Brazilian Tax Reform: Supplementary Law No. 227/2026 published

Supplementary Law No. 227/2026 was published on January 14, 2026, in the Federal Official Gazette of Brazil, marking the second stage of regulation of the Tax Reform on consumption, complementing and amending Supplementary Law No. 214/2025.

The new law formally establishes the Goods and Services Tax Management Committee (Comitê Gestor do IBS – “CGIBS”), which centralizes the collection and distribution of revenue among states, the Federal District, and municipalities, and standardizes procedures and interpretations related to the new tax regulation.

It also establishes a basis for administrative proceedings, defines transition rules until the ICMS (pre-reform state goods and services tax) is extinguished in 2033, and amends several provisions of Supplementary Law No. 214/2025.

The following updates stand out:

• The CGIBS will have the technical and operational function of issuing the unified IBS regulation, harmonizing legal interpretation standards, managing registries, collecting taxes, making compensations and transfers, and coordinating integrated inspections.
• In litigation, the law establishes a unified procedural framework for the IBS, providing for the right to the due process of law, the service of notices preferably via electronic means, and integration with the Electronic Tax Domicile (DTE). Notably, the law establishes an integration chamber to standardize interpretations in disputes involving matters common to both the IBS and the CBS. This mechanism intends to reduce inconsistencies between jurisdictions and mitigate systemic litigation.
• As for the ICMS transition, Supplementary Law No. 227/2026 provides for the approval and use of credit balances existing at the time of the transition. These credits may be offset against ICMS or IBS transferred to companies within the same group or to third parties, in compliance with the specific rules and deadlines established by law. If using such credits is not feasible, they will be reimbursed in cash and in installments. Supplementary Law No. 227/2026 also establishes a mechanism for utilizing the ICMS tax substitution (ICMS-ST) amounts existing in inventory as of December 31, 2032, reducing the risk of economic disruption during the transition.
• As for the ITCMD, the law establishes general standards for the levy, calculation basis, jurisdiction, and cases of immunity and non-incidence.

Regarding presidential vetoes, the Federal Government barred provisions that could increase litigation.

Excluded provisions include:

• The legal definition of “simulation.”
• The extension of sector-specific benefits beyond the scope already negotiated, with emphasis on proposed adjustments to the Brazilian Football Corporation (SAF) regime; proposed reductions for certain foods and beverages; and rules that would have allowed deferral or a more lenient treatment regarding gas‑distribution cashback programs for low‑income households
• Loyalty program rules whose inclusion could have affected the tax base and produced regressive effects in tax collection.

From an implementation standpoint, some provisions will take effect immediately upon publication of Supplementary Law No. 227/2026, while others will enter into force gradually. The latter includes changes to the Simples Nacional (Brazil’s simplified tax regime for small companies), operations that depend on the full establishment of CGIBS, and joint infra-legal regulations issued in coordination with the Brazilian Federal Revenue Service.

Accordingly, in order to comply with the new legislation, companies should already prioritize updating their tax liability matrices, reviewing taxpayer registries and integration with the DTE, mapping ICMS balances eligible for offset or transfer, and restructuring prices, contracts, and systems based on the location of the transaction, credit availability, and specific regimes, among other considerations.

Demarest’s Tax team is available to provide further clarification.