With the tax reform regulated this year and set to take effect in 2026, Brazil is on the brink of entering 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 provides? And how does this relate to the much-discussed non-cumulativity of taxes?
For tax lawyer Lucas Ribeiro, CEO of ROIT, a technology and consulting company leading the development of solutions for Tax Reform, the moment requires unraveling and understanding the “split payment.” “After all, it is a model that could revolutionize business finances,” he believes.
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 tax due is segregated at the time of payment and directed straight to the tax authorities, reducing the risks of default and tax evasion. “The ‘split payment’ eliminates tax evasion, 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 has helped combat tax evasion and improve revenue collection, even though it operates in 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 underpinning the Brazilian VAT
Non-cumulativity of taxes, provided 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, through the reform, of the Dual Value Added Tax (VAT) (which integrates two taxes, the CBS, Contribution on Goods and Services, and the IBS, Tax on Goods and Services), companies will be able to offset the credits generated from purchases against the debits from sales, avoiding cascade and current cumulativity.
The challenge lies in the practical application of this principle, Ribeiro evaluates. “Non-cumulativity seems simple, but its implementation requires the basics: buying everything with a proper invoice and correctly recording them. A significant change in culture, processes, and systems will be essential,” he emphasizes.
The tax expert lists some points that companies will need to master to better take advantage of the benefits of the tax reform:
- Automation of tax processes: Companies that invest in technology to automate the entire flow of tax records and payments will have a competitive advantage.
- Strategic management of credits: Knowing how to calculate and use credits efficiently will be essential to maximize profit margins.
- Contractual adjustment: Contracts with suppliers and customers need to be reviewed to reflect changes in 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 the “split payment” and non-cumulativity, Brazil is moving towards a more efficient tax model aligned with international practices. However, the 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 it starts now, in 2025, with companies preparing before it’s too late,” highlights Ribeiro.
