Sales taxes and invoicing in Brazil (2026): ICMS, ISS, CBS/IBS

Brazil does not have one value added tax. A sale of goods pays the state ICMS, a service pays the municipal ISS, manufactured goods pay the federal IPI, and almost all revenue pays the federal contributions PIS and COFINS. Most small businesses pay all of this through one monthly payment under Simples Nacional. On top of that, Brazil is in the middle of its biggest tax reform in decades: two new taxes, CBS (federal) and IBS (states and municipalities), are replacing the old ones between 2026 and 2033. And every sale has to be documented by an electronic invoice authorised by the tax authorities. This guide explains how it all fits together as of October 2026, with examples in reais.

Brazil's taxes on sales at a glance

The authorities are the Receita Federal for federal taxes, each state's finance department (SEFAZ) for ICMS, your municipality for ISS and, for IBS, the new IBS Management Committee (CGIBS). Every business is identified by its CNPJ.

The 2026–2033 reform: CBS and IBS

Constitutional Amendment 132 (December 2023) and Complementary Law 214/2025 (16 January 2025) replace five taxes with a dual VAT: CBS (Contribuição sobre Bens e Serviços, federal) and IBS (Imposto sobre Bens e Serviços, shared by states and municipalities), plus a selective tax (Imposto Seletivo) on goods harmful to health or the environment. Complementary Law 227/2026 (13 January 2026) created the committee that runs the IBS.

2026: the test year

• Invoices show CBS at 0.9% and IBS at 0.1% (LC 214, articles 343 and 346).
• The amount is offset against PIS and COFINS, and companies that meet the new filing obligations are waived from paying it (article 348). PIS and COFINS are still paid in full.
• The CBS and IBS base excludes ICMS, ISS, PIS, COFINS and IPI from 2026 to 2032 (article 12).
• Simples Nacional companies and MEIs are outside the 2026 test and do not have to show CBS.

The timeline

The final rates are not fixed yet. PwC puts the combined CBS and IBS burden at around 27.5% to 28%; treat that as an estimate.

What to decide now if you are in Simples Nacional

From 2027, a Simples Nacional company can choose to pay CBS and IBS under the regular regime instead of inside the DAS, so that its business customers get full credits (LC 214, article 41). For January to June 2027, the window to choose runs from 1 September to 30 October 2026, and the choice can be cancelled between 3 November and 20 December 2026 (Resolution CGSN 194/2026). Talk to your accountant before the deadline if you sell mainly to companies.

Split payment, where the tax is separated automatically when your customer pays, is only in testing: integration tests with payment providers start on 15 October 2026, and no mandatory start date has been announced.

Who registers where: CNPJ, MEI and Simples Nacional

Every business has a CNPJ (14 characters, written 12.345.678/0001-90). Since July 2026, new registrations can receive an alphanumeric CNPJ in the same format; the first one was issued on 31 July 2026, and existing numbers do not change. If your systems only accept digits, update them. Businesses that sell goods also register with the state for ICMS, and service providers with their municipality for ISS.

Brazil has no threshold below which you charge no tax. Your size decides the regime:

An increase of the MEI limit to R$130,000 (bill PLP 108/2021) is still waiting in Congress and is not law.

Under Simples Nacional, the rate depends on your activity's annex and your revenue in the last 12 months. In the first bracket (up to R$180,000) the rates are:

Above the first bracket, the effective rate is (revenue of the last 12 months × nominal rate − deduction) ÷ revenue of the last 12 months (LC 123/2006, article 18).

Returns and payment

• Simples Nacional: you calculate the tax each month in the Simples Nacional portal (PGDAS-D) and pay the DAS by the 20th of the following month. Once a year you file the DEFIS information return.
• MEI: the fixed monthly DAS is also due on the 20th, and once a year you file the MEI annual declaration (DASN-SIMEI).
• Regular regimes: ICMS is declared and paid monthly under each state's rules and deadlines, in the digital tax books (EFD ICMS/IPI); PIS and COFINS are reported monthly in the EFD-Contribuições, and federal debts in the DCTFWeb. São Paulo is phasing out its old GIA return, but until you are notified of the exemption you keep filing it.

Invoices: NF-e, NFC-e and NFS-e

A Brazilian invoice (nota fiscal) exists only in digital form. Its legal validity comes from the issuer's digital signature and from the tax authority receiving and authorising it before the operation takes place. The main types:

• NF-e, the electronic invoice for goods, authorised by your state's SEFAZ; the customer receives the XML file and a printed summary (DANFE) travels with the goods
• NFC-e, the electronic consumer receipt for retail sales
• NFS-e, the electronic service invoice, issued through your municipality or the national system
• CT-e, for freight transport

An NF-e carries, among other data, the issuer's and recipient's CNPJ or CPF and state registration, each product's description and tax classification code (NCM), the operation code (CFOP), the tax situation codes, values and taxes per item and, in 2026, the CBS and IBS group. An MEI must issue an invoice when selling to a company (a buyer with a CNPJ), but not to consumers (LC 123/2006, article 26).

