Brazil’s tax reform preserved the Manaus Free Trade Zone (Zona Franca de Manaus) as the only major regional incentive regime to survive the new dual VAT, with benefits secured for the term of art. 92-A of the ADCT — which, adding the 50 years to the art. 92 milestone, projects to 2073. What changes is the mechanism: IPI, reduced to zero for almost all products in 2027, is kept precisely on the goods that have equivalent production in the hub, and now protects the region’s competitive edge. For the head of tax of a manufacturer or an importer, this repositions the Manaus Free Trade Zone from a “regional topic” to a planning variable — one that can change the effective tax burden, cash flow and the very decision of where to produce.
Constitutional Amendment 132/2023 (art. 92-B of the ADCT) ordered that the competitive differential of the Manaus Free Trade Zone be maintained, and Complementary Law 214/2025 (arts. 439–458) put it into operation. The incentive is no longer a set of IPI, ICMS, PIS and Cofins exemptions and now rests on two mechanisms: the selective maintenance of IPI (art. 454) as a barrier against production made outside the hub, and the presumed IBS and CBS credits (art. 450) in favour of those who produce inside it. The percentages — already amended by Complementary Law 227/2026 and challenged in a public civil action — are the technical core and the point under dispute.
Updated June 4, 2026 · By the TaxUp team · Tax Practice.
What the reform preserved and what it redesigned in the Manaus Free Trade Zone
The Manaus Free Trade Zone is a free import and export trade area, with special tax incentives, created to make a manufacturing, commercial and agricultural hub viable in the Western Amazon. Its historical model rested on four taxes that the reform either abolishes or transforms: IPI, ICMS, PIS and Cofins. The question that organised the entire regulatory debate was direct: without those taxes, how do you keep the incentive that justifies companies’ presence in the hub?
The answer came on two levels. At the constitutional level, Constitutional Amendment No. 132/2023 determined that the new system preserve the region’s competitive differential. At the infra-constitutional level, Complementary Law No. 214/2025 detailed the instruments of that preservation in articles 439 to 458 — text that has already been amended by Complementary Law 227/2026, which readjusted the percentages and the calculation method of the presumed credit.
The central point for tax decision-makers is that the logic of the incentive has changed in nature. Before, the benefit was spread across IPI, ICMS, PIS and Cofins exemptions and reductions. Now it concentrates on two mechanisms: the selective maintenance of IPI as a barrier to production made outside the hub, and the grant of presumed IBS and CBS credits to those operating inside it.
The constitutional choice: article 92-B of the ADCT
The regime’s survival was not a residue tolerated by the reform. It was an express decision. By inserting article 92-B into the Transitional Constitutional Provisions Act (ADCT), the constitutional legislator required the Union, by complementary law, to create instruments to maintain, on a general basis, the competitive differential secured to the Manaus Free Trade Zone by arts. 40 and 92-A of the ADCT.
The wording carries a word that today sits at the centre of the controversy: maintain. To maintain is not to expand, nor to rebuild on new bases. The command requires correspondence between what existed under the old system and what comes to exist under the new one. And it is the difficulty of measuring that differential in objective percentages that opened space for the litigation discussed below.
The transition calendar that changes the math every year
The Manaus Free Trade Zone does not live in isolation from the reform’s general schedule. The milestones below define when each piece takes effect and, as a result, when the planning needs to be ready.
| Year | What takes effect | Effect on the Manaus Free Trade Zone |
|---|---|---|
| 2026 | Test year: CBS at 0.9% and IBS at 0.1%, with no collection, only an ancillary obligation | System calibration and impact mapping |
| 2027 | CBS in force, end of PIS/Cofins, IPI reduced to zero (except the ZFM exceptions), Selective Tax and the start of split payment | The differential via maintained IPI (art. 454) + presumed CBS credits comes into play |
| 2029–2032 | ICMS and ISS phase down in stages while IBS rises | Presumed IBS credits gain weight; two systems coexist |
| 2033 | Full force of the dual VAT; abolition of ICMS and ISS | The ZFM consolidates as the only major regional incentive regime kept in place |
The new competitive differential, piece by piece
The Manaus Free Trade Zone differential is no longer a set of scattered exemptions and now depends on the combination of three elements: IPI used as a barrier, presumed IBS and CBS credits used as the incentive, and the Selective Tax as an exception. Let’s take each one.
