Second supplementary bill to regulate tax reform is filed

On June 05, 2024, the Executive Branch submitted Supplementary Bill No. 108/2024 to the National Congress, seeking to regulate Constitutional Amendment No. 132/2023 (“EC”), which approved the tax reform on consumption.

This is the second bill submitted by the Executive Branch that is linked to the EC. As informed by the Federal Government, this bill aims to regulate the creation and structuring of the State Tax on Goods and Services (“IBS”) Steering Committee, IBS administrative litigation, the distribution of IBS collection proceeds, and provisions relating to the transition from the State Value-Added Sales Tax (“ICMS”) to IBS.

In addition, the supplementary bill provides for changes to the National Tax Code, providing details on the incidence of the Estate and Gift Tax (“ITCMD”), the Real Estate Transfer Tax (“ITBI”) and the Public Lighting Contribution (“COSIP”).

Among the main proposals, we briefly highlight the following:

1. IBS Steering Committee (GC-IBS) – Scope:

• collecting and distributing IBS to the states, Federal District and municipalities;
• publishing IBS regulations;
• inspecting, levying and collecting IBS;
• aligning common rules applicable to IBS and CBS;
• controlling penalties relating to non-payment, undue crediting and ancillary obligations.

2. Administrative Litigation:

• deadlines calculated in business days;
• proceedings carried out via an electronic system involving virtual trials;
• three trial levels;
• defense mechanisms: objection, rectification request, request for unification of conflicting judgments based on case law, voluntary appeal and appeal for unification of conflicting judgments based on case law.

3. ICMS Credits:

• Duly booked and approved ICMS credit balances not recorded by 2032 will be adjusted according to the IPCA inflation index and may be offset against ICMS debts, IBS debts, reimbursed in cash or transferred to third parties.

4. ITCMD:

• The taxable event will be the transfer of any assets and rights that hold economic value, including corporate acts that result in disproportionate benefits to partners or shareholders, without any business justification, in transfers between related persons.
• The tax rate will be progressive according to the transaction value.
• The ITCMD tax will be applicable even if the donors are domiciled abroad.

5. ITBI:

• The taxable event will be triggered whenever the real estate is duly transferred through the execution of an instrument or deed, or when the right in rem over real estate is executed, in the case of inter vivos transfers and inter vivos

6. COSIP:

• definition of COSIP’s purpose;
• assignment of powers to charge COSIP to the Federal District and municipalities.

The text delivered to the House of Representatives will be analyzed by the appropriate committees and submitted to a plenary vote in two rounds. Approval of the bill requires an absolute majority of votes (257 out of 513).

The vote is expected to take place before the parliamentary recess, which will begin on July 17, 2024. After approval, the bill will proceed to the Senate, which will vote in a single round and, finally, it will be submitted for presidential sanction or veto.

Demarest’s Tax team is available to provide any further clarifications on the topic.