Tax reform raises concerns for Brazilian franchises ahead of 2027

Brazil’s franchising sector is increasingly concerned about the transition to the country’s new tax system. In a report published by Correio Braziliense on 2 November, Tom Leite, president of the Brazilian Franchising Association (ABF), highlighted the introduction of the Contribution on Goods and Services (CBS), scheduled for 2027, and the need to assess how it will change the mix of taxes businesses pay.

CBS takes centre stage in the next phase

According to Leite, the introduction of CBS to replace the federal PIS and Cofins levies represents a significant change for businesses. He believes the transition is likely to draw greater attention from business owners, particularly those operating in services.

His warning has a specific focus: understanding how the change will affect each company’s tax burden. The ABF president’s comments do not amount to a single estimate of rising costs for all franchises. The concern is about the mix of taxes and the effects the change could have on businesses.

This distinction matters when interpreting the news. The scheduled introduction of CBS in 2027 is the milestone Leite identifies; the scale of the financial impact requires a separate assessment. His comments do not provide an overall percentage that can be applied across all franchise networks or franchised outlets.

Presumed-profit tax regime among the areas to watch

Leite notes that some franchisors operate under Brazil’s presumed-profit tax regime, known as lucro presumido. By highlighting this group, the ABF president stresses the need to assess the tax change in light of individual companies’ circumstances, rather than treating the entire franchising sector as a uniform group.

For networks in this position, the central question raised by his warning is how the mix of taxes they pay will change during the transition. The tax regime he cites provides a starting point for assessment, not evidence that all these franchisors will experience the same financial outcome.

It is also important to distinguish between the concerns raised and the effects that have yet to be quantified. Leite points to the significance of the transition and the need to pay attention, but his comments do not include a cost model for franchisors under the presumed-profit regime. There is therefore no basis for turning the warning into a numerical forecast of margin losses or price increases.

Concerns extend beyond franchisors

Another aspect of the ABF president’s assessment is the scope of the change. He says its effects are not limited to franchisors: they also concern other business owners across the franchising sector’s supply chain.

This broadens the discussion beyond the companies that manage franchise brands. Leite’s point is that the tax transition needs to be considered across the different businesses involved, not just the company responsible for the network.

That does not mean assuming in advance that every participant will face the same impact. On the contrary, the absence of a uniform estimate reinforces the importance of distinguishing the franchisor’s position from that of other businesses. For anyone assessing a franchise network, the relevant question is which effects have actually been calculated and which remain planning assumptions.

Bringing the warning into business planning

The practical takeaway is to include the tax transition in planning discussions for 2027. As a management measure, franchisors and franchisees can prepare questions for their accountants: which changes need to be assessed, what assumptions underpin the projections, and what information still needs to be confirmed?

It is also worth distinguishing between general guidance from a franchise network and an individual company assessment. The ABF’s warning helps put the issue on the agenda, but it does not replace an examination of each operation’s figures or justify assuming a uniform financial effect.

In practice: before revising prices, expenditure or expansion plans in response to the reform, request a tax assessment specific to the business. The priority is to turn concerns about 2027 into questions that can be tested and projections supported by evidence.