Business · Companies · 1 day ago
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.
Brazil’s proposed split payment system would automatically transfer tax to the government when a transaction is paid.
Critics say the faster tax collection could reduce businesses’ working capital and push them to seek bank loans.
Supporters say the system would help curb tax evasion and is needed for the new value-added tax model.
The system is planned to begin optionally and in phases in the second half of 2027, initially for business-to-business transactions.
General mandatory use is expected in 2028, after a delay to allow financial institutions time to adapt.
- Who
- Business representatives and Flávio Bolsonaro’s campaign have criticized the plan; Finance Minister Dario Durigan and reform architect Luiz Carlos Hauly have defended it.
- What
- Brazil’s proposed split payment would separate and transfer tax to the government automatically when a transaction is paid.
- When
- Optional phased use is planned for the second half of 2027; general mandatory use is expected in 2028.
- Where
- Brazil.
- Why
- Critics say it could reduce companies’ working capital. Supporters say it could reduce tax evasion and enable the new value-added tax credit model.
Business and plan critics
Government supporters and reform advocates
Effect on business cash flow
Business and plan critics
The system could reduce working capital by transferring tax at the time of payment and force firms to seek bank credit.
Government supporters and reform advocates
The system is a necessary part of the new value-added tax model and would help close loopholes used for tax evasion.
Whether to keep the system
Business and plan critics
Flávio Bolsonaro’s campaign has called for ending the instrument.
Government supporters and reform advocates
Dario Durigan defended its anti-fraud purpose, while saying the government was open to hearing businesses and discussing adjustments and timing.
The split payment mechanism was provided for in law.
Daniella Marques said a government led by Flávio Bolsonaro would end the instrument.
Flávio Bolsonaro again called for ending split payment, while Luiz Carlos Hauly defended its role in the new value-added tax.
Optional phased use is planned to begin, initially for business-to-business transactions.
General mandatory use is expected after a delay for financial institutions and other payment providers to adapt.
- Planned start
- Second half of 2027
- Initial scope
- Business-to-business transactions
- Expected general mandatory use
- 2028
- Current tax payment timing
- Tax can remain in company cash for around 30 to 90 days before assessment and collection.
- Selic rate cited
- 13.75% a year
What people are saying
Today companies have 15 to 30 days between sale and collection, with monthly and quarterly assessments and few withholdings at source.
suffocate the working capital of small businesses
opposing the advancement of split payment is to favor those who commit fraud
makes working capital for businesses unviable
Sources
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