Brazil’s tax reform: estimated VAT rate between 25.45% and 27% based on the adopted text of the Parliament

The Finance Minister has provided a technical note indicating that the Value Added Tax (VAT) rate, as part of the tax reform, is expected to vary between 25.45% and 27%.

This estimation is based on the version approved by the House of Representatives, though the projections might change depending on further amendments made in the Senate.

The Finance Ministry has mentioned that the 25.45% VAT rate is projected for a feasible scenario, taking into account a 10% compliance gap.

Meanwhile, the 27% rate is for a conservative scenario with a 15% compliance gap.

However, the economic team has emphasized the uncertainties of these projections, highlighting that it’s challenging to predict the exact compliance gap and that the final rates are contingent on specificities determined during the system’s regulation phase.

The standard rates of 25.45% and 27% might appear high internationally.

Yet, they reflect Brazil’s position as a nation with one of the highest taxes on goods and services consumption relative to its GDP.

Notably, the proposed tax reform retains the current tax burden on these consumptions but aims to make it more transparent with fewer exceptions.

For the full picture, see our Brazil Tax Reform: Complete Guide.