Starting February 2, 2027, manufacturers and importers of vehicles, beverages, tobacco products, aircraft and vessels will be required to pay the Selective Tax (Imposto Seletivo – IS), with rates of up to 66.7%. Provisional Measure No. 1,399, published on November 4, 2026, sets out the rules for a transitional regime that requires companies to prepare immediately.
1. Timeline and provisional nature: The Provisional Measure takes effect on February 2, 2027 and will remain in force until a specific law is enacted. The Executive Branch must submit to Congress, by May 31, 2027, a bill setting the rates applicable from 2028 onward. In other words, the current rules have an expiration date, which calls for planning in two stages.
2. Rates inherited from the IPI, with a conversion factor: Since the Selective Tax base does not include ICMS, PIS and Cofins, the current rates of the Excise Tax on Industrialized Products (IPI) were multiplied by conversion factors to preserve the tax burden. In practice, beer goes from 3.9% to 4.2%, spirits from 19.5% to 24%, other tobacco products from 30% to 37.5%, and motorboats from 10% to 12%. In 2027, beverages and tobacco products will be taxed on a percentage basis only, with no fixed amount per unit. The exception is cigarettes and cigarillos, which keep the 66.7% rate plus BRL 3.50 per pack of 20 units. A new decree may reduce these factors down to 1.00, but any reduction will depend on an adjustment to the reference rate of the Contribution on Goods and Services (CBS).
3. Vehicles with “tailor-made” rates: The base rate is 6.3% for passenger cars and 3.9% for light commercial vehicles, adjusted according to propulsion, energy efficiency, power, safety and recyclability criteria, and multiplied by a factor of 1.21. Electric models receive a 2 percentage point reduction, while diesel vehicles face a 12 point increase. A zero rate applies to vehicles registered as sustainable versions, and trucks are not subject to the tax, a category that does not include pickups, regardless of their weight.
4. Additional burden on imports: An adjustment factor of 1.17 for vehicles, vessels and aircraft, and of 1.45 for alcoholic and sugar-sweetened beverages, is also applied to the rate of the imported good, cumulatively with the conversion factor. Importers should simulate the impact on price and margin. The Executive Branch may reduce these factors based on evidence of the average gross margin of each sector.
5. Transitional relief in 2027: Until December 31, 2027, extracted mineral goods will be subject to a zero rate. Small beverage producers (supplying less than 250,000 liters of alcohol across the economic group) will be entitled to reductions of 10% to 40%. Betting and lottery games will be taxed at 0.5%.
6. Assisted tax assessment requires extra attention: The Federal Revenue Service may provide taxpayers with a pre-calculated tax assessment. Confirming or adjusting it amounts to an acknowledgment of debt, and failing to respond within the legal deadline means the balance is presumed correct and the tax liability is deemed established. This does not prevent subsequent tax assessments by the authorities. Accordingly, consistent tax documents and correct tariff classification (NCM) become essential to avoid undue tax claims.
The Selective Tax applies directly to product prices, affecting margins, competitiveness and commercial strategy. Given the transitional rules and the prospect of definitive rates only in 2028, senior management should measure the impact by product line, plan pricing and prepare systems, contracts and tax classifications for the new assessment framework.
