Brazil VAT and Sales Taxes: ICMS, ISS, IPI, PIS/COFINS — and the 2026–2033 Reform
Llandora·Updated 2026-10-14
⚠️ Disclaimer: For general information only — not tax, financial, legal, or medical advice. Figures may be outdated or incorrect; tax rules change frequently. Verify important decisions with the CRA/IRS or a qualified professional (for health topics, a licensed healthcare provider). You use this information at your own risk.
The short answer
Brazil does not have a single VAT. Instead, consumption is taxed by a layered system: ICMS (state tax on goods, transport and communications), ISS (municipal tax on services), IPI (federal tax on manufactured products), and PIS/COFINS (federal contributions on revenue). The short answer for shoppers: these taxes are baked into shelf prices, and Brazil generally has no tourist VAT refund scheme. The bigger story is the constitutional reform (EC 132/2023), which launched a 2026–2033 transition merging all of this into a dual VAT: IBS (states and municipalities) plus CBS (federal).
The current patchwork
ICMS — levied by each state (and the Federal District) on the circulation of goods, interstate and intermunicipal transport, and communications. Rates vary by state and product, which is why the same item can cost different amounts in São Paulo and Bahia.
ISS — levied by each municipality on services (hotels, restaurants, professional services). Rates vary by city.
IPI — a federal excise on industrialized products, charged at the manufacturing stage; rates differ widely by product category.
PIS/COFINS — federal social contributions charged on company revenues, with cumulative and non-cumulative regimes depending on the tax regime of the business.
Because each layer is set by a different level of government, Brazil's consumption tax burden is famously complex — and a frequent complaint of businesses operating across state lines.
The reform: EC 132/2023 and the dual VAT
The constitutional amendment EC 132/2023 (regulated by Complementary Law 214/2025) replaces PIS, COFINS, IPI (in part), ICMS and ISS with an internationally standard dual VAT:
CBS (Contribuição sobre Bens e Serviços) — federal, replacing PIS/COFINS (and IPI in the new design).
IBS (Imposto sobre Bens e Serviços) — shared by states and municipalities, replacing ICMS and ISS.
An Imposto Seletivo (selective tax) will discourage consumption of specific products such as tobacco, alcohol and sugary drinks, as well as certain vehicles, aircraft and vessels, mineral goods, and betting and fantasy sports.
The transition runs 2026–2033: 2026 is a test year in which IBS and CBS appear on invoices with test rates (0.1% IBS and 0.9% CBS) but are calculated for information only, with no actual collection. From 2027 the CBS applies in full and PIS/COFINS end; ICMS and ISS rates phase down through 2029–2032 and disappear in 2033.
What tourists should know
Prices you see in Brazilian shops already include all consumption taxes — there is no "plus tax at the register" surprise as in the US. Unlike many countries, Brazil has no general tourist VAT refund program: you cannot routinely reclaim the tax embedded in your purchases when you leave. Keep receipts for high-value items in case rules change, but do not count on a refund.
Frequently asked questions
Q: Will the reform make things cheaper?
A: Not necessarily — the reform's stated goal is simplification and neutrality, not a lower overall burden. Relative prices of goods vs. services may shift as the new rates settle.
Q: I run a small business. Do I need to do anything in 2026?
A: 2026 is designed as an educational test phase: electronic invoices (NF-e, NFC-e and others) gain fields for IBS/CBS, but calculation is informational only with no collection and no penalties for the new taxes during the transition setup. Check with your accountant before year-end, because 2027 brings real CBS collection.
Q: Does the reform change income tax too?
A: No — EC 132/2023 covers consumption taxes only. Income tax reform is a separate track (see our 2026 brackets article).
Q: Are there duty-free shops at Brazilian airports?
A: Yes, international departure areas have duty-free shops, which is separate from any VAT refund — buying there simply avoids the embedded taxes in the first place.
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