At the beginning of November, the Federal Senate approved the text of the PEC in two rounds, with some modifications.
The PEC will now return to the House for the terms amended by the Senate to be examined, so that both houses can reach a consensus on the text.
Finance Minister Fernando Haddad believes that the tax reform will be enacted by Congress this year.
Here are the main changes approved by the Federal Senate:
Sectors with reduced tax rates:
New segments have been approved to join the group that will see a 60% reduction in the standard VAT rate:
- Institutional communication;
- Cleaning products consumed by low-income families;
- Events sector; and
- Enteral or parenteral nutrition (which prevent or treat complications of malnutrition)
In addition to the above sectors, another intermediate band was created, with a 30% reduction in the full VAT rate for self-employed professionals, such as lawyers, doctors, accountants and engineers, whose profession is regulated and subject to supervision by a professional council.
In practice, the change only benefits companies, offices and clinics that do not opt for Simples Nacional.
Zero rate
The following sectors will be subject to a zero VAT rate:
- Services provided by a non-profit Scientific, Technological and Innovation Institution (ICT);
- Car purchases by taxi drivers and people with disabilities/autism;
- Purchase of medicines and medical devices by the Public Administration and non-profit social assistance entities; and
- Urban rehabilitation of historic areas and critical areas for urban recovery and conversion.
The following sectors have been included in specific tax regimes, with differentiated treatment in the levying and collection of taxes:
- Travel agencies;
- Highway concessions;
- Diplomatic missions;
- Sanitation services;
- Telecommunications;
- Sociedades Anônimas de Futebol, which will have unified tax collection;
- Intercity and interstate public transportation services;
- Green Hydrogen;
- Micro and mini power generation;
- Fuels and lubricants.
It's worth mentioning:
In addition to the changes mentioned above, the following stand out:
- There will be a "ceiling" on CBS and IBS rates;
- Changes applicable to the Selective Tax - IS:
- Incurred only once and does not form part of the calculation basis itself;
- It will not be levied on exports;
- It can be levied on weapons when they are not destined for the Public Administration;
- When extracting non-renewable natural resources, such as minerals and oil, up to 1% will be charged on a single-phase basis, regardless of the destination.
- Possibility for states to create contributions to replace the current ICMS funds by 2043;
- Increase in the FNDR from R$40 billion to R$60 billion;
- Extension of the incentive for automakers in the North, Northeast and Center-West regions;
- A 90-day deadline was set after the PEC was enacted for the executive branch to submit a proposal to reform income tax (the previous deadline was 180 days), which could be accompanied by payroll tax relief;
- Creation of mechanisms to increase tax transparency:
a) Whenever possible, the amount of the new taxes should be highlighted on the invoice;
b) Infralegal rules on tax matters must be accompanied by studies and opinions on which they are based, including an assessment of the impact of the reduction or increase on gender inequality.
Procedure:
Proposal → Procedure in the House committees → Approval in the House in 2 rounds → Approval in the Federal Senate in 2 rounds → As there were substantial changes to the text, the proposal returned to the Chamber of Deputies → A new vote is awaited in the Chamber of Deputies