Cancelling and correcting

• Cancellation: in São Paulo you can cancel an authorised NF-e within 24 hours (Portaria CAT 162/2008); other states set their own limits. After that, you correct the operation with another document.
• Correction letter (CC-e): an electronic correction letter can fix other errors, but not the values used to calculate the tax (price, base, rate), the identity or address of the sender or recipient, the issue or departure date, or the invoice number and series.
• Other corrections: a complementary invoice adds missing values, and a return invoice (nota de devolução) reverses goods sent back. For the reform, the NF-e layout now also includes credit and debit notes to adjust CBS and IBS.

Currency and record keeping

Obligations payable in Brazil must be in reais; a clause in a foreign currency is void except in the cases the law lists, such as contracts for exports and imports of goods and services (Law 14.286/2021, article 13).

Keep invoices, XML files and books until the tax claims are time-barred (National Tax Code, article 195). The tax authority's right to assess tax expires five years after the first day of the year following the one in which it could have been assessed (article 173), so in practice keep everything for at least five full years after the year of the operation.

E-invoicing and the 2026 changes

Brazil has had electronic invoices for years; the reform is now changing their content and the systems behind them.

There is some breathing room in 2026. The authorities announced that invoices will not be rejected for missing CBS and IBS fields, with no end date yet, and a 2026 compliance programme lets companies fix inconsistencies until 31 December 2026. After a notice of infringement, a company has 60 days to fix an omission and avoid the penalty. According to the Receita Federal, by October 2026, 86% of documents issued by companies that must show CBS already did.

A worked example in reais

ICMS, output minus input. A shop in São Paulo under the regular regime buys goods from a São Paulo supplier for R$6,000, including R$1,080 of ICMS at 18%. It sells them for R$10,000. ICMS is calculated “por dentro”, inside its own base: R$10,000 × 18% = R$1,800 (an R$8,200 price before ICMS divided by 0.82 gives R$10,000). ICMS to pay: R$1,800 − R$1,080 = R$720. This assumes the product is not under tax substitution (substituição tributária), where the ICMS is collected earlier in the chain.

CBS and IBS in 2026. On the same invoice, say the value without ICMS, PIS and COFINS is R$8,000. The invoice shows CBS of R$72 (0.9%) and IBS of R$8 (0.1%). If the company meets its filing obligations, it does not pay these amounts; they test the system.

Simples Nacional. A design studio in Annex III with R$150,000 of revenue in the last 12 months is in the first bracket, so its effective rate is 6%. In a month with R$15,000 of revenue, its DAS is R$15,000 × 6% = R$900, which covers its federal taxes and the ISS in one payment, due on the 20th of the following month.

Late payment by business customers

Brazil has no statutory payment term between companies, but the Civil Code gives you tools:

• if the payment has a fixed due date, the customer is in default from that day without any notice (article 397)
• the debtor owes damages, interest, inflation adjustment and legal fees (article 395)
• when no rate was agreed, the legal rate is the Selic rate minus IPCA inflation, and never below zero (article 406, as changed by Law 14.905/2024)
• the Usury Law does not apply to obligations between legal entities, so companies can agree their own interest rate
• a contractual penalty cannot exceed the principal obligation (article 412); the 2% cap on late fines applies only to consumers (Consumer Code, article 52)

Put the due date, the interest rate and the late fine in your contracts and invoices. Our guide to getting paid faster covers the practical side.

Common mistakes

1. 1Treating Brazil like a one-VAT country. A sale can involve ICMS, ISS, IPI and PIS/COFINS at once, plus CBS and IBS in 2026.
2. 2Using the wrong ICMS rate on sales to another state, or ignoring tax substitution on the product.
3. 3Missing the Simples Nacional decisions: the window for the regular CBS and IBS regime for early 2027 closes on 30 October 2026.
4. 4Fixing a price or a tax with a correction letter. A CC-e cannot change the values used to calculate tax.
5. 5Ignoring the new invoice fields because rejection is suspended. The fields are mandatory, and inconsistencies must be fixed by 31 December 2026.
6. 6Systems that reject letters in a CNPJ. New customers and suppliers can have alphanumeric CNPJs since July 2026.
7. 7Exceeding the MEI limit of R$81,000 and continuing to pay the fixed amount.

How Clientlly helps

The nota fiscal comes from the government's systems or approved software. Clientlly takes care of billing and collection around it: invoices numbered in sequence per series with Brazil's tax rates, credit notes linked to the original invoice, the PDF in your client's language, a card payment link and a view of when the client opened the invoice. If a client does not pay, reminders go out automatically 3, 14 and 30 days after the due date. Recurring invoices and multiple currencies are included.

On the purchases side, scan your receipts and Clientlly reads the tax automatically. It keeps your sales and purchase tax books per rate, including exports, and prepares tax reports for you and your accountant, with Excel and PDF exports. You can import clients, suppliers, products and opening balances from Excel or CSV, get low-stock notifications and reorder suggestions, and use the mobile app on the go. See the invoicing module and the accounting module.