The proposal, which is scheduled for a vote in the Senate Constitution and Justice Commission (CCJ) on Wednesday, aims to establish the operational framework for the future Tax on Goods and Services (IBS), one of the pillars of Brazil’s new Value Added Tax (VAT) system.
Speaking after presenting his revised substitute text to the CCJ, Braga said negotiations with lawmakers in the Chamber of Deputies had advanced positively.
“I think we are building a very good environment, but politics is like a cloud — we have to wait to see what will happen until then,” the senator said.
The bill regulates how the IBS will be collected and how disputes involving the tax will be resolved. The IBS will replace the current state ICMS tax and municipal ISS tax, while operating alongside the federal Contribution on Goods and Services (CBS), which will substitute PIS, Cofins, and IPI.
New Governance Structure
A central feature of the proposal is the definitive creation of the IBS Management Committee, an autonomous body responsible for coordinating the tax nationwide.
Braga’s latest version strengthens the stability of the committee’s leadership. Representatives from states and municipalities will serve four-year terms on the Superior Council and can only be removed under exceptional circumstances, such as criminal conviction or serious misconduct.
The committee president will be elected internally, while nine executive directors — at least one-third of them women — will be selected from tax administration professionals.
The rapporteur also introduced two new institutional bodies:
a public association between the Management Committee and Brazil’s Federal Revenue Service to coordinate IBS and CBS administration;
the National Chamber of Integration of Administrative Litigation, designed to harmonize disputes involving both taxes.
Dispute Between Municipal Associations Resolved
The revised text attempts to settle a dispute between the National Front of Mayors (FNP) and the National Confederation of Municipalities (CNM), which had delayed the temporary formation of the Management Committee for 2025.
Under Braga’s proposal, the FNP will appoint 13 municipal representatives and the CNM 14. Future elections for those seats will follow separate voting systems reflecting the organizations’ distinct representation models.
The Management Committee itself will organize future elections, removing that responsibility from municipal associations after previous coordination failures.
Fines and Compliance Rules Unified
The bill also standardizes infractions and penalties for both IBS and CBS, responding to demands from businesses and tax specialists seeking greater legal consistency.
Taxpayers who fail to pay taxes but correctly provide all required information will face a reduced fine of 50% of the unpaid amount, down from 75% in the original text. Fraud and tax evasion, however, may generate penalties of up to 200% of the tax owed.
Braga also proposed the creation of a National Tax Compliance Program, allowing negotiated settlements between taxpayers and tax authorities without judicial proceedings.
Administrative Litigation System Expanded
To handle disputes under the new tax regime, the proposal establishes a nationwide administrative litigation structure with at least 378 judges operating in trial chambers across Brazil.
Additional oversight bodies include:
the Superior Chamber of the IBS;
the Committee for Harmonization of Tax Administrations;
the National Chamber of Administrative Litigation Integration;
and a legal harmonization forum for public prosecutors’ offices.
The goal is to avoid conflicting interpretations between federal, state, and municipal tax authorities.
Changes to Earlier Tax Reform Rules
The substitute text also introduces technical amendments to Complementary Law 214/2024, the first stage of tax reform regulation.
Among the notable changes:
taxi and charter drivers earning less than R$40,500 annually will be exempt from the new taxes;
up to R$600 per month in real estate rental income will remain untaxed;
sugary beverages will face higher Selective Tax rates;
online sales platforms will become responsible for issuing invoices and collecting taxes when sellers fail to do so;
financial services tax rates will gradually rise to 12.5% between 2027 and 2033;
industries in the Manaus Free Trade Zone outside existing industrial incentive programs will receive commercial tax incentives.
Braga emphasized that the current debate should not reopen broader discussions about the reform itself, warning against turning PLP 108/2024 into “a third round” of negotiations over tax reform.
Brazil’s tax reform is scheduled to begin implementation on January 1, 2026, making the approval of the regulation bill critical for testing and operational preparation next year.