IPI: from a general tax to a barrier protecting the hub
Here is the most important conceptual turn of the reform for the region — and also the most misunderstood.
The general rule from 2027: zero rate
With the arrival of CBS, IPI loses its revenue function and has its rates reduced to zero, from January 1, 2027, for products subject to a rate below 6.5% in the TIPI table in force on December 31, 2023 (art. 454 of Complementary Law 214/2025). In practice, IPI ceases to be a relevant cost in most of the country’s industrial chains.
The exception that creates the differential: the “penalty” for producing outside
IPI is not abolished. It survives selectively, kept on the product families with a rate equal to or above 6.5% that have incentivised production in the Manaus Free Trade Zone — with a Basic Production Process (PPB) approved by the legal cut-off date. The effect is what sustains the regime: those who manufacture these goods outside the hub remain burdened by the tax, while production inside the Free Trade Zone stays relieved.
It is not a benefit the Manaus company receives. It is a cost the outside competitor comes to bear. That contrast — relief inside, taxation outside — is the new system’s translation of the competitive differential that article 92-B ordered to be preserved.
New products and the “no domestic equivalent” requirement
The rule is not open to any product. For goods that did not yet have incentivised production in the hub, IPI protection only reaches items with no domestic equivalent. It is a relevant filter for anyone planning to bring a new line to Manaus: the advantage is not automatic and depends on the product meeting the PPB criteria and the absence of an equivalent manufactured in the rest of the country.
IBS and CBS: the presumed credit as the central asset
If IPI is the barrier, presumed credits are the positive incentive. The reform treats shipments to the Manaus Free Trade Zone as exports (at a zero rate) and grants presumed IBS and CBS credits to neutralise the absence of the tax being charged on those operations. The percentages are in article 450 of Complementary Law 214/2025 (as worded by Complementary Law 227/2026).
| Mechanism | How it works | Parameter (CL 214/2025) |
|---|---|---|
| Presumed CBS credit — products with IPI below 6.5% in Dec/2023 | 6% credit | Art. 450, §2 |
| Presumed CBS credit — other products (IPI ≥ 6.5%, with IPI maintained) | 2% credit | Art. 450, §2 |
| Presumed IBS credit — by category of good | Final consumer goods 55%, capital goods 75%, intermediate goods 90.25%, IT goods 100% | Art. 450, §1 |
| Operations internal to the ZFM | Zero rate of IBS and CBS on intermediate goods and services | Arts. 439 et seq. |
| Domestic purchases of industrialised goods destined for the ZFM | Presumed credit of 7.5% (South and Southeast, except ES) and 13.5% (North, Northeast, Central-West and ES) | Art. 447, §1 |
In the new model, the credit no longer arises from the mere charge on the invoice and now depends on the tax actually paid along the chain. Tax that the supplier did not collect does not become a credit for the buyer. That is why, in the Manaus Free Trade Zone, maintaining the presumed credits is what prevents the export treatment from turning into a loss of credit — and, for the same reason, supplier selection and monitoring now have a direct effect on the effective burden.
Selective Tax: the blind spot of the favoured regime
There is an important limit. The Manaus Free Trade Zone’s favoured regime does not grant exemption from the Selective Tax. The Selective Tax, provided for in article 409 of Complementary Law 214/2025, applies to products considered harmful to health or the environment, and the hub’s incentives (arts. 439–457) reach only IBS, CBS and IPI. There is, however, a constitutional rule to observe: the ADCT (art. 126, sole paragraph) prohibits the cumulative levy of IPI and Selective Tax on the same product — where the ZFM’s IPI is maintained, the Selective Tax is set aside for that item. This is IPI/Selective-Tax non-cumulation, not a benefit specific to the Free Trade Zone. Companies whose portfolio touches products potentially reached by the Selective Tax need to isolate those items from the math before projecting any gain from the region.
Why the head of tax should reassess the Manaus Free Trade Zone now
For years, the Manaus Free Trade Zone was treated as a matter for those already there. The reform changes that framing. By concentrating the incentive in a clear mechanism — IPI maintained against outside production, presumed credits in favour of inside production — the new system makes the migration calculation more transparent and, in some sectors, more attractive.
