How the new tax logic reshapes costs, margins, and investment decisions

When I speak with investors about Brazil’s Tax Reform, I am very clear: this is not merely a tax update. It is a structural change in how prices are formed, costs are managed, and margins are preserved. Starting in 2026, Brazil enters a new economic logic, and understanding this shift before investing is no longer optional. It is strategic.

Under the new system, taxes are no longer embedded in prices. They are shown separately, calculated outside the price itself. This single change transforms financial analysis. What was once hidden inside costs becomes visible, measurable, and manageable. For investors, this means greater transparency, better cost control, and more accurate return projections.

This transformation stems from Brazil’s Tax Reform enacted by Constitutional Amendment No. 132 of 2023, which introduces the Brazilian dual VAT model. At the federal level, the Contribution on Goods and Services applies. At the state and municipal level, the Tax on Goods and Services is jointly administered. In addition, a Selective Tax applies to specific products. The purpose is not to reduce the overall tax burden, but to eliminate distortions, simplify the business environment, and align Brazil with international consumption tax standards, following guidelines issued by the Federal Revenue Service and local tax authorities.

For investors, the impact is immediate. Brazil’s previous system relied heavily on taxes calculated inside the price itself. This inflated prices, distorted margins, and concealed real operating costs. With the reform, taxes are calculated outside the price, allowing a clear separation between economic cost, price, and tax effect. This reshapes valuation, pricing strategies, and cost management, all critical elements for investment decisions.

In industry and manufacturing, the reform brings structural improvements. The new VAT ensures full non cumulative taxation, granting full financial credits on inputs, services, and capital goods. Exports are fully tax free, with credit refunds improving cash flow and international competitiveness. For foreign capital, this means fewer hidden costs and more predictable margins. In specific sectors such as energy and fuels, the Selective Tax requires strict cost control and contract management.

In retail and commerce, the change is immediate in pricing strategy. With taxes clearly disclosed, margins become transparent. Efficiency becomes visible. For investors, scale, logistics, inventory turnover, and operational discipline replace tax driven advantages. Transparent taxation rewards efficient operators and penalizes inefficient structures.

In services, impacts vary by essentiality. Healthcare, education, public transportation, and selected technology segments benefit from differentiated treatment. Non essential services may face higher effective tax pressure, requiring deep reviews of pricing models, corporate structures, and contracts. For investors, sector analysis becomes decisive.

Agribusiness remains a strategic pillar. Reduced rates and full credit along the supply chain remain in place, while unified rules reduce litigation and regional uncertainty. For investors focused on commodities, food security, and sustainability, Brazil remains a strategic production platform, now with clearer cost visibility.

In foreign trade, imports benefit from objective and predictable credit rules, while exports remain fully tax exempt. Credit recovery predictability reduces financial costs and improves long term project feasibility. Special customs regimes and trading structures, however, must be reassessed under the new VAT logic.

Another decisive shift is the gradual end of fiscal competition between states and municipalities. As ICMS and ISS are replaced by IBS, location decisions move away from artificial tax incentives and toward real economic factors such as logistics, infrastructure, and consumer markets. This reduces regulatory risk and improves investment quality.

Between 2026 and 2032, both systems will coexist, creating the most complex operational phase. Investments structured without considering this transition risk margin erosion, contractual imbalance, and loss of credits. Those who understand early that taxes no longer form part of the price, but are disclosed separately, gain planning capacity and competitive advantage.

In practice, the new environment demands technical repricing, strict cost control, contracts aligned with the new logic, valuation based on cleaner margins, and integrated tax governance. Brazil no longer hides inefficiencies. It exposes them.

For investors, this represents a more technical, predictable, and globally aligned market. Investing in Brazil becomes less about improvisation and more about structure, strategy, and execution.

Priscila Campos
CEO, Grupo International