With the Tax Reform coming into effect in 2026, the implementation of IBS and CBS significantly redefines the scope of taxation on consumption.

Expansion of the “service” concept

One of the main changes is the broadening of the definition of “service”, which now covers any transaction not classified as the supply of goods — by exclusion.

As a result, activities that are currently outside the scope of ISS or ICMS, such as leasing of movable property, assignment of rights, among others, will become taxable.

This new system adopts a broader approach: any onerous transaction involving goods or services will be subject to IBS and CBS.

This includes not only purchase and sale, but also barter, onerous assignments, leasing, and even donations with consideration.

In addition, the law establishes that certain non-onerous transactions will also be taxed if expressly provided, such as:

• free supply of goods and services between related parties;

• distribution of gifts;

• capital return with goods that generated credits upon acquisition.

Exemptions

With such a broad taxable base, lawmakers had to establish logical exemptions, such as:

• services provided by individuals within an employment relationship or as administrators;

• transfers of goods between establishments of the same taxpayer (in line with the recent ICMS Agreement 109/2024);

• several financial and corporate transactions (with exceptions);

• pure donations, provided that they did not generate credits upon acquisition, due to the absence of the “onerous” criterion.

Challenges of full non-cumulative credits

In the field of non-cumulative taxation, although the law promises a neutral system, in practice there are relevant restrictions.

Credits will not apply, for example, to goods and services for personal use or consumption, except in specific cases provided in Art. 57 of LC 214/2025, such as:

• PPE (Personal Protective Equipment);

• meals provided at the workplace;

• benefits established in collective agreements.

Open questions

This raises important discussions:

• To what extent do these exceptions guarantee the promised neutrality?

• How to treat situations where certain goods, although not for personal use, are essential to the quality of the economic activity — such as works of art and refined furniture in luxury hotels, which are part of the client experience and directly impact the tax base?

Furthermore, the exemptions often do not cover all businesses, representing a potential issue in terms of neutrality.

For example: to avoid classification as personal consumption, workplace meals must be produced by the employer.
In practice, many companies — even those with cafeterias — outsource this service. These cases lack regulation, creating uncertainty with the changes brought by LC 214/2025.

Conclusion

The new system brings important advances, but also gray areas requiring careful interpretation.

Full neutrality remains an expectation — and taxpayers must pay close attention to the exceptions and limitations to ensure compliance with these changes.