Tax Reform: Impacts and Challenges for Individual Rural Producers Through the Dual VAT System

João Paulo Freitas Da Silva; Raissa Alvares De Matos Miranda

DOI: 10.22167/2675-6528-202603034

Article derived from a Final Course Work (TCC), with content based on the student’s original work and adapted to the editorial format of the E&S Magazine with the support of the ResumeAI tool, an artificial intelligence solution developed by the Pecege Institute for textual synthesis and organization.

Abstract

The study analyzed the possible impacts of the Brazilian Tax Reform on the Individual Rural Producer, comparing the current tax system and the Dual VAT model, composed of the CBS and the IBS. The research aimed to examine a specific interstate sale operation of 164 female cattle intended for slaughter, carried out by a producer in Goiás to a meatpacking plant in São Paulo. A qualitative, descriptive, explanatory, and applied approach was used, with documentary research based on fiscal, accounting, and operational documents. The ICMS effectively calculated in the current scenario and the projected baseline scenario of the Dual VAT were compared, adopting an estimated rate of 25.45% as a simulation premise. In the analyzed operation, the tax amount increased from R$ 71,425.42 in the current scenario to R$ 187,014.09 in the projected baseline scenario. It was concluded that, under the adopted conditions and premises, the Tax Reform tends to increase the tax burden of the operation. The result can serve as a reference for rural producers who carry out similar operations and are subject to equivalent tax and operational conditions, and should not be automatically applied to different situations or considered a definitive forecast.

Keywords: Agribusiness; Rural Activity; Tax Burden; Tax System.

1. Introduction

The Brazilian tax system is widely recognized for its high complexity, characterized by a fragmented structure, a multiplicity of taxes, and overlapping regulations. This scenario compromises the system’s transparency, neutrality, and predictability (Campos, 2022). The proliferation of special regimes, legal exceptions, and ancillary obligations increases legal uncertainty and raises compliance costs, making it difficult for taxpayers to correctly fulfill their tax obligations (Uchôa, 2022).

Furthermore, the normative autonomy of the federative entities, especially regarding the Tax on Operations related to the Circulation of Goods and on Interstate and Intermunicipal Transport and Communication Services (ICMS), contributes to the fragmentation of the system and the creation of economic distortions. Such distortions negatively impact the efficiency of productive activities and the business environment in the country (Carrazza, 2019). This complex scenario directly affects the agricultural sector, which plays a strategic role in the Brazilian economy.

The agribusiness is configured as one of the main drivers of national economic growth, influencing income generation, employment, and foreign exchange, so that the structure of its taxation directly impacts production costs and the sector’s competitiveness (Bacha, 2018). Studies by the Center for Advanced Studies in Applied Economics (Cepea) and the Confederation of Agriculture and Livestock of Brazil (CNA) indicate that, in 2025, the agribusiness Gross Domestic Product (GDP) should represent approximately 30% of the Brazilian Gross Domestic Product, driven, above all, by the agriculture and livestock segments. Such relevance reinforces the need for a careful analysis of the effects of fiscal policies on the sector.

With the enactment of Constitutional Amendment No. 132/2023 (Brazil, 2023), which established the replacement of the Social Integration Program (PIS), the Contribution for the Financing of Social Security (COFINS), the Tax on Industrialized Products (IPI), the Tax on Operations related to the Circulation of Goods and on Interstate and Intermunicipal Transportation and Communication Services (ICMS), and the Tax on Services of Any Nature (ISSQN) by the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS), in the dual Value Added Tax (VAT) model, the need for a prior and comparative analysis between the current system and the new tax structure intensifies.

The proposed change raises questions about its real effects on the Individual Rural Producer, especially regarding the possibility of generating benefits or new burdens, such as increased tax burden and ancillary obligations. In this context, in-depth study of tax systems proves fundamental to identify potential economic impacts on the agricultural sector, prevent situations of fiscal overload, and allow taxpayers to adopt planning and compliance strategies.

Anticipated knowledge of the normative and operational implications of the reform allows for greater legal certainty and preparation for potential future economic effects, requiring greater planning by taxpayers (Martins, 2019). The importance of the work of specialized professionals in the tax area is highlighted, especially that of the accountant, whose technical advice is essential for adequate adaptation to the new legal requirements.

