Payment, Deduction and Recovery

After providing a brief background on the current tax reform in Brazil, this article discusses the fundamentals of the new tax on goods and services (imposto sobre bens e serviços, IBS) and contribution on goods and services (contribuição sobre bens e serviços, CBS), with respect to neutrality, non-cascading and destination-based taxation, analyses aspects of the tax reform dealing with tax credits (recovery), including notional or presumed tax credits and the new cash-based criterion for recognition of input tax. A special focus is placed on tax refunds and the novel modality of tax settlement, split payment. It also examines the various specific regimes, which work as differentiated tax rates, and briefly discusses the optional reverse charge mechanism and the cashback – a form of personalized VAT put in practice – created to mitigate any regressive impact of the reform.