Brazil's "split payment" system — the automatic tax collection mechanism at the heart of the country's landmark consumption tax reform — will not be operational in January 2027, when effective collection of the new CBS and IBS taxes begins. The announcement came from Pricilla Santana, finance secretary of Rio Grande do Sul state and second vice-president of the IBS Steering Committee, after the body's meeting on Wednesday, August 12, according to newspaper Folha de S.Paulo. "The split payment is one of the most complex tools to implement. It will not start in January," Santana said, adding that financial institutions themselves asked for more time to adapt. Under the model, banks and payment processors automatically separate the tax portion at the moment a transaction is settled. The company receives the sale amount, while the taxes go directly to Brazil's federal revenue service and to the steering committee formed by states and municipalities, without passing through the seller's account. According to Folha, the split payment will initially be optional and restricted to business-to-business transactions. Another optional mechanism will be available in 2027: the RAD (collection by the purchaser), under which the buyer pays the tax that is currently remitted by the supplier and has its tax credit automatically enabled, while the seller receives only the net amount. Operating the system will require unprecedented infrastructure. According to reporting by legal news outlet JOTA, a working group of the Finance Ministry, the federal comptroller's office (CGU) and the banks proposed paying financial institutions R$ 0.39 per processed operation. An estimated 229 payment institutions would need to join the model, processing between 1.3 and 1.5 billion transactions a year worth around R$ 6 trillion. The CGU, however, has challenged the proposal. It points to the lack of a methodology justifying the figure and notes that the payment would require Congress to approve a tax benefit, something barred by Brazil's fiscal framework after the primary deficit recorded in 2025. The mechanism has also drawn political fire. Still according to JOTA, opposition-linked figures, including Senate pre-candidate Carlos Bolsonaro, claim the split payment will squeeze companies' cash flow, since tax money will no longer pass through corporate accounts — ending the so-called "tax float," the gap between a sale and the tax payment that currently helps finance working capital. The steering committee, in turn, announced it will step up public communication to counter what it describes as disinformation about the reform. The tax reform, approved in 2024, replaces five existing taxes (PIS, Cofins, IPI, ICMS and ISS) with a dual VAT made up of the federal CBS and the state-and-municipal IBS. According to news portal G1, the technology platform that will run the new taxes — described by the government as many times larger than the Pix instant payment system — is being tested in 2026 with a symbolic 1% rate, and the transition from the old state and municipal taxes to the IBS will take place gradually between 2029 and 2032.