Brazilian tax reform on consumption: what changes for digital nomads?
The recent approval of Brazil's Tax Reform brought several changes to the country's tax collection system, marking a historic moment in the national tax landscape. For Brazilian digital nomads, who often divide their routine between different countries, these changes can bring both challenges and opportunities. This article analyses the main points of the reform and how they could impact this group.
The main changes of the Tax Reform
The Tax Reform brought profound changes to the system of taxation on consumption, in particular:
Dual Value Added Tax (VAT): The five current taxes on consumption (PIS, Cofins, IPI, ICMS and ISS) will be replaced by a dual VAT. The Contribution on Goods and Services (CBS) will be administered by the Union, while the Tax on Goods and Services (IBS) will be the responsibility of the states and municipalities.
End cumulative taxation: The reform eliminates ‘cascading taxation’, where the same tax is applied at various stages of the production chain, making the system more transparent and efficient.
Essential products with zero or reduced rates: Food from the basic food basket, essential medicines and health supplies will have reduced or zero rates, benefiting the low-income population.
Cashback for low income: Part of the taxes paid by consumers enrolled in the Single Registry of Social Programmes will be refunded, ensuring greater fiscal equity.
Gradual transition: The new system will be implemented between 2026 and 2033, with rates progressively adjusted to facilitate adaptation.
Tax benefits for specific sectors: Self-employed professionals, accessibility devices, and other segments will have reduced tax rates.
Real estate: Transactions in the property market will have a 50% discount on the general rate. Individuals with rental income of less than R$240,000 per year and up to three rental properties will be exempt from VAT. Above these limits, VAT will be applied when calculating the rent.
Selective Tax: Products that harm health or the environment, such as alcoholic drinks, cigarettes and fuel, will be taxed extra.
Opportunities and challenges for digital nomads
Digital nomads face specific challenges in relation to the Tax Reform, especially due to their constant connection with multiple tax jurisdictions. See how these changes impact this group:
Taxation of international income: With the simplification promoted by the unification of taxes, nomads will need to carefully review their fiscal relationship with Brazil, especially in relation to world income.
Cashback and tax equity: Tax refunds can benefit those who maintain family or financial ties with Brazil, providing greater tax fairness for those on low incomes.
Benefits for specific sectors: Liberal professionals who carry out international activities will be able to take advantage of tax reductions, improving the competitiveness of services provided globally.
Planning and adapting to change
For many digital nomads, the lifestyle represents the search for greater freedom and flexibility. In this context, the new tax rules, by introducing greater predictability and tax harmonisation, can facilitate financial planning, reducing uncertainties related to double taxation and tax obligations.
On the other hand, the adaptations required by the transition to the new system may require greater attention and organisation. The support of specialists and an understanding of the specificities of each country are essential tools for a safer and more planned experience in the long term.
How to prepare?
Consultation with experts: Tax lawyers can help you identify the best tax strategies and benefits applicable to your case.
International tax planning: Review tax residency and assess conventions to avoid double taxation, adjusting investments and income to the new tax reality.
Gradual adaptation: Keep track of annual rate adjustments and organise yourself to meet tax obligations efficiently.
Conclusion
The Brazilian Tax Reform brings profound and impactful changes, requiring digital nomads to adapt. Although it presents challenges, such as the need for more elaborate planning, it also offers opportunities through simplifications and greater tax equity. With the right preparation, it is possible to navigate this new scenario safely and take advantage of the benefits it offers.
If you are interested in hiring professional legal services related to Tax Planning, we are a law firm specialising in the subject. To do so, simply contact us by e-mail: contato@trpuppioadvocacia.com.br
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