With the tax reform regulated this year and set to take effect in 2026, Brazil is about to enter a new tax era. One of the pillars of this transformation is the “split payment” system. But what does it mean, in practice, to divide tax payments directly at the source, as the legislation proposes? And how does this connect to the much-discussed non-cumulative nature of taxes?
For tax expert Lucas Ribeiro, CEO of ROIT, a technology and consulting company leading the development of solutions for the Tax Reform, the moment calls for unraveling and understanding “split payment.” “After all, it’s a model that could revolutionize corporate finances,” he considers.
Split payment: the revolution in tax collection
The “split payment” is a mechanism that promises to bring more security and efficiency to the Brazilian tax system. In it, the due tax is segregated at the time of payment and sent directly to the tax authority, reducing the risks of default and tax evasion. “The ‘split payment’ eliminates tax fraud but requires greater working capital availability for companies,” explains Ribeiro.
This model is already used in some European countries, such as Italy and Poland, where it helped combat tax fraud and improve collection, although it only applies to some operations. In Brazil, its adoption comes with technological and operational challenges but promises to change the game for businesses and public administrations.
Non-cumulativity: the principle supporting Brazil’s VAT
The non-cumulative nature of taxes, enabled by the tax reform, ensures that the tax is only levied on the value added at each stage of the production chain. With the creation of the Dual Value-Added Tax (VAT) (which combines two taxes, CBS, the Contribution on Goods and Services, and IBS, the Tax on Goods and Services), companies will be able to offset credits generated from purchases against sales liabilities, avoiding cascading taxation and current cumulativity.
The challenge lies in the practical application of this principle, Ribeiro notes. “Non-cumulativity seems simple, but its implementation requires the basics: buying everything with invoices and recording them correctly. A major shift in culture, processes, and systems will be essential,” he emphasizes.
The tax expert lists some points companies will need to master to better leverage the benefits of the tax reform:
- Automation of tax processes: companies that invest in technology to automate the full cycle of tax recording and payments will be ahead.
- Strategic credit management: knowing how to calculate and use credits efficiently will be essential to maximizing profit margins.
- Contractual adjustments: contracts with suppliers and clients need to be revised to reflect changes in tax rates and payment methods.
- Team training: understanding the new tax model will be a competitive advantage. Accounting and finance professionals need to update their knowledge.
With “split payment” and non-cumulativity, Brazil is moving toward a more efficient tax model aligned with international practices. However, implementation will be challenging and will require planning, reliable data, and cutting-edge technology. “Those who master the numbers and understand the nuances of this new system will have an undeniable competitive advantage. And this starts now, in 2025, with companies preparing before it’s too late,” highlights Ribeiro.
