Tax reform dominates Brazil

Brazil is currently transitioning from its existing tax system, which includes taxes and contributions levied on revenue and on the circulation of goods and services — such as PIS, COFINS, ISS, ICMS and IPI — to a more unified taxation model through the introduction of a Dual VAT system.

Under the new framework, PIS and COFINS are being replaced by the CBS (Contribution on Goods and Services), while the IBS (Tax on Goods and Services) is also being introduced as part of the broader reform.

2026 marks the first year of this transition. Companies are already required to issue invoices showing CBS and IBS; however, these amounts do not yet have an effective tax impact. This is essentially a testing period, during which the rates and operational mechanisms are being calibrated. The new taxes will gradually become effective from 2027 through 2033, when the transition period is expected to be completed.

Adding to the complications that reform brings, another pressing concern at the moment is the tariffs that have been imposed by the United States, which continue to have a negative impact on the Brazilian economy, particularly through a reduction in exports.

“Several analyses indicate that US imports of Brazilian products have declined relative to pre-tariff trends, especially in sectors where Brazil is a major supplier,” said Karin Monchak, audit partner at MGI Assurance Auditores Independentes S.S. “At the same time, Brazilian exporters have faced uncertainty and have had to seek alternative markets or adjust their strategies.”

Brazil has formally launched an economic reciprocity process in response to unilateral tariffs imposed by the Trump administration - a move that could lead to trade and regulatory countermeasures targeting US goods and services. Brazil has repeatedly described the US tariffs as "arbitrary, unjustified and illegal" and said it submitted extensive technical evidence disputing US claims of unfair trade practices. The United States has maintained a trade surplus with Brazil, which reached USD$1.5 billion in the first half of 2026.

But according to Marcelo Lico, managing partner of Crowe Macro Auditoria e Consultoria Ltda, the tariffs have forced Brazil to get creative. “Brazil has been actively seeking to diversify its trade relationships and develop new export opportunities in other markets,” he said. “We expect this diversification to offset at least part of the impact of US tariffs over the short to medium term, although the effects will naturally vary considerably by sector.”

In the meantime, reform continues to bring Brazil in line with international standards. “Over the past 12 months, the pace of legislative updates has remained intense,” said Tatiana Andrade, partner at Kreston KBW Auditores, Brazil. “This includes the enactment of Complementary Law 227/2026, which establishes the IBS Management Committee and sets new administrative rules, as well as a timetable recently released by the Federal Revenue Service establishing, among other measures, the dates for issuing electronic tax documents under the new standards introduced by the reform.”

Brazil completed the convergence process with IFRS S1 and IFRS S2 in 2024, which resulted in the issuance by the Federal Accounting Council of NBC TDS 01 and NBC TDS 02, addressing, respectively, General Requirements for Disclosure of Sustainability-related Financial Information and Climate-related Disclosures.

In addition, NBC TAS 5000, which addresses assurance engagements for sustainability reports, integrated reporting and related disclosures, was also issued in alignment with international standards.

In 2023, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) issued Resolution No. 193, which established mandatory sustainability reporting in accordance with IFRS S1 and IFRS S2 for listed companies as from 1 January 2026. However, on 29 May 2026, the CVM issued Resolution No. 244, removing the mandatory requirement and allowing entities to assess the cost-benefit of preparing such reports, subject to communicating to the market the reasons for deciding not to do so.

“Another significant development was the approval, on 13 November 2025, of NBC TG 51 – Presentation and Disclosure in Financial Statements, aligned with IFRS 18,” said Roger Maciel de Oliveira, partner at Russell Bedford Brazil. “The new standard changes the presentation and disclosure requirements for financial statements, particularly the Statement of Profit or Loss, introducing elements that were previously more commonly associated with management reporting and supplementary financial disclosures.”

All of this is putting pressure on local firms.  The current environment - particularly the tax reform and the implementation of IFRS S1, IFRS S2 and IFRS 18 - is increasing the need for highly qualified and continuously trained professionals who are capable of contributing from a management and advisory perspective, rather than acting solely as technical executors.

​​​​​​​“The ongoing transition is putting immense pressure on corporate operations,” said Carlos Tortelli, managing partner of Crowe Consult Consultoria Empresarial. “Beyond the massive upskilling required across the entire corporate ecosystem, firms must implement and integrate sophisticated technological platforms capable of interfacing with the federal government’s new real-time auditing infrastructure.”

This shift will heavily strain corporate cash flow, according to Tortelli. Under the legacy system, companies collect 100% of sales revenue, calculate their tax liability at month-end, and remit the payment weeks later. The new split payment model eliminates this working capital window, as the tax portion is automatically deducted from company revenues at the point of sale.

“This strengthens the accounting profession, but it also represents a significant challenge, including from a cultural perspective,” said de Oliveira. “Accountants increasingly need to move beyond their traditional roles and take a more prominent position in supporting clients, providing higher-quality information for effective decision-making.”

Lico agreed, pointing out that the practical implications of the reforms go far beyond tax and accounting. “It affects technology systems, business processes, contracts, pricing strategies and, ultimately, the way companies operate,” he said. “For professional services firms, this is increasing the demand for people who can combine strong accounting and tax expertise with technology skills and a broader understanding of business.”

At the same time, investments in technology, systems, and professional development are not necessarily reflected in higher professional fees. This remains an area in which the market needs to evolve, as some professionals still fail to price their services appropriately, which can result in unfair competition.

