The Tax Reform, established by Constitutional Amendment 132 in December 2023, represents a significant milestone in the Brazilian tax system. By replacing taxes such as ICMS, ISS, IPI, PIS, and COFINS with three new taxes (IBS, CBS, and Selective Tax), this change directly impacts mergers and acquisitions (M&A) operations.

A new scenario for companies

The tax simplification introduced by the reform promises greater transparency and reduced administrative costs, factors that make Brazilian companies more attractive in the global market.

However, not all sectors will benefit equally. While export industries and agribusinesses gain fiscal efficiency, the services sector, with rates that can reach 27.5%, faces the need to adjust profit margins. For the M&A market, this means that valuations need to be more careful, considering how the changes impact pricing and the competitive appeal of companies.

Tax	Current Rate (Average)	New Estimated Rate	Notes
ICMS	12% to 25%	IBS/CBS (to be defined)	Varies by state and product/service
ISS	5% (maximum)	IBS/CBS (to be defined)	Varies by municipality and service
IPI	10%	IBS/CBS (to be defined)	Could be incorporated into IBS/CBS or maintained for specific products
PIS/COFINS	9.25%	CBS (to be defined)	Base calculation and rate of CBS are still being defined

Note:

• ICMS: The rate varies by state and product.
• ISS: Fixed at 5% for most municipalities.
• IPI: The rate varies depending on the product type.
• PIS/COFINS: The combined rates may vary in specific tax regimes.

Structuring and Planning

With the new tax rules, strategic planning takes center stage. The valuation of target companies requires detailed adjustments, incorporating the effects of tax changes on cash flow and profitability.

Sectors benefiting from tax compensation gain prominence, but those facing higher tax burdens need to restructure operations to maintain attractiveness. The integration of tax and corporate strategies becomes essential to optimize operations and mitigate risks.

Industries such as agribusiness, exports, and manufacturing will see significant gains from non-cumulativity and greater tax clarity. On the other hand, services and technology face challenges intensified by high tax rates. BNS Law has played a crucial role in this scenario, helping clients understand and address sectorial impacts by developing tailored legal and tax strategies to mitigate adversities and enhance opportunities.

Challenges and Opportunities in an Evolving Market

Although the reform opens up promising paths, the still-pending complementary regulations, such as the definition of final tax rates and transition rules, create an uncertain environment. The lack of guidelines on accumulated credits and the risks of hidden liabilities raise the complexity of transactions. Thus, legal certainty depends on a proactive approach, including preventive analyses and detailed tax planning.

In contrast, the Tax Reform can generate opportunities for M&A, increasing international competitiveness, attractiveness to investors, and tax efficiency. Adaptable companies that receive proper consultation can thrive in this new landscape.

With expertise in tax and corporate law, BNS Law helps clients navigate these changes, optimizing business strategies and mitigating risks, helping companies succeed in the Brazilian market.

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