The Tax Reform will transform Brazil’s tax system, bringing challenges and opportunities for companies across all sectors. With the transition set to begin on January 1, 2026, it is essential to understand the impacts on business areas and, most importantly, on enterprise resource planning (ERP) systems like SAP to ensure tax compliance and operational efficiency.
What is the Tax Reform?
Considered one of the most significant fiscal transformations in recent decades, the reform aims to simplify Brazil’s tax system, making it more efficient and transparent. It will replace outdated taxes with modern models that promise to reduce fiscal complexity, facilitate compliance with legal obligations, and boost economic competitiveness.
The main changes include:
- Contribution on Goods and Services (CBS): This will replace PIS and Cofins, simplifying the collection of taxes on goods and services at the federal level.
- Tax on Goods and Services (IBS): It will unify the state-level ICMS and the municipal ISS, consolidating taxes into a single calculation base applicable to both states and municipalities.
- Selective Tax (IS): Introduced to replace part of the IPI tax, it will apply to specific products, such as tobacco and beverages, serving as a regulatory instrument.
The implementation will occur gradually until 2033, allowing companies and governments to adapt to the new model without significant operational disruptions.
Impacts of the Tax Reform on SAP Systems
The transition to the new tax system will bring operational and technological challenges for companies using SAP systems. One of the main concerns is the need to upgrade to the SAP S/4HANA solution, as support for SAP ECC will be discontinued in 2027.
SAP is ending support for ECC versions for several reasons, including the need to meet customer demands for the latest technological innovations and to offer more advanced features and functionalities available in newer versions like SAP S/4HANA, while also reducing operational costs.
SAP S/4HANA is equipped to meet the new tax requirements imposed by the reform, including the implementation of Split Payment and compliance with new taxes such as CBS and IBS.
With Split Payment, part of the payment will be automatically directed to the tax authorities—federal, state, or municipal—ensuring tax compliance. This mechanism creates a direct link between the tax document and the payment method used, promoting greater transparency and efficiency in tax collection.
Other business processes within SAP will also need to be adapted, especially tax calculation. Systems must be configured to correctly calculate the new taxes and comply with non-cumulative rules. Adjustments to existing layouts will be required to meet the new legal requirements, such as the creation of attributes related to business partners, products, and organizational structures.
The replacement of SAP GRC (Governance, Risk, and Compliance) with SAP DRC (Document and Reporting Compliance) is a crucial change to ensure tax compliance under the new tax reform. SAP DRC offers enhanced functionalities, including reports adapted to the new invoice formats and more efficient integrations. With SAP GRC support ending on January 31, 2025, companies should plan the migration to DRC as soon as possible, especially considering the reform takes effect on January 1, 2026.
Adaptation Strategies for SAP-Based Companies
To prepare for the Tax Reform, it is crucial to follow a clear and efficient action plan. Evaluating the impacted business processes, such as billing, procurement, and accounting, will ensure a smooth transition. Additionally, training teams for implementation is indispensable.
Engaging specialized consultancy can make a significant difference during the transition process. Companies like Meta provide support for SAP system migration and customization, helping businesses transition to the new tax model. The steps include environment assessment, impact analysis, necessary customizations, testing, and continuous monitoring.
Tax Reform Implementation Timeline: How to Update Your SAP Solutions by 2033
The implementation of the reform will be gradual, transitioning taxes such as ICMS, ISS, PIS, and Cofins to CBS and IBS. By 2033, the rates of the new taxes will be progressively adjusted, while the old taxes will be phased out or eliminated. This approach allows companies and governments to adapt to the new tax model without major operational disruptions.
The Tax Reform is a landmark that demands careful preparation, especially for companies using SAP. Updating systems like S/4HANA and DRC is not just a matter of tax compliance but also an opportunity to modernize processes, enhance competitiveness, and ensure long-term operational efficiency.
