Brazil’s tax reform is beginning to transform the way goods and services are taxed in the country. Constitutional Amendment No. 132, enacted in December 2023, laid the foundations for replacing consumption taxes with a new system, introducing the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS). 

The change was regulated primarily by Complementary Law No. 214/2025, which defined how the new taxes would operate and established specific provisions for different types of taxpayers, including condominiums. 

For condominium managers and management companies, understanding these changes is important for organising financial management, reviewing procedures and identifying situations that may require accounting or tax adjustments. This does not mean, however, that all condominiums will start paying the new taxes on condominium fees. The legislation establishes different treatments depending on the nature of the revenue and the condominium’s tax status. 

What is tax reform and why was it introduced? 

The consumption tax reform aims to reorganise the taxation of goods and services in Brazil. The current system comprises federal, state and municipal taxes, with different rules and procedures. The proposal is to simplify this structure through a value-added tax model, with greater integration between tax authorities. 

The CBS will fall under federal jurisdiction, while the IBS will be shared between states, municipalities and the Federal District. The two taxes will gradually replace PIS, Cofins, ICMS and ISS, among others. The Selective Tax has also been introduced, but its application relates to goods and services specified by law, taking into account criteria such as harmful effects on health or the environment. 

The legislation provides for the new system to follow principles such as simplicity, transparency, tax fairness and co-operation. Implementation will, however, be gradual, to allow businesses, governments and taxpayers to adapt to the new rules. 

For the condominium sector, the key point is that the reform is not limited to traditional businesses. Complementary Law No. 214/2025 expressly includes condominiums among the entities that may be considered suppliers for IBS and CBS purposes. This does not mean that condominium fees will automatically be taxed, but it does make it necessary to assess the transactions carried out by each development. 

Will condominiums have to pay IBS and CBS on condominium fees? 

The answer depends on the condominium’s tax status and the composition of its revenue. 

The legislation allows a condominium to opt into the regular IBS and CBS regime. If it does so, the new taxes will apply to all fees and other amounts charged to unit owners and third parties, in accordance with the rules set out in the law. 

If the condominium does not opt into the regular regime, specific treatment applies. Where fees and other amounts charged to unit owners account for less than 80% of total revenue, the condominium is liable for IBS and CBS on the transactions in goods and services it carries out, under the legislation. In this situation, it may claim tax credits in proportion to the revenue arising from taxable transactions. 

The 80% threshold is an important criterion, but it should not be interpreted in isolation. It is necessary to understand which revenue is included in the calculation, which transactions are taxable and how the legislation treats each situation. The analysis should consider the condominium’s revenue as a whole, rather than just the monthly fee paid by residents. 

It is therefore incorrect to say that the reform creates a new automatic charge on every condominium fee. Nor is it safe to conclude that a condominium falls entirely outside the scope of the new taxes simply because it is not operated for profit. 

Condominium managers and management companies are advised to ask their accountants for an individual assessment, especially where the development receives payments from third parties or carries out activities beyond sharing common expenses. 

Which revenue streams and transactions require attention? 

In addition to residents’ ordinary and extraordinary contributions, some condominiums may earn revenue from the use of areas or the provision of services. Each situation needs to be analysed according to its legal nature and the reform’s rules. 

Examples requiring assessment include: 

• Letting space for aerials, equipment or advertising. 

• Granting the use of common areas for events or commercial activities in return for payment. 

• Revenue from third parties’ use of spaces. 

• Transactions involving equipment or services made available for a fee. 

• Extraordinary revenue that does not simply represent the sharing of common expenses. 

These examples do not mean that all such transactions will necessarily be taxed. Tax liability depends on the type of supply, whether consideration is provided, the condominium’s tax status and the conditions set out in the legislation. 

Complementary Law No. 214/2025 establishes that, as a general rule, IBS and CBS apply to transactions involving goods or services supplied for consideration. Identifying the nature of each revenue stream is therefore an important step towards understanding the applicable tax treatment. 

It is also necessary to distinguish the condominium’s revenue from amounts received by the management company on behalf of third parties. The contract and the way the transaction is carried out may influence the tax analysis. 

How might the reform affect financial management? 

