Tax reform: split payment threatens companies’ cash flow with new charge

The new tax collection mechanism, known as split payment, provided for in the Brazilian tax reform, is generating apprehension among companies. The measure, which should have its first optional stage in operations between companies from 2027, with tests already underway in 2026, proposes the automatic withholding of taxes at the time of sale, even before the money reaches the seller’s cash register. This profound change in financial flow raises discussions about business working capital.

How the new tax collection system works

The innovation of split payment lies in the immediate separation of amounts relating to the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS) during the sales transaction. Currently, in most transactions, the full value of the sale is received by the seller, who only then, weeks later, collects the taxes due. During this period, the money remains in the company’s cash flow, serving as essential working capital to cover operational expenses, such as salaries and payments to suppliers. With the new rule, the tax portion will be sent directly to the government, and only the remaining amount will reach the company’s account, eliminating this financial “slack”.

Companies already under pressure may feel the effects of change more

The impact of automatic retention is particularly concerning for businesses with longer financial cycles or thin profit margins. Renato Nunes, partner in the tax area at Machado Nunes Advogados, explains that, although the split payment does not increase the tax burden, it anticipates the disbursement of an amount that would be due anyway, which can worsen the taxpayer’s financial result. Companies that depend on this liquidity to finance inventories and other daily expenses may be forced to seek their own resources or resort to bank loans, increasing operating costs and, potentially, consumer prices.

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The Federation of Commerce of Goods, Services and Tourism of the State of São Paulo (FecomercioSP) expresses that the new model could intensify the pressure on companies already in difficulty. Fabio Pina, economic advisor at FecomercioSP, argues that the objectives of combating tax evasion and unfair competition could be achieved through more targeted mechanisms that have less impact on the financial health of commerce in general.

Debates about the extent of the measure and international comparisons

The Lula government’s economic team defended split payment as an effective tool to reduce tax evasion in Brazil. However, the National Confederation of Commerce in Goods, Services and Tourism (CNC) questions the broad application of the mechanism, highlighting that in similar international experiences, the measure is often voluntary or restricted to sectors with a greater risk of fraud. Gilberto Alvarenga, tax consultant at CNC, considers that most of the negative impacts will probably fall on:

• Companies with tighter profit margins.
• Businesses with a high volume of operations between companies (B2B).
• Companies that have elongated financial cycles.

The lack of a clear explanation from the Ministry of Finance about why the Brazilian model appears to be more comprehensive than other international models, which are more cautious, increases uncertainty about the real effects of implementation.

Simples Nacional and operational challenges of tax reform

Companies covered by Simples Nacional will generally be exempt from automatic tax withholding. However, FecomercioSP warns that the competitiveness of these companies may be affected. Tax credits generated for buyers who purchase products from Simples Nacional suppliers may be lower than those offered by regular regime suppliers, creating an imbalance in the value chain. The system will also have to adapt to a variety of complex business situations:

• When purchasing in installments, the tax will be separated depending on the payment of each installment.
• In cases of cancellations or returns, the tax refund is expected to occur within three business days.
• For chargeback situations, when the customer disputes the operation, the additional rules for daily processing are still being defined.

Federal bodies speak out about financial projections

The Ministry of Finance informed that withholding via split payment will be a complement to existing tax measures and that, in most transactions, it will only reach the remaining balance after using tax credits. The ministry states that there is “no technical basis to predict a worsening of liquidity”, suggesting that other changes in the reform tend to favor companies’ cash flow. Despite this position, the ministry did not detail the reason for the model’s wider application in Brazil compared to international experiences.

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The Federal Revenue, in turn, announced that quantitative studies on the possible effects of split payment have not yet been released and there is no set date for their presentation. This lack of concrete and detailed data from tax authorities adds a layer of concern for the business sector, which seeks predictability in a scenario of major tax changes.