The reform is expected to generate financial, technological, and logistical impacts for global players, encouraging a reconfiguration of the agribusiness landscape as companies reassess where to produce, process, and distribute their products.
By Mayra Theis, Partner and Agribusiness Leader at PwC Brazil
Does Brazil’s tax reform make the country more attractive for agribusiness investment? For multinational companies already operating in Brazil, as well as those evaluating future investments, this is one of the most important strategic questions today. And answering that question has always been like explaining to a foreigner what a jabuticaba is. Do you know what a jabuticaba is? Exactly. You have just understood the magnitude of my challenge. It is a Brazilian fruit that very few people outside the country are familiar with and that is difficult to describe to someone who has never seen it, much like our current tax system. After all, we spent more than 30 years discussing the reform of a system built upon complex and fragmented tax rules.
The tax reform is now becoming a reality and will replace rules that vary from one state or municipality to another, Brazil is moving toward a simpler and more standardized model, like those already adopted in many other countries. Less legal uncertainty, greater predictability, and a business environment that no longer requires an endless instruction manual on the side.
It is important to note that this change goes beyond taxation. It influences decisions about where agricultural products are produced, processed, and distributed across Brazil. To understand why, the first step is to compare the current system with the model that will be gradually implemented through 2033.
| Acronym | Tax | Level | Scope |
|---|---|---|---|
| PIS/Cofins | Federal Social Contributions | Federal | Contributions levied on company revenues |
| IPI | Excise Tax on Manufactured Products | Federal | Tax levied on manufactured goods |
| ICMS | Tax on the Circulation of Goods and Services | State | Tax on goods and certain services, with rules varying by state |
| ISS | Service Tax | Municipal | Tax on services, with specific legislation in each municipality |
New system
| Acronym | Tax | Transition and implementation |
|---|---|---|
| CBS | Contribution on Goods and Services | Replaces PIS and Cofins. A federal tax, effective in 2027 |
| IBS | Tax on Goods and Services | Replaces ICMS and ISS through a national framework. Transition between 2029 and 2032 |
| IS | Selective Tax | New tax applicable to products considered harmful to health or the environment. A new tax applicable only to products considered harmful to health or the environment. That said, the IPI will be reduced to zero in most cases |
From farm gate to port: why the Reform changes the Agribusiness map
The soybean journey, from planting to commercialization, helps to illustrate how tax rules have also shaped the Brazilian agribusiness landscape over time.
After harvesting, soybeans were rarely processed close to where they were grown. They traveled across municipalities and states before reaching a processing plant or port. At each stage of the journey, they encountered different rules and taxes.
The challenge was not merely paying taxes, but rather being unable to fully offset, at the next stage of the value chain, the taxes that had already been paid. Part of those costs became embedded in the price and traveled with the soybeans throughout the supply chain, often hidden behind tax exemptions that still carried the tax burden accumulated in earlier stages. Even when exports were exempt from taxation, those amounts were not always recovered. As a result, the cargo was shipped carrying a hidden cost that was difficult to identify and even more difficult to calculate.
Tax rules and incentives also played a significant role in determining where manufacturing plants and distribution centers were established. In many cases, location decisions were driven less by proximity to raw materials, consumers, or ports, and more by the tax advantages available in each region.
The reform is expected to gradually change that dynamic. Over time, decisions regarding production, processing, and distribution are likely to be driven more by business fundamentals such as logistics efficiency, access to raw materials, proximity to customers, infrastructure availability, and workforce considerations than by regional tax incentives.
Between 2029 and 2032, state and municipal taxes, along with state-level tax incentives, will be gradually phased out. At the same time, the full amount of tax paid at one stage of the value chain may be credited at the next, preventing tax from accumulating in the final price. For exports, taxes paid along the supply chain may be refunded to the company selling the product.
There is still time to prepare
During the transition period, which combines features of both the existing and the new tax systems, companies will have time to prepare, if they start as early as possible.
This will require companies to operate under two tax models, maintain parallel rule sets across their technology platforms, and make long-term decisions within a tax environment that is still evolving. Nevertheless, a valuable window of opportunity for adaptation remains.
The transition period, which combines elements of both the current and the new tax systems, requires companies to start preparing now, as it is just around the corner.
