Complementary Law 214/2025 establishes the Tax on Goods and Services (IBS) and the Social Contribution on Goods and Services (CBS), directly impacting the taxation of the personal care, perfumery, and cosmetics sector. The new system may simplify the tax burden, but it could also lead to increased costs, depending on the rates set and the operational structure of the companies.

Tax Substitution and the Principle of Non-Cumulativity

The new regulation replaces PIS, COFINS, and IPI (federal taxes) as well as ICMS and ISS (state and municipal taxes) with CBS and IBS, both following the principle of full non-cumulativity. This change allows for the deduction of tax credits throughout the production chain, eliminating cascading taxation and reducing the final cost of products.

End of Special Regimes

One of the main changes is the elimination of the PIS/COFINS single-phase regime and ICMS tax substitution (ICMS ST), which concentrated tax collection on the manufacturer or importer. Under the new legislation, CBS and IBS will apply at all stages of the production chain.

With the end of concentrated taxation, there is likely to be an incentive to unify activities (import, manufacturing, and commercialization) within a single entity, reducing the need to separate industrial and wholesale establishments. Fewer operations also mean fewer taxable events for IBS and CBS.

Reduction of Rates for Mass-Consumption Products

Complementary Law 214/25 provides for a 60% reduction in IBS and CBS rates for personal hygiene and cleaning products consumed by low-income families, such as:

• Toilet and bar soaps

• Toothpaste and toothbrushes

• Toilet paper

• Bleach

• Diapers and similar items

Cosmetics, however, are not included in this reduction and will remain subject to regular taxation.

The reform establishes the end of tax incentives, except in rare cases. For the cosmetics sector, this means a gradual reduction of ICMS tax benefits during the transition period, accompanied by a progressive increase in the IBS rate. Companies will need to reassess their strategies, particularly regarding the location of operations and logistics chains, prioritizing efficiency over incentives.

Tax Credits and Utilization of Balances

• PIS/COFINS: Accumulated and recorded credit balances remain valid for 5 years after their extinction (2027) and can be offset against CBS or other federal taxes, or refunded.

• IPI: Credit balances cannot be used to offset CBS or IBS debts, so it is ideal to utilize them before the CBS comes into effect. The rate will be reduced to zero for most products starting in 2027, but may be maintained for incentivized items from the Manaus Free Trade Zone (ZFM).

• ICMS: Unused credit balances, if approved, can offset IBS debts until December 2032.

Perfumery or cosmetic preparations (NCM 3303 to 3307) with an IPI rate higher than 6.5% will maintain taxation if produced in the ZFM, potentially generating presumed IBS and CBS credits.

Transition Schedule

• CBS: starts on 01/01/2027

• IBS: starts on 01/01/2029

• Full implementation: by 2033

During the transition period, the old and new taxes will coexist, with rates gradually adjusted.

Selective Tax
So far, there is no plan to apply the Selective Tax (IS) to the personal care, cosmetics, and perfumery sector, but it is advisable to monitor any potential updates.

Conclusion

The tax reform brings opportunities for simplification but requires strategic planning. Companies in the sector should review their operations, logistics, and tax structure to minimize risks and take advantage of potential credits during the transition.