Tax Reform Glossary: 30 Essential Terms Explained (VAT, CBS, IBS, IS, Split)
A complete Tax Reform glossary with 30 essential terms explained: VAT, CBS, IBS, Split Payment, Cashback, Selective Tax and more.
Executive Summary
Brazil’s Tax Reform introduced dozens of new concepts into the country’s fiscal vocabulary. For accountants, lawyers, students and business owners who need to navigate the transition, mastering these terms is the bare minimum for making sound decisions. This glossary brings together 30 fundamental terms from Constitutional Amendment 132/2023 and Complementary Law 214/2025, explained in accessible language and with practical examples where the concept requires them. From “Reference Rate” to “Value Added,” the material serves as a quick reference for day-to-day use at the company or firm.
A
Reference Rate (Alíquota de Referência)
This is the national rate that serves as the basis for calculating CBS and IBS on general operations, without any special regime. LC 214/2025 (Complementary Law 214) provides that the Federal Senate sets, by resolution, the reference rates applicable in each fiscal year, calibrated to preserve the country’s overall tax burden during the transition. The effective rate paid by the final consumer in an operation is the sum of CBS, IBS and, where applicable, the Selective Tax. [PENDING TECHNICAL REVIEW — VIVIAN: confirm the latest reference value published by the Senate / Ministry of Finance at the time of publication.]
Differentiated Rate (Alíquota Diferenciada)
This is the rate applicable to specific operations that receive treatment distinct from the reference rate. LC 214/2025 provides for a 60% reduction for areas such as health, education, public transport, agricultural products, artistic and cultural activities, among others. Some operations have a 100% reduction (zero rate) or a specific regime, such as fuels, financial services and real estate transactions. Choosing the correct regime depends on the product’s or service’s NBS/NCM classification.
Tax Anticipation (Antecipação Tributária)
A mechanism by which tax collection occurs before the taxable event actually takes place or before the close of the assessment period. It is common in the current ICMS, in situations such as forward tax substitution. LC 214/2025 governs the cases in which CBS and IBS may be required by anticipation, especially during the transition period.
B
Tax Base (Base de Cálculo)
This is the amount on which the rate is applied to arrive at the tax due. For CBS and IBS, the tax base is the value of the operation, and the non-cumulative nature of the tax is ensured through broad crediting of taxes paid in previous stages. In practice, the tax burden falls on the value added at each stage of the chain, even though the nominal tax base is the full value of the operation.
C
Effective Tax Burden (Carga Tributária Efetiva)
This is the real percentage of taxes borne by the final consumer, taking into account all the taxes that accumulated along the production chain. In a cumulative system, the effective burden tends to be higher than the nominal rate, because each stage pays tax on tax. In a VAT system, the effective burden tends to match the sum of the CBS, IBS and IS rates applied to the final value, precisely because crediting neutralizes cumulativity.
Cashback
A mechanism provided for in the reform to refund to the final consumer part of the CBS and IBS paid on the purchase of certain goods and services. The goal is to reduce the regressiveness of the consumption tax on low-income families. LC 214/2025 provides for cashback in specific cases, such as electricity and cooking gas for people enrolled in CadÚnico, with operational rules to be detailed by regulation. [PENDING TECHNICAL REVIEW — VIVIAN: confirm the updated list of products and percentages before publication.]
CBS (Contribution on Goods and Services)
This is the federal contribution created by the Tax Reform to replace PIS, Cofins and PIS/Cofins-Import. It is a non-cumulative tax, with broad crediting of amounts paid in previous stages and collection operationalized, in part, through split payment. Together with IBS, CBS makes up Brazil’s dual VAT. See also: Difference between CBS and IBS.
Cofins (Contribution for Social Security Financing)
A federal social contribution levied on companies’ gross revenue, with a general rate of 7.6% in the non-cumulative regime and 3% in the cumulative one. Cofins will be eliminated and replaced by CBS, along with PIS, over the transition period set out in LC 214/2025.
Crediting (Creditamento)
This is the right to deduct, from the taxes payable, the CBS or IBS amount that has already been levied in the previous operations of the chain. Crediting is the mechanism that operationalizes the non-cumulative nature of VAT. LC 214/2025 provides for broad crediting: as a general rule, every purchase charged with CBS/IBS generates credit for the buyer who is a taxpayer under the regular regime, except for the exceptions expressly set out in law.