From an importer paying IPI to an incentivised manufacturer: the logic of the decision
The reasoning that matters to the head of tax is this. A company that imports a finished product and resells it in Brazil may, depending on the item, remain exposed to the maintained IPI — precisely because that good has an equivalent produced with incentives in the Manaus Free Trade Zone. A company that manufactures the same good inside the hub, meeting the PPB, moves to the relieved side: zero rate of IBS and CBS on internal operations, presumed credits on the way out, and the absence of the IPI “penalty” that falls on the outside competitor.
It is this asymmetry that turns the location decision into a tax decision. For operations that import from a parent abroad, the question is no longer just logistics but structure — and it speaks directly to structuring entry into Brazil and international tax planning.
Producing in the hub or importing the finished product: decision criteria
The math is not automatic, and treating it as a shortcut is the most common mistake. The decision depends on variables that must be modelled together, over a horizon of several years.
| Variable | In favour of producing in the ZFM | Against |
|---|---|---|
| Product’s IPI profile | Good with a historical rate ≥ 6.5% and an equivalent in the hub (the outside competitor stays taxed) | Product already at a low rate or with no equivalent incentivised production |
| Industrial substance | Real ability to meet the Basic Production Process | An operation that would be merely symbolic assembly, with no substance |
| Logistics | The tax gain outweighs the cost of bringing in inputs and shipping production out of the Amazon | A chain heavily dependent on proximity to the consumer market |
| Cash flow | Presumed credits and the internal zero rate ease the current burden | Mismatch between split payment on the sale and the credit on the purchase |
| Horizon | Benefits secured to 2073 give long-term predictability | Short-term legal uncertainty over the percentages (see below) |
Economic substance and the Basic Production Process
The decisive filter is substance. The incentive is anchored in effective manufacturing, evidenced by compliance with the PPB, and not in simply setting up a company at the right address. Structures that promise the benefit without real production are the classic risk scenario and tend to be the first target of challenge. Any projection of gain must start from an industrial plan that stands on its own — with the tax gain coming in as a consequence, not as a cause.
Cash flow: split payment, presumed credits and refund timelines
Even when the burden falls, cash can tighten. Split payment segregates IBS and CBS automatically at the settlement of the sale, before the funds circulate through the company. In a presumed-credit regime, mapping the moment the credit comes in and the moment the tax goes out becomes a priority task. Complementary Law 214/2025 sets deadlines for ruling on refunds, with return where the competent body stays silent. Planning on the best-case timeline, though, is a bet that cash rarely affords.
Sectors that should put the topic on the table the most
The 6.5% IPI threshold is not neutral across sectors. It favours precisely the chains historically subject to higher rates: consumer electronics, durable consumer goods, white goods, two-wheeled vehicles and related segments of the Manaus Industrial Hub. These are the cases where maintaining IPI on outside production generates the largest differential. Consumer-goods manufacturers and technology operations with a manufacturing stage have the most to gain — or to lose — by ignoring the topic. The same goes for multinationals reassessing where to allocate production in the country.
Risks and points of attention that change the equation
Good planning around the Manaus Free Trade Zone differs from bad planning by the honesty with which it treats the uncertainties. Three weigh most today.
The litigation over the presumed credits (the article 450 case)
The design of the presumed credits is already under challenge. On May 25, 2026, FIESP (the São Paulo State Federation of Industries) filed a public civil action (ACP No. 1049079-37.2026.4.01.3400, 1st Federal Civil Court of the Federal District Judicial Section) seeking to suspend §§ 1 and 2 of article 450 of Complementary Law 214/2025, arguing that the percentages would have expanded the competitive differential beyond what article 92-B authorised, without a technical study demonstrating correspondence with the previous system. The sensitive point is conceptual: the Constitution ordered the differential to be maintained, and there is no consolidated objective parameter to measure, in percentages, what “maintain” means. Depending on the outcome, the figures in the table above may be recalibrated. For planners, the correct reading is to work with scenarios — not with a single result taken as certain.
Ancillary obligations and SUFRAMA entry clearance
The benefit has an operational gateway. Using the IBS and CBS credits depends on the goods being cleared into the zone by SUFRAMA (internamento) and on clearance by the state tax administration. The law itself bars informal forms of proof. Those who treat entry clearance as a bureaucratic detail discover, too late, that it is a condition of the credit — and the credit is the incentive. Adapting systems and controlling ancillary obligations, within a tax compliance routine, enter the project from day one.