Given the relevance of comparative analyses between the current tax system and the one proposed by the Tax Reform, the following research problem emerges: considering an interstate operation of cattle sales for slaughter, does the system proposed by the Tax Reform prove advantageous to the Individual Rural Producer from a tax perspective, when compared to the current system? The need to understand the impacts of the reform on the agricultural sector, which is vital for the national economy, justifies this study. Thus, the general objective of this study is to analyze the impacts of the Tax Reform on the Individual Rural Producer, in light of Constitutional Amendment No. 132/2023 (Brazil, 2023) and Complementary Law No. 214/2025 (Brazil, 2025), by comparing the current tax system and the dual Value Added Tax model, considering the effects on the tax burden, ancillary obligations, and economic effects of a specific interstate cattle sales operation for slaughter. It also seeks to evaluate the extent to which the results can serve as a reference for rural producers who carry out equivalent operations and are subject to similar tax and operational conditions, regardless of any corporate or family ties with the buyer.

2. Material and Methods

The present study was characterized as a qualitative research, predominantly descriptive and explanatory in nature, with an applied purpose, according to the classifications of Lakatos and Marconi (2017) and Gil (2017). The research sought to analyze the impacts of the Tax Reform on the Individual Rural Producer in the context of the implementation of the dual Value Added Tax (VAT), with the purpose of subsidizing the understanding of the problem and contributing to the proposition of practical solutions related to tax management and fiscal compliance.

The current tax system and the changes introduced by Constitutional Amendment No. 132/2023 (Brazil, 2023) and Complementary Law No. 214/2025 (Brazil, 2025) were described. The cause-and-effect relationships of these changes on the tax burden, ancillary obligations, and fiscal management of the rural taxpayer were explained, using documentary research based on primary and secondary sources.

The unit of analysis consisted of a specific interstate sale operation of 164 female cattle intended for slaughter. This operation was carried out by an Individual Rural Producer, located in the municipality of Itarumã, Goiás, to a purchasing slaughterhouse located in the municipality of Estrela d’Oeste, São Paulo. The analyzed rural producer was a partner in a family economic group and maintained a typical commercial relationship with the slaughterhouse, this being a circumstantial condition to the study and not the basis for the analysis.

Data collection was based on documentary research, using internal digital documents from the business organization and the rural producer, referring to the 2025 fiscal year. For Individual Rural Producers, Electronic Sales Invoices (nos. 192, 206, 207, and 208, issued in October 2025), supplementary value invoices, Animal Transit Guides (GTA), State Revenue Collection Forms (DARE ICMS), and Cattle Movement Statements from the Goiás Agency for Agricultural Defense (Agrodefesa) were analyzed.

For the acquiring frigorific, Electronic Tax Notes, slaughtering manifests, fiscal books of entry and calculation of the Tax on Operations related to the Circulation of Goods and on Services of Interstate and Intermunicipal Transport and Communication (ICMS), information extracted from the Public Digital Bookkeeping System (SPED), especially from the Digital Fiscal Bookkeeping of ICMS (EFD-ICMS), balance sheet, accounting statements, and payroll reports were examined.

The research development was structured in three complementary phases. Phase A, named Analysis of the Current Tax System, aimed to demonstrate the scenario of taxation applicable to the Individual Rural Producer in the current model. In this stage, the applicable taxes were identified and described, as well as their nature and economic impacts were analyzed in the case study, based on primary data extracted from fiscal, accounting, and operational documents.

Phase B, titled Simulations by the New Systematics (Dual VAT), consisted of carrying out tax simulations based on the model established by the Tax Reform. The application of the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS), which make up the taxes of the new consumption system, was considered. The calculations of the projected tax burden were carried out based on the standard rate projections released by the Special Secretariat for Tax Reform of the Ministry of Finance (SERT MF, 2023), adopting an estimated rate of 25.45% for simulation purposes.

Finally, Phase C, named Comparative Analysis, consisted of the comparison between the results obtained in Phases A and B. Differences related to the effective tax burden on the sale of female cattle intended for slaughter were examined, as well as the possible economic and operational effects for the Individual Rural Producer, based on the determined values. For organizational and analytical clarity, the data were consolidated, allowing visualization of the tax burden variation and critical analysis of the impacts of the transition between models.

