São Paulo Court Grants Injunction Excluding IBS and CBS from the ICMS Tax Base

The 16th Public Finance Court of the District of São Paulo has granted a preliminary injunction allowing a company to calculate ICMS without including IBS and CBS amounts in its tax base. Issued in Writ of Mandamus No. 1138866-98.2026.8.26.0053, the decision applies to the transition period of Brazil’s Tax Reform, during which the taxes will coexist.

Some Brazilian states have already taken the position that IBS and CBS should be included in the ICMS tax base. In São Paulo, the State Department of Finance and Planning adopted this interpretation in its Responses to Tax Rulings Nos. 32,303/2025 and 33,083/2026, on the grounds that the new taxes, once effectively due, form part of the transaction value. For 2026, however, the São Paulo tax authorities’ guidance excludes such amounts from the ICMS tax base, meaning that the controversy is primarily relevant from 2027 onwards.

The dispute concerns the scope of the concept of “transaction value” under the Kandir Law and whether specific statutory authorisation is required for the new taxes to be included in the ICMS tax base. In this context, particular attention should be paid to the amendment introduced by Supplementary Law No. 227/2026, which expressly provides for the inclusion of the Selective Tax (Imposto Seletivo) in the ICMS tax base, without establishing an equivalent provision for IBS and CBS.

The decision is preliminary and applies only to the company that brought the claim; it does not override the tax authorities’ position in relation to other taxpayers. Nevertheless, it represents a significant development in a dispute that may affect pricing, contract negotiations and the configuration of tax systems for 2027.

Against this backdrop, companies should assess the potential impact of including IBS and CBS in the ICMS tax base on their operations, taking into account the position adopted by the tax authorities in the states where they operate and whether seeking judicial protection before collection begins in 2027 may be appropriate.

Our Tax team is available to assist companies in assessing these impacts and determining the most appropriate strategy for each case.