🎧 Listen to This Article
Brazil’s sweeping consumption tax reform, enacted in 2023, marked a turning point in the country’s complex fiscal system. Most notably, it introduced a modernized value-added tax (VAT) framework. But alongside this came another transformative measure: a new selective tax, an excise-style levy on products considered harmful to public health or the environment.
Now enshrined in law through Constitutional Amendment 132/2023, the selective tax is a single-phase federal levy. While many details remain pending, businesses are urged to prepare for its implementation, scheduled for January 1, 2027.
A Sin Tax in Structure and Intent
Colloquially dubbed a “sin tax,” the selective tax will be imposed on goods and services such as alcoholic beverages, sugary drinks, smoking products, vehicles, and mineral extraction. Supplementary Law 214/2025, enacted earlier this year, formalized its legal framework and tax design.
The law specifies that the selective tax will not apply to exports, electricity, or telecommunications. Importantly, it is calculated on top of the net price excluded from its base but will be included in the taxable base of the forthcoming VATs: the Contribution on Goods and Services (CBS) and the Tax on Goods and Services (IBS). It will also feed into the bases for the existing state VAT (ICMS) and municipal services tax (ISS) during Brazil’s transitional tax period.
What’s In Scope?
The list of goods and services subject to the selective tax, as per the law, includes:
- Vehicles, except trucks and military/police-specific models
- Aircraft and vessels, with similar public sector exceptions
- Smoking products
- Alcoholic beverages
- Sugary drinks
- Extracted mineral goods
- Fantasy and forecasting sports competitions
The tax will apply on first supply, auction sales, imports, mineral extraction, or upon the provision/payment for relevant services. Even non-supply cases—such as goods consumed by the manufacturer are within scope.
Rates and Complexities
Though actual rates are pending a new law, Supplementary Law 214/2025 outlines a sophisticated rate structure:
- Vehicles: Rates will be adjusted based on power, energy efficiency, emissions, and driver-assist technologies.
- Aircraft and vessels: Taxation may vary based on carbon intensity, with zero rates for net-zero vehicles.
- Tobacco and alcohol: Both ad valorem (percentage-based) and ad rem (fixed amount) rates will apply. Alcohol taxes may depend on proof level and beverage type.
- Mineral extraction: Rates capped at 0.25%.
- Natural gas: Zero-rated when used in industrial or transport processes.
Key elements such as deadlines for monthly reporting, due dates, and audit regimes are still to be determined. That said, the overarching framework is now set.
Legislative Uncertainty
Bill of Law 29/2024, introduced in March 2024, aimed to clarify and potentially limit aspects of the selective tax. However, with Supplementary Law 214/2025 already enacted, experts consider its chances of passage slim.
Why Companies Should Act Now
Although the tax won’t take effect until 2027, time is of the essence. Companies operating in the affected sectors must begin compliance planning, especially manufacturers, importers, and service providers. That includes adjusting ERP systems, revising pricing strategies, and monitoring forthcoming regulations defining the rates.
The selective tax is more than just another fiscal instrument. It’s a regulatory tool aimed at behavioral change. As such, it represents both a compliance challenge and a potential strategic pivot point for industry players.
For further details, clarification, contributions, or any concerns regarding this article, please get in touch with us at editorial@tax.news. We value your feedback and are committed to providing accurate and timely information. Please note that our privacy policy will handle all inquiries.
