The Tax Reform — established by Constitutional Amendment 132 and regulated, among other acts, by Supplementary Law 214 — alters core assumptions regarding pricing, tax pass-through, and risk allocation in business contracts.
The creation of the CBS (Contribution on Goods and Services) and the IBS (Tax on Goods and Services), under a dual VAT model, requires a review of current contracts — especially long-term ones — and the inclusion of specific clauses in new instruments. This is essential to preserve economic-financial balance, mitigate litigation, and reinforce legal certainty.
Structural Points of the Tax Reform Relevant to Contracts:
-
Gradual replacement of PIS, Cofins, ICMS, and ISS by the CBS (federal) and IBS (state/municipal), forming a dual VAT model with “exclusive of tax” (tax-on-top) pricing;
-
Shift in taxation logic (origin → destination), with an expansion of the non-cumulative principle and the scope of tax credits, impacting the effective cost of operations, margins, and cash flow;
-
Phasing out of tax exemptions and the potential reconfiguration of supply chains;
-
Creation of the Selective Tax (IS) on goods and services harmful to health or the environment, in addition to differentiated regimes and prolonged transition rules, with potential tax burden variations over time.
These structural elements make a technical review of contractual clauses from a tax perspective indispensable.
The new formatting of tax clauses and amendments to Power Purchase Agreements (PPAs) have been discussed to address all these changes. An example of this is the amendment to the standard energy purchase and sale contract proposed by the Balcão Brasileiro de Comercialização de Energia (“BBCE”).
Despite the extensive detail provided in the four proposed pages, at the end of the day, a technical analysis of the actual effects related to the extinction of taxes (such as PIS and COFINS) and the entire transition phase (affecting CBS, IBS, and ICMS) is necessary. This ensures that the renegotiated “Price” truly preserves the economic-financial balance, preventing either the seller or the buyer from benefiting from a tax legislative change that should be commercially neutral.
The challenge lies in the complexity of the topic, which will generate significant debate. Not all parties possess the technical knowledge required to calculate these effects. Furthermore, there is a need for transparency, particularly from the seller, regarding their tax burden and the actual net price of the energy traded.
Moreover, “Clause Three – Price” of the aforementioned BBCE amendment provides an opportunity to alter previous commercial conditions, which could disadvantage the unwary. The price renewal assumes that the parties have analyzed and renegotiated the net value of the energy within the context of the tax reform, with the new agreement prevailing (pacta sunt servanda).
The team at Tribuci e Fonseca Advogados possesses proven expertise and is available to assist clients in mapping and reviewing current contracts, as well as drafting new instruments tailored to the new Brazilian tax system.