The study was conducted based on real data, access to which was formally authorized through a Term of Agreement signed by the legal representatives of the analyzed entities. The data were treated with confidentiality and used exclusively for academic and scientific purposes, preserving the confidentiality of economic-financial information and the identity of those involved. No interviews, interventions, or direct data collection with human beings were conducted, which is why the study did not fall under the hypotheses of mandatory submission to the Research Ethics Committee, according to Resolution CNS No. 466/2012. The ethical principles of transparency, responsibility, and appropriate use of the obtained information were observed.

3. Results and Discussion

This section details the research findings, which aimed to analyze the impacts of the Tax Reform on Individual Farmers, comparing the current tax system with the dual Value Added Tax (VAT) model. Initially, the characteristics of the interstate sale of cattle for slaughter and the entities involved are presented, based on data extracted from fiscal, accounting, and operational documents. Subsequently, the taxation in the current scenario is analyzed, focusing on the Tax on Operations related to the Circulation of Goods and on Interstate and Intermunicipal Transport and Communication Services (ICMS), and the tax burden is simulated under the new dual VAT model, composed of the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS). Finally, the results are compared and discussed in light of the theoretical framework and the adopted premises.

To contextualize the analysis, the research was based on a real interstate sale operation of 164 female cattle, over 36 months of age, intended for slaughter. This operation was carried out by an individual Rural Producer located in Itarumã, Goiás, with a slaughterhouse situated in Estrela d’Oeste, São Paulo, as the buyer. The slaughterhouse, part of a family economic group, reported a total gross revenue of approximately R$ 3.3 billion in the fiscal year 2025, with an average of 3,000 direct jobs. The specific branch object of the study had a revenue of about R$ 2 billion, employing 2,000 collaborators in the same period, highlighting its significant economic relevance.

The rural property analyzed, also linked to the same family group, registered gross revenue of approximately R$ 8.5 million in 2025, with a movement of about 6,000 head of cattle. The data from the specific sale operation of the 164 cattle were consolidated from electronic exit invoices (R$ 567,310.00) and complementary value invoices (R$ 167,519.42), totaling an operation value of R$ 734,829.42. These values were fundamental for the calculation of the taxes levied in both scenarios, allowing for a precise comparison of the effective tax burden.

Analysis of the Current Tax System (Phase A)

In the current tax system, the analysis of the interstate sale of female cattle showed that taxation on consumption for the Individual Rural Producer is concentrated exclusively on ICMS. According to Federal Senate Resolution No. 22/1989 (Brazil, 1989), the interstate rate applicable to the exit of cattle from Goiás to São Paulo is 12% of the total operation value. This rate is a direct component of the calculation of the tax due, which is traditionally calculated “by inside”, meaning the tax amount is already embedded in the operation’s tax base, influencing the final price.

Additionally, the state legislation of Goiás, through the Normative Instruction of the Secretary of Finance’s Office (IN GSF) No. 673/2004 (Goiás, 2004), grants a presumed ICMS credit of 19% on the value of the tax due for operations with female cattle, when subject to a 12% rate. This tax benefit aims to reduce the tax burden and encourage the agricultural sector, reflecting a specific tax relief policy for this economic activity in the state of origin.

The application of the interstate rate of 12% on the total value of the operation (R$ 734,829.42) resulted in an interstate ICMS of R$ 88,179.53. After applying the presumptive credit of 19% on this amount, which corresponded to R$ 16,754.11, the ICMS effectively due on the operation was R$ 71,425.42. This amount represents the effective tax burden borne by the Individual Rural Producer under the current regime, demonstrating the importance of tax benefits in the composition of tax costs.

Regarding federal taxes, it was found that the Individual Rural Producer does not qualify as a contributor to the Program for Social Integration (PIS) and the Contribution for the Financing of Social Security (COFINS), as these contributions predominantly fall on the gross revenue of legal entities (Brazil, 1970; Brazil, 1991; Brazil, 2002; Brazil, 2003). Similarly, there is no incidence of the Tax on Industrialized Products (IPI), as the activity is restricted to primary production, without industrialization processes (Brazil, 2010).

