Brazil’s Selective Tax: which products will pay more
Guilherme Chambarelli
Published on
4 min read
In this article
Brazil’s Selective Tax (Imposto Seletivo, or IS) is a new federal excise tax on goods and services considered harmful to health or the environment. It is expected to start in 2027 and targets tobacco products, alcoholic beverages, sugary drinks, vehicles, vessels and aircraft, mineral goods and betting activities. The list is already in the law; the rates for each product still depend on a separate ordinary law.
Key points
- The tax was created by Constitutional Amendment 132/2023 and regulated by Complementary Law 214/2025.
- It applies from 2027, alongside the full-rate CBS.
- Rates for each product require an ordinary federal law, still pending at the time of writing.
- It is charged once in the chain and does not generate credits for buyers.
- Exports are, as a rule, outside its scope, with a specific rule for mineral extraction.
What is the Selective Tax and why was it created?
The Selective Tax is an extra-fiscal tax: its main purpose is to discourage consumption of certain products, not only to raise revenue. It is part of Brazil’s consumption tax reform, which replaces PIS, Cofins, IPI, ICMS and ISS with a dual VAT (CBS and IBS). Because the new VAT has broad credits and fewer special regimes, the reform added a separate tool to tax products with negative externalities, similar to excise taxes in other countries.
Which products and services are covered?
Complementary Law 214/2025 lists the following categories:
| Category | Practical note |
|---|---|
| Cigarettes and other tobacco products | Traditional excise target, previously heavily taxed by IPI |
| Alcoholic beverages | Rates may vary by product type and alcohol content |
| Sugary drinks | Relevant for beverage makers and distributors |
| Vehicles, vessels and aircraft | Rates may vary according to technical and environmental criteria |
| Mineral goods | Charged on extraction, with a constitutional cap of 1% of market value |
| Prognostic contests and fantasy sports | Betting operators (fixed-odds betting was suspended by Provisional Measure 1,394/2026, pending Congress and the STF) |
Electricity and telecommunications are expressly excluded by the Constitution, even though they were discussed during the reform.
What will the rates be?
The rates are not yet known. The Constitution and Complementary Law 214/2025 define the structure, but the specific rate for each product must be set by an ordinary federal law. During 2026 the federal government postponed sending the rate proposal to Congress, and at the time of writing it had not been enacted. The Ministry of Finance has stated that the tax is still expected to start in January 2027, which depends on Congress approving the rates in time. Companies should avoid relying on informal figures circulating in the market until the law is published.
How does the tax work in practice?
- Single-phase: it is charged once, typically on the first sale by the manufacturer, on import or on extraction, and not at every step of the chain.
- No credits: unlike CBS and IBS, the Selective Tax paid is not creditable by the buyer. It becomes a cost embedded in the price.
- Part of the VAT base: the Selective Tax is included in the base of CBS and IBS (and of ICMS and ISS while they still exist), which increases the total burden.
- Exports: as a rule, exported goods are not taxed, except for the specific rule on mineral extraction, which applies regardless of destination.
Who will feel the impact first?
Manufacturers and importers of the listed products bear the tax directly and must decide how much to pass on to prices. Distributors, retailers and bars will feel it through higher acquisition costs. Fleet operators and logistics companies should watch vehicle rates. Mining companies face a tax charged on extraction, even when the product is exported. For betting operators, the outlook also depends on the fate of Provisional Measure 1,394/2026, which suspended fixed-odds betting in September 2026.
What should companies do now?
- Map which products in the portfolio fall within the listed categories, by tax classification code.
- Build price scenarios with different rate assumptions and update them once the rate law is published.
- Review supply and distribution contracts for clauses on new taxes and price adjustment.
- For beverages, assess whether reformulation (for example, sugar content) could change the tax treatment.
- Align ERP and invoicing systems with the new tax fields for 2027.
Frequently asked questions
Does the Selective Tax replace IPI?
Partly. From 2027, IPI is reduced to zero except for products that compete with those made in the Manaus Free Trade Zone. The Selective Tax takes over the role of taxing specific harmful products.
Can buyers take a credit for the Selective Tax?
No. The tax is not creditable, so it works as a final cost in the chain.
Does it apply to imported products?
Yes. Imports of the listed goods are taxed, which keeps domestic and imported products on equal footing.
When will the rates be known?
Only when the ordinary law setting them is approved and published. Until then, any figure is an estimate.
How Chambarelli Advogados can help
Our Corporate Taxation team and our Foreign Desk help companies model the Selective Tax, adjust pricing and review contracts ahead of 2027. Book a meeting with one of our partners.
Informational content, updated October 2026. It does not replace advice on your specific case.
