Sanctioned on July 15, 2023, with the approval of Law 14,596/23, the Foreign Trade Tax Reform seeks to improve the Brazilian tax system in international transactions.

With changes to Transfer Prices, it aims to ensure transparency and fairness between companies in the same group, avoiding illegal practices.

Law 14,596/23 aims to equate the Brazilian tax system with the best international practices and strengthen the business environment. Thus generating legal security and attracting foreign investors.

The Foreign Trade Tax Reform is well received precisely due to the legal security and predictability provided, establishing clear rules and promoting stability in commercial transactions.

Above all, there is the expectation of boosting international trade, benefiting payers and collectors.

However, debates arise about the internal impacts of the reform. Replacing taxes with Value Added Tax (VAT), for example, raises questions about the simplification of the tax system and its effects on the economy and companies. Therefore, it is essential to analyze the consequences of this change in economic sectors.

Other relevant aspects of Foreign Trade Tax Reform include regulation by the Federal Revenue, through a Normative Instruction. As well as considerations on foreign trade — such as the use of accumulated credits and the incidence of the Selective Tax on specific products.

The Foreign Trade Tax Reform is an important step in modernizing the Brazilian tax system, promoting transparency and justice in international operations.

What changes with the foreign trade tax reform?

The main change brought about by the Foreign Trade Tax Reform is the way Brazilian taxes are charged on goods and services. The proposal is to replace the five taxes currently in force with just two.

Furthermore, Law 14,596/23 also changes where the tax is collected. Thus, instead of payment at the production location, it will be carried out at the destination.

When does Law 14,596/23 come into force?

As a result of the conversion of Provisional Measure No. 1,152, published at the end of 2022, Law 14,596/23 will come into force on January 1, 2024, allowing taxpayers to opt for its early application from January 1, 2023.

As established in Normative Instruction (RFB) No. 2,132/23, the option for early adoption must be formalized in September 2023, through a specific term to be presented upon opening a digital process on the e-CAC Portal.

It is important to highlight that this option will be irreversible, that is, once made, it cannot be changed later. Therefore, a detailed assessment of the effects resulting from early adoption is recommended, in accordance with the guidelines in the aforementioned Normative Instruction.

Established premises and highlights

According to the report of the commission in charge of analyzing foreign trade tax reform projects, some premises have already been established and deserve to be highlighted:

• effective replacement of IPI, PIS, Cofins, ICMS and ISS with a VAT
• creation of a complementary and extra-fiscal Selective Tax to discourage the consumption of certain goods and services
• possibility of using accumulated credits to offset new VAT debts.