Accumulated Credit (Credit Balance)
This is the CBS or IBS amount credited by the taxpayer that exceeds, in a given assessment period, the amount due on output. This credit balance is kept in favor of the taxpayer and may be used to offset future periods or be subject to refund, in the cases and within the deadlines defined by LC 214/2025 and its regulations. Unlike the ICMS experience, in which accumulated credits often remain locked up, the CBS/IBS regime seeks to give effective liquidity to the credit balance.
D
Input Deduction (Dedução de Insumos)
An expression used to describe the economic effect of crediting: by taking credit on the inputs acquired, the taxpayer ends up, in practice, paying CBS and IBS only on the value added by its activity. It is not a deduction from the tax base, but a reduction of the tax due through credit on what has already been paid in previous stages.
Credit Statement (Demonstrativo de Crédito)
A document and information structure designed to record and evidence the CBS and IBS credits appropriated by the taxpayer. Together with the electronic invoice and the split payment system, the statement makes it possible to track credit balances, credits to be appropriated and amounts already offset, within each assessment period.
E
Constitutional Amendment 132/2023 (EC 132)
A constitutional rule enacted in December 2023 that introduced the legal framework for the consumption Tax Reform. EC 132 amended several articles of the Federal Constitution, created Brazil’s dual VAT (CBS and IBS), established the Selective Tax, enshrined the principles of neutrality, simplicity and destination-based taxation, and defined the basic transition schedule. All of the reform’s sub-constitutional legislation, including LC 214/2025, derives its validity from EC 132. See also: Constitutional Amendment 132.
I
IBS (Tax on Goods and Services)
This is the subnational tax, with shared jurisdiction among states, the Federal District and municipalities, that replaces ICMS and ISS. It is non-cumulative, follows the destination principle (the tax goes to the consuming entity, not the originating one) and is administered in an integrated way by a Managing Committee with representation from the federative entities. See also: Difference between CBS and IBS.
ICMS (Tax on the Circulation of Goods and Services)
A state tax on the circulation of goods, electricity, communications and interstate and intermunicipal transport, which will be replaced by IBS. The current ICMS is responsible for much of the complexity of the Brazilian system: 27 state pieces of legislation, fiscal war among states and a cumulative effect in various operations. The replacement by IBS seeks to standardize rules and eliminate the fiscal war.
IPI (Tax on Industrialized Products)
A federal tax on industrialized products that will be eliminated over the course of the transition. Its revenue-raising and regulatory functions pass, respectively, to CBS and to the Selective Tax. During the transition, IPI remains in force, with rates reduced to zero for most products, kept only to preserve the competitiveness of the Manaus Free Trade Zone.
IS (Selective Tax)
A federal tax created by EC 132/2023, with an extra-fiscal purpose, levied on the production, sale or import of goods and services considered harmful to health or the environment, such as alcoholic beverages, tobacco products and sugary drinks. Unlike CBS and IBS, IS does not allow broad crediting: its logic is to discourage the consumption of these products, not merely to raise revenue.
ISS (Tax on Services of Any Nature)
A municipal tax on services, which will be replaced by IBS. The current ISS creates great complexity for companies that provide services in several municipalities, with more than five thousand municipal pieces of legislation and their own rules on the place of taxation. With IBS, uniform national rules apply, with taxation in the destination municipality.
VAT (Value Added Tax)
A consumption taxation model adopted by most countries, in which the tax is levied at each stage of the chain, but the tax paid in previous stages can be fully credited. Brazil is implementing a dual VAT, with two distinct jurisdictions (CBS, federal; IBS, subnational) and harmonized rules. See also: What VAT is in Brazil.
L
LC 214/2025 (Complementary Law 214)
A complementary law that regulates the consumption Tax Reform at the sub-constitutional level. It defines the taxable events, tax base, reference rates, differentiated and specific regimes, crediting mechanisms, the rules for split payment, cashback, the Selective Tax, the IBS Managing Committee and the transition regime. It is the central document that companies, accountants and lawyers need to master in order to operate in the new system.
N
NBS (Brazilian Nomenclature of Services, Intangibles and Other Operations)
The official classification system for services, intangibles and other operations that do not involve physical goods. NBS is the equivalent, on the services side, of what NCM represents on the products side. In the CBS and IBS regime, it serves to identify the operation, apply the correct rate and fit the service into any differentiated or specific regimes. [PENDING TECHNICAL REVIEW — VIVIAN: confirm the status of the NBS version adopted by the regulation as of the publication date.]
