Brazil sets temporary Selective Tax rates for alcohol, tobacco and sugary drinks

Brazil’s federal government published Provisional Measure 1,399/2026 in the Official Gazette on Wednesday, November 4, setting the rates and complementary rules for the new Selective Tax that will apply to goods and services considered harmful to health or the environment starting February 2, 2027.

The measure lays out a temporary transition from the current tax model to the new system created under Constitutional Amendment 132 of 2023, the country’s tax reform. The Selective Tax is set to replace the federal tax on industrialized products, known as the IPI. Under the provisional framework, the transition rules will remain in force through December 31, 2027.

During that 11-month period, the Selective Tax rates for vehicles, aircraft, vessels, tobacco products, alcoholic beverages and sugary drinks will be based on the current IPI rates after the application of specific conversion factors. The government did not, in the text cited by Agência Brasil, detail those factors in the news report, but it said the provisional measure defines the structure that will be used until Congress decides the permanent model.

That temporary design is especially relevant for the beverage industry because alcoholic drinks and sweetened beverages are among the products covered by the new tax. Brewers, distillers, wineries, soft drink makers and importers may need to reassess pricing, margins and supply contracts as Brazil moves into the new tax regime, particularly because the definitive rates for 2028 are still to be debated.

According to the presidential chief of staff’s office, the measure also sets sustainability and energy-efficiency criteria for rates applied to vehicles, aircraft and vessels. Some vehicle categories will receive a zero rate, including those bought by people with disabilities or autism spectrum disorder and by professional drivers who use the car in the rental category, such as taxis. Vehicles certified as sustainable versions by the Ministry of Development, Industry, Trade and Services will also qualify for the benefit.

The Selective Tax will also apply to trucks with a gross vehicle weight of 3,500 kilograms or more, except pickup trucks, as well as to certain vehicles, aircraft and vessels with specific technical characteristics intended for the operational use of the armed forces or public security agencies, according to the report.

For extracted mineral goods, the provisional measure sets the rate at zero through December 31, 2027. The government said the permanent regime for those items will be the subject of separate legislative debate. Lotteries including Mega-Sena, Lotofácil and Loteca will face a 0.5% rate.

The government said it will also send Congress a proposed constitutional amendment to extend the IPI on goods considered harmful to health or the environment until the Selective Tax is fully effective. The stated goal is to avoid a tax gap that would reduce the burden on products the government classifies as damaging to health.

The measure also includes a revenue-balancing mechanism. If the Selective Tax raises more revenue than expected, the increase will be offset by an equivalent reduction in the reference rate and projected revenue of the Contribution on Goods and Services, or CBS. If Selective Tax revenue falls short, the reverse will happen.

The final Selective Tax rates are scheduled to take effect on January 1, 2028. Before that, the government is expected to send Congress a bill by May 31, 2027, setting out the permanent rates. That means the temporary schedule published on Wednesday, November 4, gives businesses an initial framework for 2027, while leaving the longer-term burden on products such as alcoholic and sugary drinks to be settled in the legislative debate ahead.