related matters.

In this context, companies like Europartner, with a long history of providing legal and administrative representation, are not just service providers, but strategic partners who can translate complex legal jargon into actionable business strategies, ensuring a smooth and compliant operation.

Tax reform: how accounting in Brazil and fiscal management will change

The tax reform is poised to fundamentally alter the accounting and fiscal management in Brazil. The changes go beyond simple tax calculations and will require companies to rethink their entire fiscal strategy, data management, and operational processes.

• The end of the “tax war”: The unification of state and municipal taxes (ICMS and ISS) into the IBS is designed to eliminate the long-standing “tax war,” where states offered tax incentives to attract businesses. While this creates a more uniform system, it means that previous tax planning strategies based on location will become obsolete, requiring a re-evaluation of business models.
• New bookkeeping and reporting requirements: While the reform aims to simplify the system, it will introduce new requirements for digital bookkeeping (SPED). Companies will need to adjust their internal systems to accurately track and report transactions under the new IBS/CBS model. The details of how to generate and submit these reports will be very important for a company’s financial health.
• The need for specialized accounting: The transition period, where companies must manage two separate tax systems, will demand a high level of expertise. Accountants will need to be specialists in the new reform, capable of managing dual reporting, optimizing the new tax credits, and providing strategic advice on how to structure operations to benefit from the new framework. For an international company, this is not a task for a generalist, but for a partner with deep, up-to-date knowledge of the Brazilian tax system.

Read: The Brazil Legal Representative – your partner in company administration

A strategic partnership for tax reform: how Europartner can help your business

In this scenario of tax reform and new regulations, partnering with a specialized company is not a convenience, but a strategic necessity. 

With over 15 years of experience in the Brazilian market, Europartner has positioned itself as an ideal partner for international companies navigating these complexities. 

Our team, which is multicultural and multidisciplinary, has a deep understanding of the Brazilian tax system and the specific challenges faced by foreign businesses.

Our services are designed to address the key pain points created by the tax reform:

• Legal Representation and Company Administration: We act as your local legal representative, ensuring that your company meets all legal requirements and has a reliable point of contact for Brazilian authorities. This is important for managing the new tax framework.
• Tax Optimization: We provide expert advice on how to structure your operations under the new tax laws to minimize your tax burden. We help you understand and leverage the new tax credits and rules, ensuring your business remains competitive.
• Integrated Administrative and Fiscal Management: We offer comprehensive accounting and fiscal management services, from daily bookkeeping to complex tax reporting. We ensure your company remains compliant with the new SPED requirements, allowing you to focus on your core business.

By choosing Europartner, you are not just hiring a service provider; you are building a strategic partnership that provides security, efficiency, and peace of mind in a changing market.

Accounting in Brazil: the next step for your business

The Brazilian tax reform represents an important step towards modernizing and simplifying the country’s tax system. While the long-term benefits are substantial, the transition period presents a complex challenge for international companies. 

Managing the coexistence of old and new tax laws, adapting accounting systems, and ensuring continuous compliance require specialized knowledge and a proactive approach.

For foreign companies, success in this new environment will depend heavily on the quality of their local support. Having a partner who understands both the legal and accounting implications of the reform, and who can act as a guide through the bureaucratic landscape, is a strategic imperative. 

Europartner stands ready to be that partner, offering the expertise and integrated services necessary to turn the challenges of the tax reform into opportunities for growth and prosperity in Brazil.

Ready to start your journey in Brazil with confidence? Contact Europartner today and ensure your company is fully prepared for the future.