Federal Government presents Tax Reform bill that unifies PIS and COFINS at a 12% rate

By Andreia Moraes Silva

Long awaited, the tax reform bill presented by the Federal Government only unifies PIS and COFINS and causes a nominal tax rate increase, which would become 12% (even though the Government denies any tax burden increase).

The Government’s justification for such a shy “tax reform” is to promote the reform in steps and to promise to submit new bills dealing with the IRPJ – Corporate Income Tax – and IRPF – Individual Income Tax – (reducing corporate taxation and recriating dividend taxation), IPI – Excise Tax on Manufactured Products – (simplifying and aligning it with the selectivity principle) and the payroll de-onneration (aiming to reduce the cost of formal labor).

Under this standpoint, Bill 3387/2020, presented yesterday (07/21), would be just the first step of the reform. It creates the Social Contribution upon Transactions with Goods and Services (CBS), which, if approved, shall replace the PIS and COFINS contributions and shall be levied upon an entity's the gross revenue and increments, such as fines and burdens, arising from internal and import transactions. The main points of the bill are summarized below:

a) The CBS calculation base does not include: ICMS (State Sales Tax), ISS (Local Service Tax), the CBS itself, and unconditional discounts;

b) Are taxpayers of the CBS: legal entities and individuals equalled to legal entities by the IRPJ legislation;

c) Are not taxpayers of the CBS: residential condominiums, philanthropic institutions and foundations, class-representation entities, committees of professional inspection, autonomous social services, temples of whichever religion, unions, and political parties;

d) Digital platforms shall be responsible for collecting the CBS levied on transactions performed through them, if the seller doesn’t register the transaction