Cases like that of Sonho de Valsa, which was once classified as a bonbon and then as a biscuit, or McDonald's ice cream, reclassified as a dairy beverage, reveal how tax classification in Brazil is surrounded by complexity and legal uncertainty.

More than just fiscal curiosities, these disputes expose structural flaws in the system and show that, even with the proposed Tax Reform, the country will still need to deal with technical ambiguities, divergent interpretations, and regulatory challenges.

The controversy surrounding tax classification 

The case of Sonho de Valsa clearly illustrates the conflicts of tax classification in Brazil. Traditionally considered a bonbon, the product was reclassified by its manufacturer as a wafer biscuit. As a result, it ceased to pay IPI (previously 3,25% or even 5%), as it was reclassified into the bakery category, which is exempt from this tax.

McDonald's ice cream , in turn, had its name changed to "frozen treat," "dairy dessert," or simply dairy beverage. With this reclassification, the PIS/Cofins tax rate, which reached 9,25%, became zero.

These examples demonstrate how seemingly simple disputes over tax classification directly impact the tax burden, influence competitiveness, and generate litigation between companies and the tax authorities.

Why does this dispute matter? Tax impact and practical effects.

The way a product is tax-classified can profoundly alter its tax burden. When a commodity is reclassified—as in the case of Sonho de Valsa chocolates or McDonald's ice cream—this can result in substantial changes to the applicable tax regime, reducing taxation and directly impacting companies' financial results .

This tax difference has important practical effects. The reduction in taxes allows the final price to the consumer to be more competitive, which can expand market share. Consequently, companies that adopt a favorable classification are able to operate with more attractive margins, influencing the dynamics of competition.

From a tax perspective, disputes over tax classification generate litigation and increase the risk of audits by the Internal Revenue Service. 

Contentious proceedings in the Administrative Council of Tax Appeals (CARF) or the Judiciary can represent significant costs for companies and imply the loss of tax benefits, fines, or retroactive charges, which highlights the need for technical and legal certainty in the classification of products.

Finally, there is an impact on public revenue. When products are reclassified into lower tax brackets, revenue is reduced, leading to debates about tax fairness and resource allocation.

These challenges make it clear that tax classification conflicts are not merely formal, but reflect deep weaknesses in the Brazilian tax system – weaknesses that persist even in the face of the changes proposed by the Tax Reform.

Structural problems of the classification system 

Brazil adopts a highly complex tax classification system. The Mercosur Common Nomenclature (NCM), combined with the IPI Incidence Table (TIPI), contains more than 10.000 distinct codes that determine the tax classification of goods. This high granularity generates gray areas, where similar products can be classified in different ways , with very different tax impacts.

Thus, there is room for divergent interpretations by both companies and tax authorities. Choosing a more favorable classification – within legal limits – is frequently used as a legitimate form of tax planning.

Companies specializing in or supporting accounting technology can identify reduced tax treatments through detailed technical classification, taking advantage of tax incentives, exemptions, or specific tax regimes.

This practice, while legal, highlights flaws in the tax structure . As a result, society ends up treating two similar products with different taxation, based on codes that do not accurately reflect the reality of the item.

This erodes legal certainty, fuels tax disputes, and undermines balanced revenue collection, exposing weaknesses that persist even with a potential tax reform.

What changes (and what doesn't change) with the Tax Reform

The proposed Tax Reform introduces a Dual VAT model. It will consist of the Contribution on Goods and Services (CBS) , a federal tax that will replace PIS, Cofins, and IPI, and the Tax on Goods and Services (IBS) , a state and municipal tax that will absorb ICMS and ISS.

The unification of these taxes aims to reduce the number of consumption taxes, promising to simplify calculations, eliminate cumulative effects, and generate greater transparency in the tax system . The proposed model follows international VAT recommendations, with emphasis on fiscal neutrality and destination-based taxation.

However, while simplification may reduce many tax classification disputes , the new system does not completely eliminate this type of conflict. Products considered selective , such as beverages or basic food items, may continue to generate technical disagreements regarding taxation or eligibility for specific benefits.

Therefore, despite the expected simplification with CBS and IBS , interpretations regarding the classification of similar products may still generate litigation. Technical standardization remains a challenge, especially in special regimes and exemption brackets that require well-defined criteria.

Lessons and reflections for the future of the Brazilian tax system.

Emblematic cases such as Sonho de Valsa chocolate and McDonald's ice cream demonstrate that the Tax Reform will not completely resolve classification conflicts. Even with the simplification brought about by the dual VAT model ( CBS and IBS ), technical ambiguity will remain a critical point.

Brazilian experience shows that interpretative differences persist in products with a complex nature or multiple functions. If the technical classification matrix is ​​not improved, there will still be room for tax disputes between tax authorities and companies. Therefore, the reform needs to be accompanied by clear regulation and standardization of technical classification criteria.

It is essential that the new system incorporates objective technical definitions, limiting subjectivity and differentiating special conditions such as select products or basic food items. This clarity reduces misinterpretations , improves legal certainty, and decreases tax litigation.

Only in this way will it be possible to promote a more efficient, transparent, and justified tax system. Formal simplification is not enough; it is necessary to transform structural ambiguity into precise operational rules, aligned with global best practices and focused on fiscal equity.

The closing thought

Disputes surrounding tax classification, such as the cases of Sonho de Valsa chocolates and McDonald's ice cream, demonstrate that the Brazilian tax system still grapples with complexity, legal uncertainty, and divergent interpretations. While the Tax Reform represents progress in simplification , it does not completely eliminate these challenges, which will continue to require technical analysis, clear regulation, and standardization of criteria.

For professionals who wish to deeply understand the impacts of the Reform and operate confidently in a constantly changing environment, the IDP Postgraduate Program in Tax Law offers solid and up-to-date training. With renowned professors and a practical approach, the course equips participants to handle complex tax disputes and contribute to a more efficient and fair system.

References

BRAZIL . Constitution (1988). Constitution of the Federative Republic of Brazil of 1988. Brasília, DF: Presidency of the Republic. Available at: https://www.planalto.gov.br/ccivil_03/constituicao/ConstituicaoCompilado.htm.

BRAZIL. Ministry of Finance. Federal Revenue Service. Understanding the Consumption Tax Reform . June 27, 2025. Available at: https://www.gov.br/receitafederal/pt-br/acesso-a-informacao/acoes-e-programas/programas-e-atividades/reforma-consumo/entenda.

BRAZIL. Ministry of Finance. Federal Revenue. NCM – Fiscal Classification of Goods. August 26, 2024. Available at: https://www.gov.br/receitafederal/pt-br/assuntos/aduana-e-comercio-exterior/classificacao-fiscal-de-mercadorias/ncm.

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CNN BRAZIL. BAST, Elaine. Is Sonho de Valsa a candy ? For the CARF, no; see other tax curiosities. July 11, 2023. Available at: https://www.cnnbrasil.com.br/economia/financas/sonho-de-valsa-e-bombom-para-o-carf-nao-veja-outras-curiosidades-tributarias/.

Tax Engineering: Discover 5 popular products that changed to reduce taxes and you didn't notice! Jornal Contábil, April 25, 2025. Available at: https://www.jornalcontabil.com.br/noticia/engenharia-tributaria-conheca-5-produtos-populares-que-mudaram-para-reduzir-impostos-e-voce-nao-percebeu/.

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