Pressure on fees also directly affects the ability to recruit and retain talent. Small and medium-sized accounting and audit firms often lose professionals to whom they have trained and developed to larger firms, as they may be unable to compete with the remuneration packages and benefits offered by major organisations.

“Overall, however, the accounting profession has rarely experienced such a high level of visibility or such strong opportunities for greater recognition,” said de Oliveira. “Accountants increasingly have the opportunity to assume their proper role as strategic advisers to management, generating high-quality information for decision-making and participating directly in the decision-making process, rather than acting merely as observers or operational executors.”

As a result of the tax reform, demand for tax advisory services, as well as for high-quality accounting services, has increased considerably.  “Demand remains strong but is shifting from traditional compliance services to areas such as advisory, tax transformation, technology, risk, and decision-making support,” said André Valério, partner at Ecovis Brazil. “At the same time, there is pressure on fees for more standardised services.”

Monchak has seen the strongest growth in tax advisory, tax reform implementation, compliance, digital transformation and technology consulting. “Demand has also increased for AI-driven automation solutions, as businesses look to improve efficiency, manage compliance obligations,” she said.

 Despite the rising pressure, there has not been any major consolidation, merger or acquisition activity in the Brazilian accounting sector as yet. What has been more common is the development of partnerships between independent firms, which combine their expertise and resources to expand their market reach while maintaining their separate legal entities and organisational independence.

“While Brazil has not experienced a dramatic consolidation wave in the accounting profession, there is a clear trend toward strategic partnerships, acquisitions, and consolidation among firms looking to strengthen their advisory capabilities, invest in technology, and respond to increasing regulatory complexity,” said Monchak.

However, Lico thinks there are signs that consolidation to coming to Brazil. “Investment funds, including international investors, have started acquiring smaller local accounting and professional services businesses as part of broader consolidation strategies,” he said. “This has not yet materially changed the structure of the Brazilian market, but I expect the trend to accelerate in the coming years, following what we are already seeing globally.”

But for now, tax reform is the main focus for local firms.  “The next 12 months will effectively mark the beginning of the operational phase of Brazil’s Tax Reform,” said de Oliveira. “In my view, this will create even greater demand for accounting firms, advisory practices and audit firms that are adequately prepared and have trained their professionals to respond to clients’ needs, particularly in addressing tax-related questions, uncertainties and practical implementation issues.”

Andrada agrees that tax reform will be the most pressing issue for local companies, despite the shiny distraction of technology. “The transition will require continued investment in technology, training and client advisory services, making tax transformation one of the main areas of opportunity for accounting firms in Brazil,” she said.

However, the digital revolution cannot be ignored, as the continuing evolution of technology will require ongoing investment from firms seeking to remain competitive in the market. “The next 12 months will be marked primarily by the practical implementation of tax reform, the advancement of artificial intelligence, and the growing demand for advisory services,” said Valério.

While everyone interviewed has seen a big uptick in client demand, Lico is cautious about the future, as he has concerns about how politics could affect the local business community.

“Brazil is entering a period of both uncertainty and significant expectations,” he said, “We are in an election year, and the outcome will inevitably influence the economic outlook for 2027. Regardless of the result, important fiscal and monetary policy challenges will need to be addressed. A sustainable reduction in interest rates will be particularly important to stimulate private investment and improve access to credit for Brazilian companies.”

One thing reform was supposed to do was to reduce the “Brazil Cost” – in the past it has been so complicated to do business in Brazil that opening new operations in the country came with a hefty price tag. Alexandre Labetta, managing partner of Baker Tilly Brazil, warns that even if the reforms work, it will not be as simple as making Brazil cheaper.

“If well implemented, the reform ‘may’ bring relevant gains: greater transparency, better use of credits, reduction of cumulative effects, lower litigation, and a more neutral tax environment,” he said. “This would make Brazil easier to analyse, more internationally comparable, and more attractive to investors.

“At the same time, practical experience already shows that the transition does not produce uniform effects across all sectors and business models,” he continued. “In many cases in which we have advised clients on the adaptations required by the new rules, the impact review has also identified an actual or potential increase in the tax burden. This point is especially relevant for companies operating with thin margins, long chains, specific regimes, tax incentives, complex commercial structures, or limitations on credit recovery.”

This is a sensitive, but fundamental, point. Simplifying a system does not automatically mean reducing the burden for all taxpayers. In some cases, the reform may reduce systemic distortions but increase economic pressure on certain sectors or business models.

Tortelli is in no doubt that the next year will be tough. “The short-term outlook is characterised by a stark dual reality,” he said. “On one hand, companies face an uncompromising deadline to align their systems with the new tax regulations. On the other hand, corporate Brazil is grappling with severe macroeconomic headwinds; capital costs remain punishingly high, with commercial credit interest rates hovering around 20% annually. This restrictive credit environment has triggered a wave of corporate distress and judicial reorganisation filings (the USA Chapter 11).

“Consequently, the pressure on finance teams has escalated significantly, making cash flow forecasting, tight liquidity management, and rigid KPI tracking a daily survival requirement for managers and accountants alike,” he concluded.

The next 12 months should present significant opportunities for the accounting profession in Brazil. However, firms and professionals will need to be well prepared to address the challenges that are already emerging.