The year 2026 marks a historic turning point in the Brazilian tax system. Starting this Thursday (1st), the transition of the tax reform on consumption officially begins, with the entry into operation of the new Dual Value Added Tax (VAT)..
Although the IRS classifies 2026 as a “testing year,” taxpayers who issue invoices must be aware. This is not a simulation: there will be real financial movements, issuance of invoices with new mandatory fields, adaptation of systems and direct impacts on the routine of companies, rural producers, importers and, in some cases, individuals.
In practice, this year will act as a big dress rehearsal before the definitive replacement of five taxes. Of this total, three are federal: the Social Integration Program (PIS), the Contribution to the Financing of Social Security (Cofins) and the Tax on Industrialized Products (IPI). The Tax on the Circulation of Goods and Services (ICMS) is administered by the states; and the Service Tax (ISS), by municipalities.
These five taxes will begin to be phased out in 2027, but there will be a test rate in 2026. PIS, Cofins and IPI will give rise to the Contribution on Goods and Services (CBS). ICMS and ISS will give rise to the Goods and Services Tax (IBS). The sum of CBS and IBS will result in Dual VAT.
This year, there will be a test rate of 0.9% CBS and 0.1% IBS, which will be deducted from current taxes. From 2027 onwards, the five taxes on consumption will be gradually abolished, while the CBS and IBS rates will rise.
Below, see what comes into effect in 2026 and what measures taxpayers need to take:
Changes in 2026
- First year of practical operation of the new system;
- Beginning of the transition with real financial transactions;
- Current taxes continue to exist in parallel;
- Gradual extinction of PIS, Cofins, ICMS, ISS and IPI begins in 2027
- Key year for technological and fiscal adjustments
Dual VAT charging on a trial basis
Total rate of 1%:
- 0.9% CBS (federal);
- 0.1% IBS (state and municipal).
The amount paid does not represent an effective increase in the tax burden. The amount collected as CBS and IBS will be offset against what the company already pays in PIS and Cofins. In practice, the company pays the new tax, but deducts the same amount as the old taxes, keeping the total disbursement unchanged in 2026.
Changes to invoices
Even with symbolic rates, ancillary obligations are immediate.
Companies must:
- Highlight CBS and IBS in invoices;
- Fill in new mandatory fields;
- Correctly inform the tax classification of products and services.
Errors in the Mercosur Common Nomenclature (NCM), in the National Classification of Economic Activities (CNAE) or in the tax framework can:
- Prevent the issuance of the note;
- Generate incorrect collection;
- Stop the company’s revenue.
Updating company systems
- Software management and issuance of tax documents need to be adapted
- Systems now consult tax rules in real time;
- Invoices may be rejected due to registration inconsistencies;
Those who do not comply are at risk of:
- Rejection of invoices;
- Stoppage of operations;
- Future assessments.
Postponement of penalties
On December 23, the Federal Revenue Service and the IBS Management Committee announced the postponement of automatic punishments:
- There will be no immediate fines for failure to complete IBS and CBS;
- The exemption is valid until the first day of the fourth month after the publication of the regulations.
Despite the flexibility, the recommendation is that taxpayers who issue invoices fully comply with the rules since January, to avoid future inconsistencies and problems when inspection is fully active.
Split payment
Regulated by bill approved by Congress At the end of last year, the split payment (split payment) will automatically separate the tax at the time of payment.
The tax amount will not enter the company’s account, but will be transferred directly to the government. This will require a review of cash flow and working capital, because tax money will no longer circulate within the company throughout the month.
Although it will only be mandatory from 2027, companies need to prepare in 2026.
Review of contracts and registrations
Companies must:
- Review contracts with suppliers and customers;
- Adjust tax transfer clauses;
- Review tax records and classifications.
The correct framework will be fundamental for the generation and use of credits in the new VAT non-cumulative model. This model eliminates cascading billing, common in medium and small companies.
Individuals
From July 2026:
- Individuals considered habitual taxpayers of IBS and CBS will need to register with the National Legal Entity Registry (CNPJ);
- The measure does not transform the individual into a company, but it facilitates tax calculation and control.
Testing on real estate and rentals
In 2026, data collection for future taxation begins, which takes effect in 2027.
Individuals may be taxed who:
- Sell more than three properties per year, acquired less than five years ago;
- Sell more than one property built by them in the last five years;
- Obtain annual revenue of more than R$240,000 by renting more than three properties.
Rural producers
- Total exemption for annual revenue of up to R$3.6 million;
- Producers above this limit will start contributing VAT;
- Estimated rate could reach 28%, compared to around 5% today;
- Seeds and fertilizers are exempt;
- Food and agricultural inputs will have a 60% reduction in the general VAT rate.
Imports
- Imports of goods and services are now taxed by CBS and IBS;
- Taxation upon entry of the product into the country, to equal taxation to the national product;
- VAT estimated at around 28%, in addition to existing taxes;
- In 2026, the testing phase continues, without an effective increase in the tax burden.
In summary: how to prepare for 2026
- Update systems and software management;
- Adequate the issuance of invoices;
- Review registrations, contracts and tax classifications;
- Plan the impact of split payment in cash flow;
- Treat 2026 like a mandatory dress rehearsal.
The IRS recommends that companies and individuals issuing invoices do not use 2026 as a waiting year. The tax authorities warn that those who do not prepare could face serious difficulties in 2027, when old taxes begin to be phased out and the real rates of the new tax system come into force.
