What was once a common dynamic in Brazil’s logistics condominium market is likely to take on a new shape with the implementation of the country’s tax reform. Regions with lower ICMS — the tax on the circulation of goods and services — and IPTU exemptions, Brazil’s urban property tax, consolidated logistics assets in more remote areas, where tax benefits helped offset operational disadvantages. This scenario is expected to change, even if gradually.

Starting in 2027, PIS and Cofins will be eliminated and fully replaced by CBS, a federal tax. IBS, the Goods and Services Tax, will begin implementation in 2029 and will be collected by states, replacing ICMS, which will no longer be levied, together with the municipal ISS service tax. The transition will be progressive, in line with the adjustment periods required for the new tax systems, making 2026 an essential year for validations and adaptations to the new collection model. 

One of the most significant changes lies in the way the tax will be collected. Under the current system, ICMS has often been reduced by states as a way to encourage companies to establish operations in specific regions. In that previous scenario, the destination of the goods was not as relevant, since tax incentives could compensate for operational inefficiencies in delivering products to the end consumer.

With the reform, IBS will unify ICMS and ISS, and tax collection will be based on the destination of the product. This makes the previous logic of tax incentives obsolete, according to Ayrton Ruy Giublin Neto, partner responsible for the tax practice at Santos Silveiro Sociedade de Advogados.

“Now, taxation is determined by the destination, by whoever is buying the goods. If you sell a lot to the state of São Paulo, the tax impact will be determined by the state where your consumer base is located. So the logic behind industrial allocation tends to change. It will become more attractive to be close to the consumer market, and the tax burden of the place where the company is installed will have less impact,” he explained.

From this perspective, the party most directly affected by the adjustment is not the property owner, but rather the tenant occupying the asset and selling the goods. In this case, the impact could be felt if there is a large-scale migration of tenants away from regions that lose attractiveness along with their tax incentives.

“If the market stops looking for properties in these remote regions, the asset manager will have to rotate that asset or exchange it for another one. There will be an organic reallocation of resources. This will happen in its own time, because there is a transition period and a compensation fund for fiscal benefits in regions that consolidated around them. But in the medium and long term, and for those starting projects today, the shift from the origin principle to the destination principle already needs to be taken into account. It is already impacting real projects,” Ayrton concluded.