Currently, defining the logistics network in Brazil involves not only locating suppliers and customers with their respective logistics costs, but also analyzing the tax benefits offered by different states, such as incentives from the State Tax on Circulation of Goods (“ICMS”).
Proper logistics and tax planning plays a fundamental role in ensuring competitiveness, reducing costs and maximizing operational efficiency. With the imminent changes expected in the tax reform, companies of all sizes will need to reevaluate their strategies to adapt to the new tax and logistics scenario.
We highlight 4 points that require attention below by companies doing business in Brazil:
1. End of the Tax War and Unification of ICMS: Currently, one of the biggest difficulties faced by companies is the complexity of ICMS, with rates and rules that vary between states in Brazil. The tax reform foresees the unification of ICMS into a single national law, through its replacement by the Tax on Goods and Services (IBS), eliminating interstate tax disputes and simplifying tax calculation. As a result, the need to plan logistics routes and establish new distribution centers based on state tax incentives can be significantly reduced, bringing greater predictability to the tax costs of logistics operations.
2. Changes in Tax Benefits for the Logistics Sector: Regional tax benefits, such as incentives for setting up distribution centers in certain locations, will be reviewed. With the standardization of tax rates, states will lose part of their ability to offer these incentives.
Therefore, companies will have to reevaluate the location of their distribution centers and warehouses, considering factors such as transportation costs, proximity to markets and operational efficiency as a priority, rather than regional tax advantages. It is worth noting that ICMS tax incentives will remain in force until 2032. The reduction of these benefits will be progressive during the transition period, with a reduction of 1/10 per year from 2029, until their complete extinction in 2033.
3. New IBS incidence on added value: With the creation of the IBS, which will replace the ICMS and ISS, the tax burden will be calculated based on the added value at each stage of the production chain. This new format will make logistics an even more relevant stage, since each movement and addition of value will directly impact taxation. Therefore, companies will need to review their supply chains to optimize taxation, ensuring cost reduction and greater operational efficiency.
4. Transition Rules and Operational Adaptation: The transition to the new tax system will be gradual, with the current system and the new regime expected to coexist for a certain period. During this phase, companies will need to deal with two tax regimes simultaneously, which requires integrated and updated systems for correct calculation of taxes. This transition scenario will temporarily bring greater complexity to logistics operations, requiring rapid and efficient adaptation.
The tax reform will bring profound changes to companies’ logistics management. While unifying taxes could simplify the system in the long term, the transition period will require a major adaptation effort. To remain competitive, it will be essential to reassess the supply chain, optimize routes and invest in technology.
