The effects of tax reform on the agribusiness of Brazil

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Constitutional Amendment no. 132 of 2023, designated as tax reform, promoted significant changes in the National Tax System. The regulation of this constitutional amendment was initiated with Complementary Law no. 214 of 2025, sanctioned in January of the current year. The norm, complying with the new constitutional command, instituted the following taxes:

1. IBS – Tax on Goods and Services, of shared competence between states, municipalities and Federal District;
2. CBS – Contribution on goods and services, of competence of the Union;
3. IS – Selective Tax, of the competence of the Union.

These taxes will gradually replace ICMS, ISS, PIS, COFINS and IPI. In fact, it was widely publicized that the five taxes would be replaced by a single tax. However, this only Value Added Tax (VAT) was transformed into the figure of VAT Dual (IBS and CBS) and the selective tax (IS) was added, on the grounds that it will tax goods that harm the environment.

The Constitutional Amendment Proposal (PEC) n. 45/2019, which resulted in Constitutional Amendment no. 132 of 2023, listed as “justification”, for tax reform, especially the following motivations: need for “simplification”, “need to reduce litigation”, “increased productivity and potential GDP of Brazil”, extinction of “cumulative” and, of the famous, “tax war” between federated entities.

As the thinkers of the modification declared, all these problems, existing in the current tax system, represent an obstacle to the growth of the country. The changes would be made to correct all these obstacles. Thus, the new model should generate non -cumulative taxation, of simple understanding and systematic, not generate litigation and increase the country’s productivity.

Sheila de Paula
Attorney

The reformulation promotes tax burden transfer between the productive sectors of the country’s economy, changing the taxation of various activities, some more, as is the unquestionable case of “services”. Notwithstanding to be considered as a “main motor of the Brazilian economy”, according to a conjuncture letter number 66 of the Institute of Applied Economic Research (IPEA), published in the first quarter of the current year, in analysis of GDP performance of 2024. In this sector, the rate could reach 28% of the value of the service, for those who are not part of the “differentiated regime” – regime with tax reduction – and without credits to deduce.

Another important sector of the Brazilian economy, agribusiness, responsible for the promotion of the food chain, will also be impactful. Participated with 23.2% of the Brazilian Gross Domestic Product (GDP) in 2024, and 23.5% in 2023, according to data released by the Brazilian Confederation of Agriculture and Livestock (CNA), with calculations from the Center for Advanced Studies in Applied Economics (CEPEA), University of São Paulo (USP).

Agribusiness will be part, in the new rule, of different types of treatment and collection:

1. Of the “regular regime” – applied to all;
2. of the “favored regime” – with advantage over others, such as Simples Nacional;
3. of the “specific regime” – for those who escape the rule, such as the real estate branch;
4. of the “differentiated regime” – with tax rate reduction or presumed credit concession.

This may generate complexity to the individual rural producer, now inserted in a new universe.

There are a large amount of new rules. Follow the main ones:

• The rural producer or legal entity who earns gross revenue less than R $ 3,600,000 (three million six hundred thousand reais) in the calendar year and the integrated rural producer will not be considered taxpayers of IBS and CBS, and they are allowed to register as a contributor to the “regular regime”. This limit will be updated annually;
• There will be the institutes of “deferral”, “presumed credit” and “suspension” for some cases, with the objective of equalizing the situation between rural producers opting and not opting and to minimize matters related to seasonality, bringing the right to credit to the duty of the debt;
• The taxpayer of the IBS subject to the “regular regime” may appropriate presumed credit in the acquisitions of goods and services of rural and/or non-contributing integrated producer;
• For the “specific regime”, IBS and CBS will only focus on: gasoline, anhydrous fuel ethanol, diesel oil, biodiesel, liquefied oil and natural gas, hydrated fuel ethanol, aviation kerosene, fuel oil, processed natural gas, vehicle natural gas and other fuels. Biofuels are assured a lower taxation to fossil fuels;
• Immune, exempt, subject to zero rate, deferral or suspension shall not allow credit appropriation except presumed credit;
• Exchange of the acquisition of capital goods with specific rules for those framed in the regular regime; For the non -contributing rural producer, IBS and CB aliquots are reduced to the supply and importation of agricultural tractors, machines and implements;
• There are four tables listing the products of the basic basket, other reduced human consumption foods, agricultural inputs and aliquot reduction and rate reduced to zero for vegetables, fruits and eggs;
• There is also a reduction of tax rates for the supply of agricultural products, aquacos, fishing, forests and fresh vegetable extractivists;
• Rental of property is a fact that generates IBS and CBS;
• End of current tax exemption with the gradual reduction of ICMS and ISS tax incentives and benefits (eg agreement 100/1997);
• Selective Tax (IS) will tax mineral goods, including dolomitic sulfur and limestone;
• The “agro rates” were extinguished and authorized the establishment of similar ones with effective until 2043, for those states that already had on April 30, 2023.

All of these details are important to agribusiness and don’t look simple at all. Each item provides a different impact on the various Agro chains. The exemption of the basic basket and vegetable products have a positive effect for low -income families.

The permanence of presumed credit institutes, deferral and suspension, already existing in various ICMS laws, also generate positive effects for producers in general and for agro -industry, mitigating the problem of seasonality and bringing the appropriation of credit to the debt.

Reductions of rates prevent agricultural products from having an exorbitant elevation and also demonstrate the work in defense of agro by industry representatives, CNA and SRB.

The gross revenue limit to determine who is IBS and CBS taxpayer translates concerns with small producers. Differentiated taxation for biofuels and fossil fuels encourages the growth of fuel production elaborated from biological material, which are renewable natural sources.

The concern to include capital goods (machines and agricultural implements) in specific regime shows concern about the non -increase of this stage of production.

However, the taxation of mineral goods by the selective tax, the “agro fees”, the taxation of the lease of real estate and the completion of tax incentives and benefits will undoubtedly cause distortions for agribusiness. The first distortion is, quite apparent, in increasing input acquisition costs, raising production costs, reducing profit margin and leaving agro investment less attractive.

Taxation of the lease of immovable property will impact the rent of rural property, even with the reduction of the rate. With the changes, the need to revise long -term contracts and investment reevaluation arises. It is believed that the incidence of selective tax on mineral goods will reflect on commodity exports and will cause cumulative taxation system.

The issue of seasonality in agribusiness and, on the other hand, the obligation to collect the tax at the time of purchase will generate impacts on the cash flow of companies that acquire inputs (such as fertilizer), caused by distance between credit appropriation and the obligation of the debt. By studies prepared by the Confederation of Agriculture and Livestock of Brazil (CNA), some agribusiness production chains may have greater impacts than others.

Therefore, the need for all production chains arises to make calculations to verify the impact of change on their business. Regulation, which will result from PLP no. 108 of 2024, under discussion in the National Congress, will also help define the direction of agribusiness, still uncertain at some points that depend on that standardization.

Finally, the tax reform did not solve the problems that justified it. And it will surely result in difficulties for agribusiness, increasing the food production chain and ultimately burdening consumers, despite the mechanisms of the basic basket and others inserted in the new system.