Split Payment: Tax Reform brings changes in the way taxes are collected

Measure impacts companies' cash flow and imposes need for technological adaptation

By Fabiana Soares

 

One of the innovations introduced by the Tax Reform, the implementation of the split payment mechanism, represents a significant change in how companies pay taxes. This approach, in a way, simplifies tax collection but also brings implications that taxpayers need to consider.

The method will be implemented for the payment of the Goods and Services Tax (IBS) and the Contribution on Goods and Services (CBS), both created under this new tax framework in the country.

 

What is split payment and how will it work?

Split payment is a tax collection model in which the tax amount due is automatically separated from the main transaction value. In this system, the tax amount is transferred directly to the tax authorities at the time of payment, while the remaining amount, corresponding to the sale value, is credited to the supplier.

In this way, the government ensures that the tax is paid and that there is no double taxation. Automating the payment process is also a way to combat tax evasion.

 

What is changing

In the model currently in effect in Brazil, the taxpayer is responsible for collecting the taxes due on their commercial transactions and making the payment on the specified dates.

This process provides companies with some autonomy regarding their payment scheduling but also creates gaps for noncompliance. With split payment, this dynamic changes significantly.

For example, consider the purchase of a product for BRL 1,000, applying a 26.5% rate (the estimated standard rate for IBS and CBS):

Traditional method   (before the Tax Reform)	Split payment   (from the Tax Reform)
The seller receives BRL 1,000.00 at the time of purchase and later pays BRL 265.00 in taxes.   After paying the tax, the seller retains a net amount of BRL 735.00 from the transaction.	The values are separated automatically at the time of the transaction.   The seller receives BRL 735.00 (net amount) at the time of purchase, as BRL 265.00 related to the tax is directly allocated to the government.

 

How credits work

IBS and CBS have full non-cumulativity, meaning that all purchases generate credits to be offset against taxes due. With split payment, the government also intends for the tax deducted from the payment to the supplier to be net of the credits available for the taxpayer to use, also automatically, adding more complexity to this process.

There will be two models for credit utilization: intelligent and simplified. In the first, the split payment system recognizes the credits the taxpayer is entitled to and automatically offsets them against the taxes due. The simplified model is aimed at the retail sector and applies a fixed credit percentage to all transactions, so that at the end of the monthly calculation, a final settlement occurs between the taxpayer and the tax authority.

 

Key impacts

One of the main innovations of the new Brazilian tax system, split payment will have significant effects on companies, both positive and challenging:

 

Impact on cash flow

Split payment may affect cash flow, as the tax is withheld at the time of the transaction, preventing the funds from temporarily remaining with the company until the payment deadline. In other words, the availability of working capital may be compromised.

 

Need for technological adaptation

Companies will need to adapt their billing and payment systems to operate under the new model, which will require investments in technology.

 

Tax security

The risk of tax assessments due to errors in tax collection tends to decrease, as the payment will be automated.

 

Reducing tax evasion

The new system makes tax evasion more difficult, promoting a fairer and more competitive business environment.

 

Preparation for Split Payment

Just as there will be a transition for other aspects of the Tax Reform, the implementation of split payment will not be immediate. According to government information, the system will be tested in 2026 and is expected to become operational in 2027.

Until then, companies should prepare for this transition by assessing the impacts, rethinking their cash flow and pricing processes, and investing in technology to ensure a smooth adaptation to the new mechanism.

It is important to highlight that until the full implementation of the Reform, companies will have to navigate a complex transitional phase, with the coexistence of both the current and new systems. Additionally, tax payment slips will still be issued until split payment is fully operational, which depends on the government's development of the necessary technologies.

Tax Reform with peace of mind

The team of tax specialists at Domingues e Pinho Contadores closely monitors regulatory changes in this area to provide clients with high-quality information and solutions tailored to business needs. Count on this support to navigate the Tax Reform with peace of mind: dpc@dpc.com.br.