In an interview with Exame, our partner Pedro Bresciani discussed the effects of split payment—a mechanism under the tax reform that automatically withholds the IBS and CBS at the time of payment—on companies’ cash flow and contracts.

The collection of the CBS is still scheduled to begin on January 1, 2027, but the split payment system will be rolled out gradually and on an optional basis, and is not expected to become mandatory for business-to-business transactions until 2028. The postponement does not eliminate the need for preparation, since the end of the time lag between receiving payment for a sale and paying the tax—which many companies use as working capital—will have an immediate impact on cash flow.

Pedro points out that the timing of the sale will now influence the amount paid. “It makes a difference whether you make a sale on the 20th or the 29th, because on the 29th you may have more credits and will pay less,” he explains. He also notes that the split represents “a delegation of oversight authority” to the financial system and that any disputes may drag on, as demonstrated by the ICMS tax substitution system. “The legislation sounds great, but in practice, it took 20 years for the Federal Supreme Court to rule that you are entitled to a refund of the overcharged amount,” he says.

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