Starting in 2027, businesses will operate under two tax regimes simultaneously, maintain parallel sets of rules in their technology systems, and make long-term decisions based on a tax framework that is still evolving.
| Period | Milestone | What companies should expect |
|---|---|---|
| 2026 | Testing year | New taxes will appear on invoices with limited financial impact, allowing organizations to assess their effects on systems and operations. The year will be dedicated to preparing systems and data, with no impact on cash flow but significant changes to operating models. |
| 2027 | CBS takes effect | The new federal tax will replace the existing ones and begin to be fully implemented. For companies operating in Brazil, this will mark the first tangible impact on pricing, margins, and systems. At the state and municipal levels, however, everything will remain unchanged, except for compliance and reporting requirements. |
| 2028 | Consolidation | A critical period for reviewing operating models, logistics structures, contracts, and tax strategies before state-level incentives begin to disappear. |
| 2029-2032 | Transition period | Gradual replacement of state and municipal taxes by the new framework. Historic tax incentives lose relevance and organizations must adapt to new operating conditions. |
| 2033 | Unified system | The old system will be fully phased out. In its place, only two consumption taxes aligned with the VAT (Value-Added Tax) model will remain, a framework that international companies are already familiar with from other markets. |
As the table illustrates, the most significant efforts will be concentrated in 2026 and during the transition period between 2029 and 2032. Redesigning logistics networks, renegotiating contracts, and adapting operational structures takes years, which is why acting early is so important. And, frankly, before things get better, and they will, they are likely to become more challenging. A significant amount of work lies ahead as companies adapt to the new reality. That is why a well-planned transition is so important.
What needs to be decided now
The reform goes beyond taxation. Its impact is reflected in cash flow projections that need to be reassessed, contracts that require renegotiation, and systems that are not equipped to provide the information demanded by the new model. As a result, companies, particularly their finance and technology teams, must ensure that their efforts are aligned with the new tax environment that is taking shape.
What does the finance department need to monitor?
Marcos Panassol, Partner at PwC Brazil and leader of the firm's Financial Transformation practice, offers a warning that often goes unnoticed:
"For agribusiness companies, the most significant impact of the reform may not be the tax calculation itself, but rather its influence on cash management, working capital, financing structures, and commercial decisions.”
Agribusiness is characterized by long operating cycles, upfront investments, and substantial working capital requirements, with inputs frequently purchased months before revenues are generated. Under the new system, companies will need greater visibility into the connection between commercial transactions, tax credits, payments, and cash receipts, as tax and financial information will become increasingly integrated.
Much of the sector relies on financing structures linked to commercial transactions, receivables, and supply chain relationships, all built around the cash conversion cycle that exists today. As this cycle may change under the new tax framework, Marcos Panassol recommends revisiting underlying assumptions, without presuming that the impact will necessarily be negative.
“This does not mean that receivables financing will become more costly or more difficult to access. Nevertheless, companies should reassess their financial models and liquidity planning. In businesses with seasonal cash flows or substantial investments made before harvesting, even minor changes in liquidity dynamics can have significant implications for treasury operations,” he explains.
The impact also reaches the front office, requiring commercial teams to reassess pricing strategies, margin expectations, and contractual arrangements, since profitability depends not only on the applicable tax rate but also on the timing of tax credit utilization and payment conditions across the value chain.
Long-term contracts deserve particular attention, as they often incorporate tax assumptions and provisions designed for a system that is now being replaced.
How can the technology sector prepare?
Rafael Almeida, SAP Consulting Director at PwC Brazil, has extensive experience in leading large-scale SAP-driven digital and technology transformation programs. Over the past two years, he has led technology readiness initiatives for the tax reform, evaluating its impacts and helping organizations assess the effort required from their IT functions to meet the new regulatory requirements. “The tax reform represents one of the most significant business transformation initiatives Brazil has experienced in recent decades. From a technology perspective, organizations will need to review and adapt a wide range of systems, including ERP platforms, tax engines, electronic invoicing solutions, procurement, sales, logistics, pricing, and data management applications.”
The scope of this review explains why tax compliance is no longer the sole responsibility of the tax function. Instead, it requires robust governance across business and technology teams, supported by structures capable of coordinating regulatory monitoring, solution design, testing, and deployment across multiple functions. In this model, governance ensures data quality, traceability, and consistency in calculations across tax, finance, procurement, commercial, and technology teams.
There is, however, another obstacle holding back software developers: “The uncertainty surrounding specific regulations that have not yet been fully defined by the government directly affects development timelines and delays the release of the system updates required to comply with the new model,” he says.
As a result, part of the implementation timeline remains beyond the control of organizations preparing for the reform, reinforcing the importance of acting early on what can be addressed internally. For many companies, this effort offers an opportunity to modernize legacy systems, simplify processes, and improve data quality, thereby strengthening their digital foundation for future regulatory and business requirements.
The reform also aligns Brazil more closely with the VAT models adopted around the world. By reducing local requirements that have historically driven extensive system customization, the new framework enables broader adoption of standard ERP (Enterprise Resource Planning) capabilities, greater process harmonization across regions, and reduced dependence on highly customized solutions. While country-specific requirements will remain, Brazilian operations are expected to become a more integrated component of global operating models, rather than a unique exception requiring separate management.
Contact us
