Tax reform: Government files a proposal to create the Social Contribution on Operations with Goods and Services (CBS) 

Social Contribution on Operations with Goods and Services (Operações com Bens e Serviços - “CBS”), a value-added tax (IVA), replaces the Social Integration Program and the Public Servant Assets Formation (PIS/Pasep) and the Social Security Financing (Cofins). 

23/07/2020

HIGHLIGHTS

Tax reform: Government files a proposal to create the Social Contribution on Operations with Goods and Services (CBS) 


The Federal Government, through the Ministry of Economy, presented to the National Congress on July 21 a Tax Reform project that brings the creation of the Social Contribution on Operations with Goods and Services (Operações com Bens e Serviços - “CBS”), a value-added tax (IVA), replacing the Social Integration Program and the Public Servant Assets Formation (PIS/Pasep) and the Social Security Financing (Cofins). 

The proposal is part of Law Project 3887/2020 and its premise is the simplification of the tax, aiming, among others, at reducing legal litigation, considering that the CBS will be easier to calculate and also in the taking of credits since any credit related to business activity may be deducted from the CBS due, including credits from companies in Simples Nacional (taxed - levied).  The rate foreseen for CBS is 12%, and it will be a non-cumulative tax that will be applied only to the revenue resulting from operations with goods and services in a broad sense.

CBS will not be applied to companies that are part of the Simples Nacional, products of the basic food basket, charitable entities, temples of any cult, political parties, cooperatives and condominiums. In addition, there will be specific rules for the single-phase incidence on some products. The operations involving the Manaus Free Trade Zone and Free Trade Areas were preserved. And financial and similar entities will also be subject to specific rules and the 5.8% rate 

The National Congress will have to analyze the project, which establishes transition rules between the current taxes and the CBS and foresees a six-month period, as of the law's publication, for the new tax to become effective. 

The proposed law is a technical proposal for IVA, which acts within the federal tax collection, not affecting ICMS (Tax on Operations Related to the Circulation of Goods and Services of Interstate and Intermunicipal Transport and Communication) and ISS (Tax on Services of Any Nature), which are being discussed in the Proposal for Amendment to the Constitution No. 45, in progress in the House of Representatives. 

The Government also foresees another phase of the reform, which will cover the discussion on Income Tax, dividends, indirect taxes, IPI.

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