Brazil’s Tax Reform: why employers should review their collective bargaining agreements now

Brazil's tax reform will gradually replace the current indirect taxes with two new value-added taxes, the CBS and the IBS, from 1 January 2027.

Employers will be able to recover, as tax credits, part of these taxes embedded in the cost of private healthcare provided as part of their employees’ compensation packages.

However, employers may claim the credit only if the healthcare is provided under a collective bargaining agreement. Brazilian law recognizes two types: a sector-wide agreement negotiated between unions (CCT) and a company-level agreement negotiated with the union (ACT).

If the employer grants the healthcare solely under an internal company policy, no credit is allowed on employee benefits.

We therefore recommend that companies operating in Brazil review their applicable collective agreements now. The review should confirm that the agreements cover the healthcare the company actually provides. Companies should also map the calendar of upcoming union negotiations. Each professional category negotiates on its own annual base date. A company that postpones the issue may go through an entire bargaining cycle without the required provision and, as a result, lose the right to claim the credit.

Companies should also assess the employment law implications of including the benefit in a collective agreement. Once a collective clause provides for the benefit, its terms become binding on the employment relationship. For this reason, we recommend defining the coverage, eligible beneficiaries, cost-sharing and term of such compensation with substantial care.

We also recommend calculating an estimate of the expected tax benefit before negotiations begin. The credit does not necessarily match the price paid for the healthcare, because it is capped at the taxes owed by the healthcare provider under its special tax regime.

Our Brazilian member firm, Gaia Silva Gaede has been addressing this matter through an integrated approach involving its tax and labor and employment practices.

If you would like to understand how these changes apply to your organisation or personal situation, please get in touch with your local CELIA Alliance contact.