The risk of structures without substance
Worth repeating, because it is the costliest mistake. In a system that comes to prize neutrality, exception regimes are viewed under a magnifying glass. Arrangements that seek the benefit without real production not only tend to be undone but also expose the group to assessment and retroactive liability. The yardstick is simple: if the industrial operation would not be justified without the incentive, it will probably not survive a substance review.
How TaxUp structures a decision on the Manaus Free Trade Zone
A serious analysis of the hub does not start from the answer. It starts from the product: its IPI profile, whether there is an incentivised equivalent, whether the manufacturing meets the PPB. It then models the effective burden in both scenarios — importing the finished good or producing in Manaus — across the transition, and only then weighs the tax gain against the logistics cost and the cash effect of split payment.
“In the post-reform Manaus Free Trade Zone, the incentive is no longer in the tax the company stops paying, but in the tax the outside competitor starts paying. Whoever grasps that inversion stops treating the hub as a regional matter and starts treating it as a structural decision.”
TaxUp team · Tax Practice
TaxUp has followed the reform’s regulation since Complementary Law 214/2025 was enacted and structures these decisions for manufacturers and international operations, connecting the diagnosis to tax planning and the full reading of the reform’s impact on companies.
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Frequently asked questions
Did the tax reform end the Manaus Free Trade Zone?
No. Constitutional Amendment No. 132/2023 and Complementary Law No. 214/2025 preserved the regime, with benefits secured for the term of art. 92-A of the ADCT (projected to 2073). What changed was the incentive mechanism, which migrated from the old IPI, ICMS, PIS and Cofins exemptions to the selective maintenance of IPI plus presumed IBS and CBS credits.
What happens to IPI in the Manaus Free Trade Zone in 2027?
From 2027, IPI is reduced to a zero rate for products with a rate below 6.5% (art. 454 of Complementary Law 214/2025). It is kept on goods with a rate equal to or above 6.5% that have incentivised production in the hub, with an approved PPB. In practice, those who produce these goods outside the Free Trade Zone keep paying IPI, while internal production stays relieved.
How do the presumed IBS and CBS credits work in the Free Trade Zone?
Article 450 of Complementary Law 214/2025 (as worded by Complementary Law 227/2026) provides a presumed CBS credit of 6% for products whose IPI rate was below 6.5% in December 2023 and 2% for the others. The IBS credit varies by category: 55% for final consumer goods, 75% for capital goods, 90.25% for intermediate goods and 100% for IT goods. Operations internal to the hub have a zero rate of IBS and CBS. These percentages are under a public civil action.
Is it worth migrating production to the Manaus Free Trade Zone because of the reform?
It depends on the product and the substance of the operation. The advantage is greater for goods with a historical IPI rate equal to or above 6.5% and an incentivised equivalent in the hub, provided the company meets the Basic Production Process for real. The decision requires modelling effective burden, logistics and cash flow together — not just comparing rates.
Does the Selective Tax apply to Manaus Free Trade Zone products?
The Manaus Free Trade Zone’s favoured regime does not grant exemption from the Selective Tax (art. 409 of Complementary Law 214/2025). There is, however, a constitutional rule barring the cumulative levy of IPI and Selective Tax on the same product (ADCT, art. 126). Products reached by the Selective Tax must be isolated from any projection of gain from the hub.
How long do the Manaus Free Trade Zone benefits last?
For the term of art. 92-A of the ADCT — which, adding the 50 years to the art. 92 milestone, projects to 2073 — under articles 439 and 458 of Complementary Law 214/2025. There is, however, short-term legal uncertainty over the presumed-credit percentages, the subject of a FIESP public civil action in 2026 and already amended by Complementary Law 227/2026.
Sources: Constitutional Amendment 132/2023 (art. 92-B of the ADCT — maintenance of the competitive differential); Complementary Law 214/2025, as worded by Complementary Law 227/2026 (art. 409 — Selective Tax; arts. 439–458 — Manaus Free Trade Zone, notably art. 447 — credits of 7.5%/13.5%; art. 450 — presumed IBS/CBS credits; art. 454 — IPI); SUFRAMA — Technical Note No. 6/2025 (update of the ZFM regulatory framework). Law 15.273/2025 includes the Municipality of Pacaraima/RR in the Boa Vista Free Trade Area. Informative content; it does not constitute a legal opinion or formal advice.
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