Brazil Tax Reform: TCU Approves 11.3% CBS Rate

On October 28, 2026, Brazil’s Federal Court of Accounts (TCU) approved an 11.3% reference rate for the Contribution on Goods and Services (CBS), a new federal VAT that forms part of Brazil’s broader tax reform and is scheduled to take effect on January 1, 2027.

The decision is significant because, for the first time, the TCU has been formally tasked with calculating the reference rate of a federal tax. The 2023 tax reform introduced this responsibility, and Complementary Law 214/2025 regulates it. The calculation was approved during an extraordinary plenary session chaired by TCU President Minister Vital do Rêgo.

Practical Implications 

The CBS will replace the federal consumption taxes PIS and Cofins. The reform aims to simplify Brazil’s complex indirect tax system, improve transparency, and reduce the cascading effect, in which taxes are charged on amounts that have already been taxed.

The reference rate is meant to preserve the federal government’s revenue during the transition. To calculate it, the TCU analyzed revenues collected between 2012 and 2021 from the taxes the reform will abolish or reduce. According to the TCU president, the goal was neither to maximize revenue nor to set the lowest possible rate. Instead, the TCU sought a rate that preserves the revenue equivalence required by the Brazilian Constitution.

The TCU also calculated a 44.2% reduction in the CBS rate for certain purchases by direct public administration bodies, autonomous agencies, and public foundations. This reduction is intended to maintain the existing level of taxation on those transactions, in line with the applicable legislation.

Future Steps

The proposed 11.3% rate has been submitted to the Federal Senate, which is responsible for approving the reference rate by December 15, 2026. However, the 11.3% figure is only a reference rate and does not necessarily represent the final rate that will be applied to taxable persons.

One of the next major tasks will be determining the rates for the Tax on Goods and Services (IBS), which will replace certain existing consumption taxes at the state and municipal levels. According to the TCU President, this process will require close cooperation between the Court, the IBS Management Committee, the Ministry of Finance, the Federal Revenue Service, and state and municipal authorities. Their joint efforts will be necessary to coordinate the implementation of the new tax framework.