IBS and CBS in the ICMS and ISS tax base: the controversy that could become the next tax 'case of the century'

A new chapter of legal uncertainty in the Tax Reform transition

While the technical timeline of the Consumption Tax Reform keeps moving forward in electronic invoices, a parallel legal discussion has emerged with the potential for direct financial impact on the final price of products and services starting in 2027: should the IBS and CBS be included in the calculation basis of ICMS and ISS, the very taxes they are replacing?

What is under discussion

The coexistence of IBS and CBS with ISS and ICMS, during the transition of the consumption tax reform, has given rise to claims seeking to include the amounts of the new taxes in the calculation bases of the taxes that will be progressively replaced. This is not an academic matter: in 2027 and 2028, IBS will be charged at state and municipal rates of 0.05% each, while CBS will replace PIS and Cofins, meaning the economic impact of the controversy will be concentrated on CBS.

The argument most explored by taxpayers is systematic in nature: when regulating the Selective Tax, the constitutional amendment itself expressly determined its inclusion in the ICMS and ISS bases, without establishing an equivalent rule for IBS and CBS. In other words, where the legislator wanted to include it, it did so explicitly — and the silence regarding IBS and CBS is read by part of the doctrine and recent case law as a deliberate choice, not a gap to be filled by the tax authorities.

The first court ruling

The controversy has already left the theoretical realm. It gained traction after the São Paulo State Treasury Department declared, in Responses to Tax Inquiries, its intention to require the inclusion of CBS and IBS in the ICMS calculation basis starting in 2027. In response, in Writ of Mandamus No. 1138866-98.2026.8.26.0053, filed with the 16th Public Treasury Court of the São Paulo District, a preliminary injunction was granted ensuring the company's right to calculate and pay ICMS without including the amounts corresponding to CBS and IBS in its calculation basis.

In the reasoning, the legislator, when enacting Complementary Law No. 227/2026, expressly inserted only the Selective Tax into the ICMS base, intentionally remaining silent about IBS and CBS, and there is also a legal asymmetry noted by tax experts: while Complementary Law No. 214/2025 expressly excludes ICMS from the IBS and CBS bases, the tax authorities are seeking to impose the reverse relationship.

The precedent, however, is far from settled. As of September 2026, the injunction favorable to the taxpayer coexists with reports of contrary rulings in lawsuits filed in Federal Court, and experts are already comparing the debate to the historic controversy that culminated in Theme 69 of the Federal Supreme Court, when the exclusion of ICMS from the PIS and Cofins calculation basis was defined — the famous "tax case of the century."

States divided, 2026 as a temporary comfort zone

For the test year of 2026, there is relative consensus: for the test year of 2026, the São Paulo Treasury itself ruled out the inclusion, given the absence of an economic burden during the period, since the rates are symbolic. The problem begins in 2027, when the impact ceases to be merely informational. At this point, the federative entities already disagree: the Federal District stated that CBS and IBS are not part of the ICMS calculation basis in 2026, while the São Paulo tax authorities stated that IBS and CBS, once they become chargeable, must be included in the ICMS calculation basis, since they will form part of the transaction value that is the basis for the state tax. Other states, such as Santa Catarina, also stated that IBS and CBS will not be part of the ICMS calculation basis in 2026, without indicating what will happen starting in 2027.

This fragmentation is a concern for the market: the trend is that most states will advocate for the inclusion of the new taxes in the ICMS base starting in 2027, which should trigger extensive litigation, not only regarding ICMS, but also ISS.

What tax, accounting, and IT teams need to monitor now

• Monitor the publication of Tax Inquiry Responses from the states where the company operates, since the understanding is not uniform;
• Map out, together with the accounting department, whether it is feasible to file a company-specific legal action before 2027, given that there are rulings to the contrary in other courts, and the issue is unprecedented, which calls for caution;
• Prepare the ERP's tax parameterization to support two scenarios for calculating the ICMS/ISS basis (with and without IBS/CBS), allowing for quick switching depending on the jurisdiction and any company-specific court ruling;
• Stay alert to developments in the net value Technical Notes (NF-e 2026.008) and the DANFE layout (NT 2026.010), which also address the composition of the values displayed on the tax document and may need to reflect the outcome of this dispute.

This content is for informational purposes only and does not replace guidance from your accounting firm or a tax attorney, especially given a topic that still lacks consolidated case law.

If your company needs an ERP with flexible tax parameterization to keep up with changes like this without rework, talk to Edoo.