IBS.
The new subnational tax.

What IBS is

IBS is a subnational tax — shared between states (which lose the ICMS) and municipalities (which lose the ISS). It is administered by the IBS/CBS Steering Committee, a body created by Complementary Law 227/2026.

Unlike the current ICMS (each state with its own legislation, dozens of special regimes, fiscal war), IBS will have uniform federal legislation. The federative entities will lose the autonomy to create their own benefits — which ends the fiscal war between states that has lasted since the 1990s.

Reference rate ~17.7%

The IBS rate is not fixed in law: it will be set by a resolution of the Federal Senate (Constitution, art. 156-A, § 1, XII, and ADCT, art. 130). The Ministry of Finance estimate is approximately 17.7% for the IBS — a figure that already sums the state and municipal portions — plus ~8.8% for the CBS, totalling ~26.5%. That total is not a coincidence: 26.5% is precisely the cap that Complementary Law 214/2025 places on the sum of the reference rates (art. 475, § 11). The cap is a trigger ceiling, not a rate — if the projection exceeds it, the Executive must propose a review of tax benefits.

There are differentiated regimes:

• Zero rate: basic food basket, medicines for cancer/AIDS/rare diseases, medical devices for persons with disabilities
• 60% reduction (effective rate ~11%): health, education, public transport, agricultural products, fresh foods
• CadÚnico cashback: water, sewage, gas, energy, telecom (a refund instead of an exemption)

Full non-cumulativity — unprecedented in Brazil

The big difference between IBS and the current ICMS is full non-cumulativity. Under the current regime, several situations create residual cumulativity (freight between establishments not creditable, restrictions by end-use, special regimes). With IBS, every tax paid at any stage of the chain generates a full credit for the next stage.

This mechanism eliminates the residual “tax on tax” that today makes the chain 5-12% more expensive without anyone capturing the value. Industries with long chains (manufacturing, agribusiness, construction) tend to benefit substantially.

IBS timeline

• Jan 2026: token IBS of 0.1% (testing phase), ICMS/ISS at full rates
• Jan 2029: IBS phase-in begins — it rises progressively, ICMS/ISS start to be deactivated
• 2033: ICMS and ISS extinguished, only IBS in force

The 2029-2033 period is one of coexistence — a company may issue an NF-e with ICMS, ISS and IBS simultaneously depending on the operation. Operational adaptation is complex and requires advance planning.

End of DIFAL and Tax Substitution

Two structures that dominate the complexity of the current ICMS cease to exist:

• DIFAL (interstate rate differential): there is no longer an “internal rate” vs “interstate rate” — IBS is uniform nationwide. Interstate operations create no additional complexity.
• Tax Substitution (ST): there is no longer any advance collection of the tax. Each link pays on what it sells, with a full credit for what it paid. Sectors today under heavy ST (fuels, beverages, pharmaceuticals) will have a much simpler cash flow.

For e-commerce and multi-state distributors, this is the biggest operational gain of the Reform — the end of 27 separate state registrations and per-state special regimes.

What IBS changes by company profile

The effect of IBS is not uniform — it depends on the position in the chain and the business model. Full non-cumulativity benefits those with many creditable inputs; those with few may see their burden rise.

Service companies with few creditable inputs (consultancies, regulated professionals) are the ones that most need to model the impact — for many the burden rises, and the choice of regime and structure makes a difference. Estimate the rate for your sector in the calculator.