The President of the Republic sanctioned, last Thursday (17), the Complementary Law of Tax Reform (PLP nº 68/2024), which has now become Complementary Law 214/2025. The text was approved with 15 presidential vetoes, but none of them affected the articles related to the taxation of electricity.
“Today is a day to thank the deputies and senators, the rapporteurs who participated in the Chamber and the Senate, because what has been proven today is that anyone who understands history and politics knows that it is only possible to approve something of this magnitude in an authoritarian regime,” declared Lula during the signing ceremony of the text.
Tax Reform, which has been discussed for decades, aims to simplify tax collection in Brazil. The main changes to the tax system include:
- Replacement of PIS/Cofins by CBS (Contribution on Goods and Services): Under the jurisdiction of the Union, the new tax will be levied on transactions involving material and immaterial goods and services.
- Replacement of ICMS/ISS by IBS (Tax on Goods and Services): The IBS is the responsibility of states and municipalities and will also apply to goods and services.
- Replacement of IPI by IS (Selective Tax): Federal tax that will be applied to products and services considered harmful to health and the environment, such as cigarettes and fossil fuels.
The transition period will begin in 2026 and end in 2033. In 2025, current taxes will remain unchanged. In 2027, PIS/Cofins will be eliminated, and between 2029 and 2033, ICMS and ISS will no longer be charged.
“Brazil will start to change in 2027 and I would say that many companies that doubted the possibility of this reform are already starting to look at Brazil more seriously. It won’t be noticeable tomorrow or the day after, but I’m sure that this is the greatest economic legacy that you [President Lula] will deliver to the Brazilian people,” said Finance Minister Fernando Haddad.
Taxation in Distributed Generation
Article 28, regarding the taxation of distributed generation, was maintained without changes. Thus, energy generated and compensated by consumers under the microgeneration (up to 75 kW) and minigeneration (between 75 kW and 1 MW) regime will continue to be exempt from IBS and CBS.
However, the exemption does not apply to costs such as:
- Availability cost,
- Reactive energy,
- Power demand,
- Charges for connection and use of the distribution system,
- Tariff components not associated with the cost of energy, among other amounts charged by the distributor.
According to Einar Tribuci, a lawyer specializing in electric power and tax law, distributed generation projects with power exceeding 1 MW will be subject to the two new taxes, the estimated tax burden of which is approximately 28%. This percentage is higher than the ICMS amount currently paid by entrepreneurs, which could negatively impact the financial return on these investments. In light of this, it is likely that there will be legal action involving the collection of these taxes.
“I would like to make a provocation here: although the Complementary Law introduced the exemption for distributed generation, at least preserving it for projects of up to 1 MW with the same owner, there is an important negative point. Unfortunately, Congress did not extend this benefit to other types of DG. The fact is that tax legislation has not kept up with the evolution of regulation in the sector,” said the lawyer.
“With the absence of exemption from CBS and IBS for shared distributed generation in the Complementary Law, the motivation of entrepreneurs to seek judicialization grows even more”, he added.
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Benefits for low-income families
The return of 100% of CBS and 20% of IBS on energy, water, gas and telecommunications bills for low-income families was also established, a measure that became known as cashback.
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