SMALL BIG 4

The City of São Paulo,on August 15,2025,published version 3.2 of its service e-invoice (Nota Fiscal Paulistana – NFS-e) user manual.

The update reflects adjustments to harmonize the local NFS-e layout with Brazil's recent tax reform,which introduces two new indirect taxes: the Contribuição sobre Bens e Serviços (CBS) and the Imposto sobre Bens e Serviços (IBS). Beginning January 1,2026,CBS and IBS will replace several indirect taxes in Brazil,including the municipal service tax ISSQN. As a result,São Paulo's updated NFS-e layout will become mandatory on the same date.

Companies may already begin configuring their ERP and tax solutions to issue XMLs under the new format. However,production systems may continue using the current layout until December 31,2025. Updates to São Paulo's web services are anticipated in the coming months,ahead of the January 1,2026,enforcement date.

Finally,since this update applies exclusively to São Paulo's NFS-e,other municipalities are expected to announce similar adjustments to their XML layouts and technical manuals.

Source: KPMG Tax Newsflash

The Brazilian Institute of Responsible Gaming (IBJR) has once again voiced its opposition to the proposed tax hike on online gambling included in Provisional Measure (MP) 1.303,now under review in the National Congress.

According to the institute,the measure undermines legally licensed operators,creates legal uncertainty,and may even harm government revenue.

IBJR stresses that companies already operating under regulation have made substantial investments. Each licensed operator paid roughly BRL 30 million (USD 5.56 million) for a five-year license,resulting in more than BRL 2.3 billion (USD 426 million) in government revenue. Such commitments,the institute notes,underscore the importance of maintaining a stable regulatory framework to foster market growth and sustain investor confidence.

The proposed change would lift the contribution rate from 12% to 18%—a 50% increase just seven months after the regulation took effect. IBJR representatives argue that this sudden rise undermines trust in the regulatory system,destabilizes legal operations,and penalizes compliant operators.

The institute further contends that raising taxes does not address structural weaknesses in the system and is ineffective in curbing the illegal gambling market,which still accounts for nearly half of all betting activity in Brazil.

The institute maintains that long-term regulatory stability is essential to attract and retain both domestic and international operators,warning that abrupt policy shifts risk discouraging future investment in the sector.

Finally,IBJR emphasizes that increasing taxes on legal operators will not resolve the country's revenue challenges. Instead,the institute calls for stronger enforcement against illegal operators while preserving a consumer-oriented regulatory structure that promotes responsible gambling. By fostering predictability in tax and licensing regimes,Brazil can support the expansion of its regulated market while simultaneously reducing illegal activity.

Source: iGaming Today

Starting January 1,2026,Brazil will raise the withholding tax on Interest on Net Equity (INE) distributions from 15% to 20%.

INE,a uniquely Brazilian mechanism,allows companies to remunerate shareholders with a deductible payment that reduces corporate taxable income. For years,INE has been an important tool in corporate finance,balancing shareholder returns with tax efficiency.

The 5-percentage-point increase reflects the government's effort to boost tax revenues amid broader fiscal reforms. Companies that rely heavily on INE to optimize dividend policies will see a reduced tax advantage. Foreign investors,in particular,may face a higher effective tax burden on Brazilian equity investments. This change could shift preferences from INE distributions toward traditional dividends.

The measure was included in the government's recent tax package to simplify and broaden the tax base. Corporate treasuries should revisit capital distribution strategies before the new rate takes effect. Modeling scenarios now will help identify the optimal mix between INE,dividends,and reinvestments. Investors should also review their expected after-tax returns under the revised regime.

The increase aligns with other global trends of tightening corporate tax incentives. Ultimately,the new INE tax rate is a clear signal: Brazil seeks more revenue while rebalancing shareholder taxation.

Source: EY Global Tax News

While some US states are restricting data center investments due to energy issues,Brazil offers 80-84% renewable energy capacity with surplus available for new projects.

This creates a value proposition beyond just tax incentives. Data center operators can access reliable,clean power without the regulatory hurdles they face domestically. US data centers often struggle with grid capacity constraints and face increasing scrutiny over energy consumption,while Brazil actively courts these energy-intensive operations.

"Some U.S. states are restricting data center investment due to energy issues,while we have surplus energy"

- Brazilian Official

Brazil's approach demonstrates how countries increasingly use strategic economic policies to navigate complex international relationships. The Redata program directly responds to the US imposing 50%import tariffs on Brazilian goods,with officials stating the incentives aim to "build goodwill with big tech firms and also more broadly with the United States". This strategy shows Brazil pivoting from confrontation to collaboration. The country even dropped plans to tax big tech firms specifically to avoid escalating trade tensions.

By targeting a sector where American companies have clear interests—data center expansion—Brazil creates leverage for broader diplomatic negotiations while potentially securing billions in foreign investment.

Source: Tech in Asia

A comprehensive overview of the major tax changes affecting Brazil in 2025-2026.