Split payment: proposed revision of LC 214/2025 reopens debate on working capital as technical tests move forward

What's at stake

Since October 15, 2026, the Federal Revenue Service and the IBS Management Committee have been conducting the first phase of integration testing for the Public Split Payment Platform with Payment Service Providers (PSPs). The consumption tax reform enters a new implementation stage starting October 15, 2026, when integration testing begins for the public split payment platform, a mechanism that will allow the value of the new taxes to be separated at the moment a commercial transaction is financially settled. For now, this stage is purely technical: no transaction will be processed definitively through split payment and participating PSPs will not be subject to penalties, ensuring a safe environment for verifying the integration's functioning.

But while the technical gears turn, legal and financial debate gained momentum this week. On October 22, a specialist in implementing the tax reform in fiscal systems and ERPs publicly advocated for a change in legislation before the mechanism is expanded to the entire market.

The proposal: restricting withholding to the regular regime

André Ferreira de Moraes argued that the National Congress should revise Brazil's split payment legislation. The proposal seeks to amend Articles 31 through 35 of Complementary Law No. 214/2025 to restrict automatic tax withholding to transactions with buyers under the regular regime, excluding sales to end consumers, pure Simples Nacional companies, and Individual Microentrepreneurs (MEIs).

The financial argument behind the proposal is straightforward: applying automatic withholding to sales without credit rights imposes cash flow costs and working capital needs even on compliant suppliers, since it removes funds from the company before the tax's ordinary due date. So far, however, there is no specific complementary bill scheduled by the National Congress leadership to amend Articles 31 through 35 — in other words, the idea remains a technical proposal, with no formal legislative process underway.

What the law says today

Split payment is set out in Articles 31 through 35 of Complementary Law 214/2025, as amended by LC 227/2026, with Decree 12,955/2026 regulating the CBS and addressing the simplified procedure. The segregation of IBS and CBS amounts is carried out by the payment service providers themselves: the segregation of IBS and CBS is performed by electronic payment service providers and by institutions operating payment systems, a rule that applies even to providers not regulated by the Central Bank.

Why this matters for company cash flow

The most discussed effect is the end of the so-called tax float. Split payment affects cash flow: it removes the tax from cash at the moment of payment, ending the tax float, an effect felt first by leveraged companies with long supplier payment terms. The impact tends to be uneven across sectors: the most immediate effect is the loss of the interval between receiving payment for a sale and the tax due date, which is greater in narrow-margin, high-turnover activities such as food retail, pharmacies, and distribution, requiring a review of cash projections, payment terms, and working capital lines.

Timeline to watch

For those planning budgets and system adaptations, it's worth remembering that the current phase is only testing: the system is expected to be operational for B2B transactions in the second half of 2027. This provides a real window for fiscal and IT teams to adjust reconciliation processes, PSP integration, and cash contingency plans — but the window is shorter than it seems, since layout and rule changes continue to be published almost monthly.

What fiscal and IT teams can do now

• Map sales volume by buyer type (regular regime, Simples Nacional, end consumer) to understand the actual exposure should the buyer-based carve-out proposal move forward.
• Simulate the effect of withholding at settlement on short-term working capital, especially in high-turnover, narrow-margin operations.
• Monitor the regulation of Articles 31 through 35 of LC 214/2025 and any joint acts by the IBS Management Committee and the Federal Revenue Service that will define gradual implementation dates.
• Test, together with banks and acquirers, the integration of tax invoicing systems with the settlement flows already in the homologation phase.

This content is for informational purposes only and does not replace guidance from your company's accounting department, especially given a topic that is still under legislative and technical debate.

Want to understand how split payment and the other tax reform changes will impact your company's fiscal and financial processes? Talk to Edoo.