Company: AKO-B
Filing Date: 2025-03-26
Form Type: 20-F
Source: 0001410578-25-000473
Chunk: 23

Company: ANDINA BOTTLING CO INC
Filing Date: 2025-03-26
Form: 20-F
Item: Item 3
Chunk 23
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 too many rules, numerous exceptions and high compliance costs.
The first and most important complementary law to regulate the tax reform on consumption (Complementary Law No 214/2025) was enacted on January 16, 2025.
This Law creates new taxes that replace the current taxes on consumption in Brazil, and establishes general rules for the new tax system, including the tax regime applicable in the transition period until the new tax regime comes into effect.
In relevant part, the tax reform replaces the current indirect taxes on goods and services (ICMS, IPI, ISS and PIS/COFINS) with basically three new taxes: the goods and services tax (IBS), the contribution on goods and services (CBS) and the excise tax (IS).
The CBS, a federal tax, and the IBS, a state and municipal tax, share identical regulations and structures, so as to form a Dual-VAT model. This uniform framework aims to simplify the compliance and to ensure consistency across the different levels of government. The IS is a selective tax applied to specific goods and services considered to be harmful to health or environment. Please note that some sugary drinks (such as sodas) are listed among the products subject to IS.
A key factor that may impact our profitability is the expiration of several tax incentives on which we currently rely. The few incentives to remain are those outlined in the Federal Constitution. Additionally, the tax reform establishes a timeline for the gradual phase-out of ICMS tax incentives from January 2029 to December 2032.

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The tax reform establishes a transition period from January 2026 to December 2032, during which the current tax system will coexist with the new framework.
Since 2018, the Brazilian government has gradually increased the value-added tax on manufactured products (Imposto sobre Produtos Industrializados or “IPI”) applicable to soft drinks concentrate. These changes have negatively affected our operations, since they significantly reduced the tax credit derived from purchases of concentrate from the Manaus Free Trade Zone that currently benefits Rio de Janeiro Refrescos and the soft drinks industry as a whole.
IPI tax credits derived from purchases of concentrate from the Manaus Free Trade Zone were significantly affected by Complementary Law No 214/2025. As of January 1, 2027, such tax credits will be reduced to zero for products which had previously been subject to a rate lower than 6.5%, as provided in the Table of Incidence of the Tax on Industrialized Products (TIPI