The Tax Reform represents a turning point for the services sector in Brazil. With the replacement of taxes such as ISS, PIS and Cofins by a model based on the Dual VAT (Value Added Tax), composed of CBS (Contribuição sobre Bens e Serviços), at the federal level, and IBS (Imposto sobre Bens e Serviços), at the state and municipal level, the impact will be significant, especially for companies that have historically operated under lower tax rates.
In this new scenario, the tax burden is likely to increase for a large portion of service companies, which demands a more active approach to financial, tax and operational management. This is not merely a matter of fiscal adaptation, but a strategic review of the entire business model.
What changes in practice: ISS vs. IBS
The ISS, a municipal tax with rates between 2% and 5%, applies to the gross revenue of service providers. As mentioned, under the Tax Reform it will be replaced by IBS, a state and municipal tax that will be part of the new VAT (Value Added Tax) model.
Unlike the ISS, which is cumulative and does not allow input credits, IBS will be non-cumulative, meaning companies will be able to take credits for inputs used in their operations. This benefits longer supply chains (such as manufacturing and retail), but may represent a higher burden for service companies that have few creditable inputs.
In practice, companies that today may be paying 2% ISS on revenue could face a higher effective tax burden under IBS, depending on the volume of available credits.
According to estimates from the Ministério da Fazenda, the IBS reference rate could be approximately 18.7%, which combined with the CBS (federal) rate of around 9.25% will result in an estimated total burden of up to 28% in some cases. (Source: Ministério da Fazenda via Tax Group)
Most affected sectors
The Reform will affect the entire services sector, but the impacts vary according to the type of activity and cost structure. Some segments that deserve closer attention:
Advertising and marketing agencies
Consulting and professional services
Technology, software development and SaaS
Healthcare clinics and private practices
Educational services and training
PJ service providers with low operating costs
Businesses with a lean structure, few inputs and high margins tend to feel more tax pressure.
Reassessing suppliers and redesigning operations
One of the main practical changes concerns how these companies relate to their suppliers. The new tax credit logic, now based on financial value rather than just the nature of the transaction, makes the choice of business partners a factor directly tied to the company's fiscal efficiency.
Hiring informal suppliers, those with inadequate fiscal document issuance or poor tax structuring, can prevent the use of credits and increase the final cost of the service. Business owners need to consider the supplier's ability to generate valid tax credits, in addition to price, lead time and quality.
This change may also require a review of partnerships, outsourcing arrangements and internal processes. The analysis must involve not only finance, but also procurement, legal and accounting.
Contracts, pricing and cash flow impact
The coming increase in tax burden requires an urgent review of contracts, margins and pricing structures. Businesses operating under fixed contracts or with poorly defined adjustment clauses should take precautions now to avoid future losses.
Another important point: the new model may alter the cash flow timing, since the system of tax credits and debits may create gaps between tax payment and the receipt of amounts billed. Failing to address this can compromise working capital, especially for service companies that work with long payment terms.
Strategic accounting and technology as allies
In this new environment, the accounting and finance function moves beyond being a calculation center and takes on a consultative and strategic role. It will be essential to have an accounting partner that not only calculates taxes, but helps simulate scenarios, evaluate more advantageous tax regimes, optimize credit utilization and even influence the corporate and operational structure of the business.
Process automation will be essential. This includes everything from the correct issuance of invoices to ERP integration with tax planning. The use of dashboards, managerial income statements and fiscal projections will become routine for companies that want to navigate this new scenario well. Those who choose to cut costs on building a qualified team and specialized consulting firms will find good reason to regret that decision soon enough.
Opportunities: those who plan, lead
Despite the challenges, the Reform also opens doors for positive structural adjustments. Companies can, for example:
Evaluate opening branches in states with more attractive tax rates
Reorganize the model for hiring contractors or PJs
Restructure operations to better capture tax credits
Create new products or service packages with a more favorable tax structure
Those who manage to align strategy, technology and accounting may turn the Reform into a competitive advantage.
Practical checklist: how your service company can prepare
Map your suppliers and assess the tax impact of each one
Review all contracts (clients and partners), including tax adjustment clauses
Update your pricing structure to account for the new tax burden
Talk to your accountant about tax regimes, simulations and planning
Assess your cash flow and build projections based on the new model
Train internal teams — procurement, sales and finance need to understand the basics of the reform
Invest in technology — updated systems will be essential for maintaining compliance
In summary
The Tax Reform will require deep adjustments from service companies. But it will also create space for innovation, efficiency and scale gains, especially for those who act early. Businesses that manage to adapt with sound tax intelligence, technology support and accounting aligned with strategy will come out ahead.
More than meeting fiscal obligations, the challenge now is to build a financially sustainable, tax-efficient operation that is ready for the new cycle of the Brazilian economy.
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Article also published on LinkedIn.
Gregory Gomes
Accountant | Specialist in Financial and Tax Planning
Partner at AdvisorTips
