Brazil’s proposed split payment prompts debate over business cash flow

Brazil’s tax reform includes a system called split payment, which separates tax from a sale and sends it to the government when the customer pays.

The system is expected to begin on an optional, phased basis in the second half of 2027, initially for business-to-business transactions.

General mandatory use is expected in 2028, after banks and payment providers have time to adapt.

Business representatives say the faster tax transfer could reduce the cash companies have available for day-to-day costs and push them to borrow.

The concern is that under the current system, tax money can remain in a company’s cash flow for a period before it is collected.

Finance Minister Dario Durigan argues that split payment would help curb tax evasion, while political figures have called for it to be dropped.

The government says it is willing to hear businesses’ concerns and discuss changes or timing, but has not said it will abandon the system.