ACCOUNTING FOR THE DUAL VAT IN BRAZIL: CONCEPTUAL FOUNDATIONS, RECOGNITION AND DISCLOSURE UNDER COMPLEMENTARY LAW NO. 214/2025

Abstract

Objective: This article aims to analyze the conceptual, accounting, and tax foundations of the Dual Value-Added Tax (Dual VAT) model established by Complementary Law No. 214/2025, from the perspective of financial accounting and Brazilian Accounting Standards (CPC). It seeks to understand how the new taxes - the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS) - affect the recognition, measurement, and disclosure of business transactions in financial statements, in light of the principles of economic neutrality and substance over form. Problem diagnosis: The consumption tax reform represents one of the most profound transformations in the Brazilian accounting and tax system since the convergence to international standards under Law No. 11.638/2007. The new Dual VAT model shifts the taxation focus toward the real economic flow of operations, requiring companies to reconfigure their accounting, tax, and financial systems - particularly due to the adoption of split payment mechanisms and the linkage of credit entitlement to the effective settlement of the tax obligation. Methodology/Approach: The study adopts a qualitative and normative approach, based on theoretical-descriptive and documentary research, examining Complementary Law No. 214/2025, the relevant CPC pronouncements (00, 16, 23, 25, 26, 47, and 48), and the international standards IFRS 15 and IFRS 18, as well as the OECD (2017) International VAT Guidelines and specialized literature on VAT neutrality and the debit-credit mechanism. Practical examples of accounting entries for B2B and B2C operations are presented to illustrate the treatment of credits, debits, and tax transfers under the new regime. Results: The analysis indicates that IBS and CBS assume the nature of transitory accounting flows, rather than costs or expenses, and therefore must be recognized as temporary rights and obligations with no direct impact on profit or loss. The recognition of tax credits occurs only upon financial settlement of the liability, pursuant to Article 27 of Complementary Law No. 214/2025, introducing a new accounting timing and stronger integration between accounting, tax, and treasury functions. The study further demonstrates that CPC 16 reinforces the measurement of costs net of recoverable taxes, while CPC 47/IFRS 15 consolidates the exclusion of taxes from revenue, ensuring comparability and neutrality. Contributions: The article contributes to the field of tax accounting by proposing a conceptual and practical framework for the recognition and disclosure of the Dual VAT, linking the legal framework of Complementary Law No. 214/2025 with existing accounting standards. It highlights that the success of the transition to the new model will depend on accounting governance and technological integration within corporate systems, ensuring traceability, consistency, and reliability in IBS and CBS records. The study also emphasizes the need for specific accounting policies and enhanced disclosures to faithfully represent the principle of economic neutrality, which underpins the new Brazilian tax system.