A new tax controversy is beginning to gain traction in the courts and deserves companies' attention.

Brazil's Tax Reform promises to simplify consumption taxation. However, during the transition period, a legal dispute could lead to a higher tax burden for various sectors of the economy.

The question is straightforward: should IBS and CBS amounts be included in the ICMS tax base?

Some state tax authorities believe they should. In Rio Grande do Sul, for example, the State Revenue Service expressed support for their inclusion in Opinion No. 26.253/2026.

This interpretation could result in ICMS being calculated on the amounts of the new taxes as well, increasing the total tax payable by companies.

The Tax Reform established a specific calculation method for IBS and CBS based on an exclusive, or “tax-exclusive,” taxation model. In this context, it is argued that including these taxes in the ICMS tax base conflicts with tax neutrality and improperly expands the scope of the state tax.

The issue has already resulted in decisions in favor of taxpayers.

In October 2026, a court in São Paulo recognized, in a first-instance ruling, a company's right to exclude IBS and CBS from the ICMS tax base starting in January 2027.

Although no definitive judicial position has been established, the ruling highlights the legal significance of this dispute.

What is the impact on companies?

For manufacturers, distributors, wholesalers and commercial businesses, including the new taxes in the ICMS tax base could increase the ICMS burden, affecting cash flow, pricing and tax costs.

The economic impact, however, will depend on each taxpayer's circumstances, particularly the possibility of offsetting ICMS tax credits.

Given this scenario, proactively assessing the effects of including IBS and CBS in the ICMS tax base could be an important measure to preserve competitiveness and avoid unnecessary tax costs.

The time to assess this issue is now, before its financial effects materialize.