Non-Cumulativity (Não Cumulatividade)
A constitutional principle, reinforced by EC 132/2023, according to which the tax should ultimately fall only on the value added by each stage of the chain. It is operationalized through crediting of the amounts paid in previous operations. Full non-cumulativity is one of the reform’s main promises, in contrast to the current PIS and Cofins regime, in which crediting is restricted, and to ICMS, in which various operations generate accumulated credit without effective use.
NCM (Mercosur Common Nomenclature)
A classification code for physical products used for customs and tax purposes in Brazil and the other Mercosur countries. It continues to be used to identify products in the CBS and IBS regime, especially for applying differentiated rates and specific regimes provided for in LC 214/2025.
P
Assessment Period (Período de Apuração)
The time interval within which CBS and IBS debits and credits are compared to arrive at the amount to be paid or the credit balance to carry over to the next period. LC 214/2025 and its regulations define the periodicity applicable to each taxpayer profile (monthly as a general rule, with specific rules for certain regimes).
PIS (Social Integration Program)
A federal social contribution levied on gross revenue, with a general rate of 1.65% in the non-cumulative regime and 0.65% in the cumulative one. It will be eliminated and replaced by CBS, along with Cofins, over the course of the reform schedule.
Destination Principle (Princípio do Destino)
A rule adopted by EC 132/2023 according to which IBS revenue belongs to the federative entity where the good or service is consumed, not to the entity where it was produced. It is one of the pillars for ending the fiscal war: states and municipalities stop competing to host production through tax waivers, since they now collect based on consumption within their territories.
R
Brazilian Federal Revenue Service (RFB)
The federal agency responsible for administering federal taxes, including CBS and the Selective Tax after the reform. The RFB is also responsible for the technical regulation of operational aspects of split payment and works in an integrated way with the IBS Managing Committee to harmonize ancillary obligations across the three spheres of government.
Transition Regime (Regime de Transição)
The period in which the current system and the new system coexist, according to the schedule of EC 132/2023 and LC 214/2025. Effective collection begins in 2026 in test mode; CBS fully replaces PIS and Cofins in 2027; IBS is introduced gradually between 2029 and 2032, with full elimination of ICMS and ISS in 2033. See also: Reform schedule 2026-2033.
S
Simples Nacional (simplified tax regime)
A simplified taxation regime for micro and small enterprises. LC 214/2025 keeps Simples Nacional within the new system, with its own crediting rules: an opting company may choose to continue paying CBS and IBS through the Simples collection document (without transferring full credit to buyers) or to pay CBS and IBS outside Simples, generating full credit for the customer. The choice has a direct impact on the opting company’s competitiveness in B2B chains.
Split Payment
An operational mechanism by which, at the moment of financial settlement of the operation, the amount corresponding to CBS and IBS is segregated and directed straight to collection, while the net amount goes to the seller. The buyer uses the credit immediately, based on confirmation of the collection. Split payment reduces the risk of tax default and simplifies assessment, but it requires integration among payment systems, ERPs and electronic fiscal infrastructure. See also: Split payment and cash flow.
Tax Substitution (Substituição Tributária)
A mechanism by which the law assigns to a third party, distinct from the direct taxpayer, responsibility for paying the tax. It is widely used in the current ICMS (forward ICMS-ST). LC 214/2025 addresses the cases of tax substitution applicable during the transition and how these regimes adjust to the design of IBS.
T
Credit Transfer (Transferência de Crédito)
The possibility for the CBS and IBS credit balance to be transferred between establishments of the same taxpayer and, in specific cases, between distinct taxpayers, under the terms of LC 214/2025. The goal is to prevent the credit from sitting idle and to give liquidity to the non-cumulativity mechanism, especially in export operations, long production-cycle projects and companies with structural credit balances.
V
Value Added (Valor Agregado)
This is the difference between the sale value of a good or service and the cost of the inputs acquired from third parties and used in the operation. In a production chain, the sum of the values added by each stage equals the final value of the product or service delivered to the consumer. VAT is so named because, although the nominal tax base of each operation is the sale value, the economic burden falls only on the value that each agent added to the previous stage.
Want to go deeper?
In /napratica, VMAHUB publishes detailed analyses of each of these concepts and how they show up in companies’ routines. For a personalized analysis of your case, talk to our compliance team: [email protected].
Read also:
- What VAT is and how it works in Brazil
- Difference between CBS and IBS
- Constitutional Amendment 132
- Tax Reform schedule 2026-2033
Sources: Federal Constitution, as amended by Constitutional Amendment 132/2023; Complementary Law 214/2025; guidance materials from the Brazilian Federal Revenue Service on CBS and the Selective Tax.
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