At the municipal and district level, the Individual Rural Producer also does not qualify as a contributor to the Tax on Services of Any Nature (ISSQN), given that this tax applies to the provision of services (Brazil, 2003). Therefore, the analysis of consumption taxation in the current system, for the case studied, was limited to the incidence of ICMS, with other consumption taxes being inapplicable to the legal nature and activity of the rural producer in question. The total effective tax burden of the operation, considering only the ICMS after presumed credits, was 9.72% of the animal sales value.

Simulations by the New Systematics (Dual VAT) (Phase B)

The second phase of the research focused on simulating taxation under the dual Value Added Tax (VAT) model, as established by Constitutional Amendment No. 132/2023 (Brazil, 2023) and regulated by Complementary Law No. 214/2025 (Brazil, 2025). This new system foresees the replacement of several existing taxes by the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS), which will be levied non-cumulatively on goods and services.

For the simulation, the projected standard rate of 25.45% was adopted for the joint incidence of CBS and IBS. This premise was based on studies by the Special Secretariat for Tax Reform of the Ministry of Finance (SERT MF, 2023), which indicated a feasible scenario for the total rate, potentially varying up to 27% in a more conservative scenario. It is important to note that this rate is an estimate and was used exclusively for analytical and comparative purposes in this study, subject to future regulatory definitions.

Unlike ICMS, which is calculated “from within”, CBS and IBS, in the simulated model, were applied “from outside” on the transaction value. This means that the tax is added to the price of the good or service, without integrating its own tax base. This incidence methodology represents a significant structural change in price formation and tax burden transparency, directly impacting the final transaction value for the buyer and the taxpayer’s perception of the fiscal burden.

When applying the projected rate of 25.45% to the total operation value of R$ 734,829.42, the total amount of taxes calculated in the dual VAT scenario reached R$ 187,014.09. This amount corresponds to an effective tax burden of 25.45% on the sale of cattle intended for slaughter. This result demonstrates the logic of the new model, which seeks broad and uniform incidence on consumption, regardless of the condition of the Individual Rural Producer, eliminating the particularities and sectoral tax benefits existing in the current system.

Comparative Analysis and Discussion of Results (Phase C)

The comparison between the results obtained in the two scenarios revealed a significant increase in the tax burden for the Individual Rural Producer in the analyzed operation. In the current tax system, the total amount of taxes calculated was R$ 71,425.42, corresponding to an effective tax burden of 9.72%. In the simulated dual VAT scenario, the total projected tax amount was R$ 187,014.09, with an effective tax burden of 25.45%. This difference represents an increase of R$ 115,588.67 in the amount of taxes and a rise of 15.73 percentage points in the effective tax burden.

This increase in the tax burden can be attributed mainly to the replacement of a regime with presumed ICMS credit, which significantly reduced the tax burden in the current system, with a dual VAT model with a broad and uniform standard rate. The absence of specific tax benefits for the agricultural sector in the projected scenario, combined with the “outside” incidence of the new taxes, contributes to the increase in the operational tax cost. The transition from a fragmented system to a unified value-added tax, although seeking simplification and neutrality, may generate unfavorable impacts for sectors that currently benefit from special regimes.

The findings of this study dialogue with the literature that discusses the impacts of the implementation of value-added tax models. Appy (2019) highlights that sectors intensive in inputs and with a history of special regimes tend to experience a relative increase in the tax burden in the absence of adequate compensatory mechanisms, which includes relevant segments of agribusiness. The sale of cattle, which currently benefits from presumed ICMS credits, exemplifies this trend, where the elimination of such benefits results in a higher fiscal burden.

In line with this perspective, Schoueri and Zilveti (2020) emphasize that replacing sectoral tax benefits with broad consumption taxation can lead to a redistribution of the tax burden along the production chains. Less vertically integrated economic agents, such as individual Farmers, may feel greater pressure, as the ability to fully pass on the increase in tax costs along the chain may be limited, affecting their competitiveness and profit margins.

It is essential to emphasize that the results presented are conditioned by the specific premises of the simulation. The analyzed operation involved the sale of 164 female cattle, with specific documentation, an individual rural producer profile, and determined commercial conditions. Furthermore, the estimated rate of 25.45% for CBS and IBS is a projection and may be altered by future regulations. Therefore, the applicability of these findings stems from the equivalence of operational and tax conditions, and not from corporate identity or other factors not directly related to the operation.

