The complementary law will regulate the differentiated tax regimes of basic consumer goods for Brazilians
The basic text of tax reformapproved by the Chamber of Deputies in the early hours of Friday 7, provides for different tax regimes regarding the general rules, such as e.g zero rate for some items consumed by Brazilians.
Although the main goal of the reform was to simplify the charge with the creation of two Value Added Tax (VAT)which replace five federal, state and municipal taxes, the text provides for the possibility of exempting the collection of VAT on a series of goods.
Specific medications, such as those used for cancer treatment, basic products for menstrual health care AND foodstuffsFor example, fruit, egg AND french bread they are among the items that may be exempt from future VAT charging and are tax-free.
There is also the possibility of a 100% reduction of the rate on higher education services (Prouni) and on urban redevelopment activities of historic areas and critical areas for urban recovery and reconversion.
According to the reform rapporteur, MP Aguinaldo Ribeiro (PP-PB)the Complementary Law which will deal with various aspects of the Goods and Services Tax (IBS) and the Contribution on Goods and Services (CBS), such as goods and services which will have zero rate, reduced rate, general rate and selective tax.
List of some items that can be exempted
- education services;
- health services;
- medical and accessibility devices for people with disabilities;
- medicines and basic menstrual care products;
- vegetables, fruits and eggs;
- agricultural, aquaculture, fish, forestry and vegetable extractive products in nature;
- inputs from agriculture and aquaculture, food for human consumption and personal care products;
Summary of the tax reform (PEC 45/2019)
Extinction of five taxes
- Tax on Industrialized Products (IPI);
- Movement of Goods and Services Tax (ICMS);
- Tax on services of any kind (ISS);
- Contribution for the financing of the Social Security (Cofins);
- Contribution to the Social Integration Program (PIS).
Creation of the IBS
In place of these five taxes, which would be abolished, a unified tax would emerge: the Goods and Services Transaction Tax (IBS) along the lines of a value added tax.
Selective tax creation
The selective tax would also be created.
Revenue sharing
The created IBS aims to make life easier for the taxpayer, who would pay the tax with a single rate. However, internally, the amount raised would be split between federal, state and municipal authorities.
Unified management
The collection and distribution of IBS revenue would be managed by a national management committee, with representatives from each entity.
Tax refund for the poorest
Return part of the tax collection to the poorest households, where the tax paid would be returned through an income shift mechanism.
Transition between models
Since the reform affects the fiscal capacity of the Union, States and Municipalities, the proposed transition for the end of the five taxes will be of eight years, from 2026 to 2033. Of 50 years, from 2029 to 2078.
Source: Terra
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