The reform’s impact on the condominium budget will not necessarily be the same for every development. Condominiums that receive only residents’ contributions may be in a different position from those that also carry out commercial transactions or earn revenue from third parties. 

The composition of expenditure also requires attention. Outsourced services, maintenance, cleaning, security, building work and contracted supplies may be affected by the transition to the new tax system. The way suppliers pay taxes and the scope for claiming tax credits may influence the actual costs of contracts. 

This does not justify a general assertion that condominium services will become more or less expensive. The effect will depend on the sector, the supplier, the contract and the rules applicable to each transaction. 

For condominium managers, the most prudent approach is to monitor changes in costs and avoid projections based solely on general estimates of tax rates. The reform provides for transitional mechanisms and specific regimes, so the analysis should take account of the rules in force at each stage. 

What changes for condominium management companies? 

Management companies play an important role in organising the information needed to assess the reform’s effects. They can support condominium managers in identifying revenue streams, organising contracts and communicating with accountants. 

One of the first steps is to check whether financial and accounting systems can adequately separate residents’ contributions from other revenue. This distinction helps in understanding the composition of total revenue and assessing the 80% criterion set out in the legislation. 

It is also advisable to review supplier registration and documentation procedures, as well as to monitor changes to electronic tax documents. The reform provides for the integration of information between tax authorities and establishes documentation requirements for taxpayers subject to the new system. 

The management company does not replace the condominium’s accounting or legal advisers. Its role is to help ensure that data is organised, contracts can be located and decisions are based on reliable information. 

How should condominium managers and management companies prepare? 

Preparation can begin before any actual change to condominium fees. The first step is to map revenue and expenditure, identifying transactions that may require a tax assessment. 

Next, it is worth gathering service contracts, tenancy agreements and agreements granting the use of spaces, together with accounting documents that help explain the composition of the condominium’s revenue. With this information, the accountants can assess its tax status and indicate whether adjustments are needed. 

It is also important to follow official guidance on ancillary tax obligations, tax documents and transitional procedures. As regulations and technical measures may be updated, decisions based on outdated information may not reflect the rules applicable at the time. 

Finally, communication with residents should be clear. If an assessment indicates potential financial impacts, the condominium manager should explain which factors were considered, which changes are actually necessary and which issues still depend on further regulation or professional analysis. 

How NewSun’s clean energy subscription helps simplify management 

Among the initiatives to make condominium management more straightforward, NewSun’s clean energy subscription stands out by enabling condominiums to progress on their environmental journey without the need for building work, complex installations or equipment purchases. 

The model allows the condominium to participate in a solution based on renewable sources while maintaining its normal supply from the electricity distributor. There is no need to install solar panels, carry out structural alterations or take on responsibilities associated with maintaining its own equipment. 

Another significant benefit relates to predictability. In a context where the Force of Unpredictability constantly affects operating costs, solutions that help organise and plan energy expenditure more effectively take on strategic importance for condominium management. 

Thus, even condominiums that are not yet in a position to establish a vegetable garden or a composting unit can begin their sustainability journey through practical, accessible actions aligned with current market demands. 

What is the timetable for tax reform? 

The reform is being implemented gradually. The year 2026 marks the start of the IBS and CBS testing phase, with rates set out in the legislation and obligations relating to the adaptation of systems and tax documents. 

A new stage begins in 2027, with the collection of CBS and the abolition of the federal taxes it replaces, subject to the conditions set out in the legislation. The transition from ICMS and ISS to IBS will take place gradually between 2029 and 2032. The transition is scheduled to be completed in 2033. 

For condominiums, this means that preparation should not focus solely on a single date. Monitoring the rules, organising records and assessing transactions need to take place throughout the transition period. 

The safest approach is to follow announcements from Brazil’s Federal Revenue Service, the IBS Management Committee and the bodies responsible for regulation. Operational deadlines and procedures may be detailed in specific measures, which should be considered alongside the main legislation. 

Tax reform does not, in itself, bring about an automatic increase in condominium fees. Its effects will depend on each development’s circumstances, the revenue it earns and the way it manages contracts and expenditure. With information, organised accounting and professional support, condominium managers and management companies will be able to assess the changes with greater confidence and prepare condominiums for the transition.