The Tax Reform, enacted through Constitutional Amendment No. 132/2023, is reshaping the way consumption taxes will be levied in Brazil. Among the most relevant changes for businesses is the new role of the Tax on Industrialized Products (IPI).
Starting in 2027, the IPI loses its traditional revenue-raising function and gives way to a new structure, with direct impacts on tax planning, pricing, and production and distribution strategies.
In this transition scenario, it is essential for entrepreneurs and managers to anticipate and understand the main changes involving the IPI in the Tax Reform.
Below, we highlight the key points of attention for the industrial sector:
1. The IPI Will Change Its Role: The traditional IPI, provided for in article 153, IV, of the Federal Constitution, will cease to have a predominantly revenue-raising function. According to art. 126 of the Transitional Provisions Act (ADCT), its rates will be reduced to zero starting in 2027. The exception will be for products whose industrialization is incentivized in the Manaus Free Trade Zone (ZFM), maintaining the tax as an instrument to protect regional competitiveness, as per article 40 of the ADCT. But pay attention to one of the most sensitive points of the reform: industries located outside the ZFM that produce goods similar to those manufactured in the region will continue to be subject to full IPI collection, with full rates, preserving the tax advantage of the Free Trade Zone.
2. Arrival of the Selective Tax: The extrafiscal function of the IPI will be absorbed by a new tax: the Selective Tax (IS). Established by article 153, VIII, of the Constitution, the IS will apply to the production, commercialization, or importation of goods and services harmful to health or the environment, such as alcoholic beverages, cigarettes, and polluting vehicles. Its primary objective is not revenue-raising, but rather to discourage the consumption of certain items. Companies operating in these sectors should, from now on, map their products to assess how classification under the new tax may affect their margins and pricing structure.
3. Transition Period Until 2027: Until the effective reduction of its rates in 2027, the IPI will continue to be required under the current framework. This means companies will have to manage a dual tax reality: the existing system and preparation for the new model. This coexistence demands heightened attention to tax compliance and internal systems, such as product registrations, fiscal classifications (NCM), and ERP parameterizations. Anticipating the adaptation of internal processes will represent a significant competitive advantage in the transition to the new regime.
4. Distinct Impacts by Sector and Region: The effects of the Reform will not be uniform. As mentioned, companies in the Manaus Free Trade Zone will continue to benefit from the IPI as an instrument to promote local production. In contrast, industries in other states must analyze whether their products will be burdened by the Selective Tax and, based on that, review their cost structure. This asymmetry may alter competitiveness between regions, influencing strategic decisions on plant locations, distribution centers, and logistics.
5. Fiscal and Technological Adjustments: The new tax system will require a thorough review of internal processes. Updates to fiscal registrations, NCM classifications, special regimes, and, above all, integration with the Public Digital Bookkeeping System (SPED) will be inevitable. Although the stated goal of the Reform is simplification, the transition period will demand investment in technology, team training, and rigorous monitoring of the regulations that will be issued. Prior planning will mitigate the impacts of the transition and ensure tax compliance.
For the entrepreneur, the message is clear: the IPI is changing its role, but its relevance persists in a transition period that demands strategy and planning. More than understanding the literal wording of the Constitutional Amendment, it is essential to foresee the practical impact of these changes on the final price of products, the tax burden, and business operations. Anticipating is the best path. In this sense, adjusting systems, reviewing fiscal classifications, and strengthening legal-tax monitoring from now on can represent savings, legal security, and competitive advantage when the new model is fully in effect.