The analysis cannot be automatically reproduced for other operations, states, products, acquirers, tax benefits, or legal regimes, as each context has its particularities that can significantly alter the effective tax burden. However, the study serves as a reference for individual rural producers who carry out similar operations and are subject to equivalent tax and operational conditions, regardless of corporate or family ties with the acquirer, offering an overview of the potential impacts of the reform.

Given the scenario of a potential increase in the tax burden and a change in the logic of tax incidence, the performance of professionals specialized in taxation, such as accountants, becomes even more crucial. Technical advice is essential for the correct interpretation of new legislation, compliance with ancillary obligations, scenario simulation, identification of lawful tax savings opportunities, and structuring tax planning strategies that mitigate risks and avoid fiscal overload, ensuring the economic sustainability of rural activities.

In summary, the research demonstrated that, for the specific operation of interstate sale of female cattle by an Individual Rural Producer, the transition from the current tax system to the dual VAT model, with the projected rate of 25.45%, tends to result in a substantial increase in the tax burden. This change, driven by the elimination of tax benefits and the new incidence methodology, requires rural producers to undertake in-depth tax planning and rigorous adaptation to the new legal and operational requirements, with the support of specialized professionals, to mitigate economic impacts and preserve the viability of their activities.

4. Conclusion

The study analyzed the impacts of the Brazilian Tax Reform on the Individual Rural Producer, by comparing the current tax system with the dual Value Added Tax (VAT) model, composed of the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS), in a specific interstate sale operation of female cattle for slaughter. It was found that, in the current scenario, the effective tax burden on the operation was R$ 71,425.42, corresponding to 9.72% of the sale value, benefited by a presumed ICMS credit. In contrast, in the simulation of the dual VAT model, with a projected rate of 25.45%, the amount of taxes reached R$ 187,014.09, representing an effective tax burden of 25.45%. This difference of R$ 115,588.67 and the increase of 15.73 percentage points in the effective tax burden showed that, under the adopted conditions and assumptions, the Tax Reform tends to substantially increase the fiscal burden for the Individual Rural Producer in the analyzed operation, mainly due to the replacement of a regime with tax benefits by a broader and more uniform taxation.

The main contribution of this study lies in offering an overview of the potential impacts of the Tax Reform for individual rural producers who carry out similar interstate cattle sales operations, under equivalent tax and operational conditions, regardless of corporate or family ties. However, it is essential to recognize that the results are conditioned by the specific premises of the simulation, such as the projected rate of 25.45% for CBS and IBS and the particularities of the analyzed operation, and are not automatically applicable to different contexts. The transition to the new system requires greater documentary organization, operational control, and in-depth tax planning, adapted to the size, legal nature, location, type of operation, and commercial structure of each producer. Future research is recommended to compare different profiles of rural producers and production chains, monitor the evolution of the Tax Reform’s regulation, and value the work of specialized professionals, such as accountants, to mitigate risks and ensure the economic sustainability of rural activities.

Bibliographic References

Bacha, C.J.C. 2018. Economia e Política Agrícola no Brasil. Alínea, Campinas, SP, Brasil.

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Brasil. 2023. Emenda Constitucional nº 132, de 20 de dezembro de 2023. Altera o sistema tributário nacional e dá outras providências. Diário Oficial da União. seção 1, Brasília, DF, 21 dez. 2023. Disponível em: <https://www.planalto.gov.br/ccivil_03/constituicao/emendas/emc/emc132.htm>. Acesso em: 25 out. 2025.

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Carrazza, R.A. 2019. Curso de direito constitucional tributário. 31ed. Malheiros, São Paulo, SP, Brasil.

Martins, I.G.S. 2019. O sistema tributário na constituição. 14ed. Saraiva, São Paulo, SP, Brasil.

Uchôa, M. 2022. Complexidade Tributária, Ambiente de negócios e transparência: uma análise para países selecionados. Dialética, São Paulo, SP, Brasil.

Article originating from the Final Course Work of the Specialization in Tax Management of the MBA USP/Esalq

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