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Helder Oliveira, Managing Partner | Tax Consultant

The Brazilian Tax Reform and Pricing: Why Every Company Will Need to Reassess Its Pricing Strategy by 2033

Helder Oliveira

Helder Oliveira Managing Partner and Tax Consultant at Select Tax Consultoria Tributária explains how Brazil’s Tax Reform will reshape pricing. He highlights tax-exclusive models CBS and IBS credits split payment and continuous repricing as critical factors influencing competitiveness profitability and corporate strategy.

Brazilian Tax Reform and Pricing Strategy

Brazil's Consumption Tax Reform represents one of the most significant transformations of the country's business environment since the establishment of the National Tax System. While much of the discussion has focused on the replacement of PIS, COFINS, ICMS, and ISS by CBS and IBS, one of its most far-reaching consequences will emerge almost silently in the way companies price their products and services.

The transition from a tax-inclusive system to a tax-exclusive model fundamentally changes the pricing logic currently adopted across the market. More than a mere tax compliance adjustment, it represents a structural shift with direct implications for margins, competitiveness, commercial strategies, and ultimately, corporate profitability.

A Structural Shift in Price Formation

Under the current framework, consumption taxes are embedded within the transaction's own tax base the well-known and complex phenomenon of tax-inclusive taxation. With the implementation of CBS and IBS, taxes will be separately stated, following the prevailing logic of Value Added Tax (VAT) systems adopted worldwide.

Under this model, companies will establish a net price for their products or services, while taxes will be added separately to the final transaction value.

Although this change may appear largely conceptual, its economic implications are substantial. Customer price perception changes, supplier comparisons become more transparent, and companies become increasingly dependent on a comprehensive review of their margin structures in order to preserve profitability.

The End of Pricing Based Solely on Mark-Up

Historically, many Brazilian companies have developed their pricing policies using simplified mark-up methodologies, incorporating taxes, operating expenses, and target profit margins into a single pricing formula.

With the Tax Reform, this approach is likely to become insufficient to capture the new economic dynamics created by the VAT system.

Pricing decisions will require an integrated and dynamic assessment of several factors, including:

The effective tax burden applicable to each transaction;

• The utilization of CBS and IBS tax credits throughout the supply chain;

• The financial effects of the Split Payment mechanism;

• Contribution margins calculated on net values;

• Competitors' commercial positioning and pricing strategies;

• Working capital requirements arising from potential cash flow mismatches.

As a result, two companies operating within the same industry may present significantly different effective costs and final prices depending on the efficiency and quality of the tax credits generated throughout their supply chains.

The Influence of Tax Credits on Competitiveness

One of the cornerstones of the new system is the adoption of a broad-based input tax credit model. Unlike the current framework, where tax credit entitlement depends on complex legal concepts such as "inputs," "essentiality," and "relevance," the Reform introduces a significantly more comprehensive mechanism.

In practice, most acquisitions related to business activities will generate CBS and IBS tax credits, subject to the legal restrictions established by law.

This change creates a highly relevant economic and commercial effect. For the first time, supply chain tax efficiency becomes a direct driver of business competitiveness. The lowest purchase price will not necessarily translate into the lowest economic cost.

Competitiveness will no longer depend solely on the nominal acquisition price but also on the amount of recoverable tax credits generated by suppliers. Consequently, a transaction that appears less expensive at first glance may become economically disadvantageous if it fails to generate the expected tax credits.

As a result, supplier selection, qualification, and strategic supplier management will become central components of tax planning, pricing strategies, and profitability management.

The Impact of Split Payment on Working Capital

Another important feature of the Tax Reform is the Split Payment mechanism, under which taxes levied on a transaction may be automatically segregated and remitted directly to the tax authorities at the moment of financial settlement.

Although its full implementation still depends on complementary regulations and technological developments, the underlying logic of the model represents a significant change in corporate financial management.

Today, many organizations benefit from the timing difference between collecting revenues and remitting taxes, using this temporary cash availability as part of their working capital management strategy. With the automatic segregation of tax amounts, this financial flexibility is expected to diminish, requiring greater discipline in managing working capital, cash flow, and operational financing needs.

In this context, pricing decisions will increasingly incorporate not only tax considerations but also financial variables related to liquidity and business sustainability.

The Strategic Challenge for Simples Nacional Companies

One of the most complex aspects of the transition concerns companies operating under the Simples Nacional regime.

Although the simplified tax regime has been constitutionally preserved, the new tax credit dynamics may significantly alter the commercial relationship between these businesses and the broader corporate market.

Companies subject to the Actual Profit (Lucro Real) or Presumed Profit (Lucro Presumido) regimes will evaluate not only the price offered by suppliers but also the effective tax credits generated by each transaction.

Because Simples Nacional companies traditionally transfer limited tax credits, reflecting their effective tax burden, many may face significant competitive pressure in certain sectors.

In this environment, an important strategic discussion will emerge regarding the economic viability of remaining exclusively under the traditional Simples Nacional framework or adopting alternative mechanisms that allow broader CBS and IBS credit transfer to customers.

Failure to anticipate this shift may result in contract renegotiations, margin compression, and loss of competitiveness within supply chains that are highly sensitive to tax credit recovery.

The Need for Continuous Repricing

An aspect frequently overlooked by the market is that the transition to the new system will occur gradually through 2033.

Throughout this period, the existing and new tax systems will coexist, in a process characterized by the progressive reduction of current taxes and the gradual expansion of CBS and IBS until full implementation.

As a result, pricing reviews will not be a one-time exercise but an ongoing business process.

Organizations will need to establish permanent monitoring mechanisms to assess:

• Changes in their effective tax burden;

• Impacts on historical contribution margins;

• Economic effects on long-term contracts;

• Shifts in competitors' cost structures;

• Variations in profitability by product, customer, and distribution channel.

Companies that maintain static pricing structures risk experiencing gradual margin erosion without clearly identifying its underlying causes.

The Strategic Role of Corporate Controllership

In this environment of transformation, Corporate Controllership moves beyond its traditional compliance role and assumes a strategic position within business management.

The discussion is no longer exclusively tax-related; it now encompasses financial, commercial, and operational considerations.

Among the function's critical responsibilities are tax scenario modeling, pricing policy reviews, profitability analysis by customer and product, working capital planning, and ongoing monitoring of the Reform's economic impacts.

Organizations that treat the Tax Reform merely as a change in reporting obligations or billing systems will likely miss one of the most significant opportunities for competitive advantage creation during this decade.

Conclusion

Brazil's Tax Reform introduces a new economic logic for businesses operating in the country. The discussion extends far beyond tax compliance and increasingly influences decisions related to pricing, supplier management, cash flow, profitability, and corporate strategy.

The transition to tax-exclusive pricing, combined with the strategic importance of tax credits and the financial implications of the new collection system, makes pricing review a permanent management priority.

More than a regulatory requirement, understanding the dynamics of CBS and IBS and developing robust repricing capabilities will become essential tools for margin protection and value creation.

Companies that begin this process in a structured and proactive manner will be better positioned not only to comply with the new rules, but also to transform regulatory change into a sustainable competitive advantage.