Tax Reform
Selective Tax (Imposto Seletivo)
The new "sin tax" replacing IPI on products harmful to health or the environment. If you import alcohol, tobacco, vehicles, or sugary drinks, this applies to you.
What is the Selective Tax?
When IPI is eliminated in 2027, most products simply benefit from the lower CBS rate replacing PIS/COFINS/IPI. But certain product categories — those considered harmful to health or the environment — get a replacement tax: the Imposto Seletivo (IS).
Think of it as Brazil's version of excise duties that most countries apply to alcohol, tobacco, and similar products. The key differences from IPI:
- Narrow scope — IS applies to only 6 product categories, versus IPI which applied to virtually all manufactured goods
- Per-unit basis — IS is primarily specific (per unit, per liter, per gram), not ad valorem. This means the tax doesn't change with price fluctuations.
- Environmental angle — IS on vehicles is linked to emissions, favoring electric and hybrid vehicles. This is new.
- Non-creditable — unlike CBS and IBS, IS paid on inputs is NOT creditable. It's a final cost.
IS is non-creditable — it's a real cost
CBS and IBS paid on imports generate credits you can offset against domestic sales. IS does NOT. If you import whisky and pay IS, that IS cost stays in your landed cost permanently. This is intentional — the IS is designed to discourage consumption, not to be part of a credit chain.
Products affected
Tobacco products
HS 2401–2403Brazil has the highest tobacco tax in Latin America. IS aims to maintain this level.
Alcoholic beverages
HS 2203–2208Per-unit taxation means higher ABV = higher IS. Wine (~12% ABV) taxed less than spirits (~40% ABV).
Sugary beverages
HS 2009, 2202New category. Soft drinks, juices with added sugar, energy drinks. Pure juice (100% fruit) exempt.
Passenger vehicles
HS 8703Green vehicles benefit. High-emission vehicles pay more. Electric vehicles may pay 0% IS.
Fossil fuels (extraction)
HS 2709–2711Applies to extraction, not imports of refined fuels. Imported gasoline/diesel not directly affected.
Mineral extraction
HS 2601–2617Applies to extraction in Brazil, not imports of minerals.
IS on alcohol — per-liter-of-alcohol model
This is the most significant change for wine and spirits importers. IPI was ad valorem (percentage of price), which meant cheaper wines paid less tax in absolute terms. IS is specific per liter of pure alcohol, which changes the economics:
| Product | ABV | Old IPI (ad valorem) | IS impact (per alcohol) |
|---|---|---|---|
| Still wine (750ml) | 12% | 10% of price | Lower (low ABV) |
| Sparkling wine (750ml) | 12% | 20% of price | Significantly lower |
| Whisky (750ml) | 40% | 60% of price | Depends on price point |
| Vodka (750ml) | 40% | 60% of price | Depends on price point |
| Beer (350ml can) | 5% | 40% of price | Lower (very low ABV) |
IS rates per liter of pure alcohol not yet finalized. Above is directional analysis based on LC 214/2025 framework.
Wine importers win, premium spirits are a wash
The shift from ad valorem IPI to per-unit IS benefits low-ABV products (wine, beer) and premium spirits (where the old 60% IPI was a massive absolute cost). Budget spirits may see a slight increase since the per-unit IS is proportionally higher on low-price, high-ABV products. Combined with EU-Mercosur tariff reductions, EU wine becomes significantly more competitive in Brazil.
IS on vehicles — the green tilt
The vehicle IS is the most innovative aspect. Instead of flat IPI rates by engine size, the IS considers three factors:
- CO₂ emissions — higher emissions = higher IS. Zero-emission EVs may qualify for 0% IS.
- Energy efficiency — vehicles with better km/l (or km/kWh) ratings get lower IS.
- Vehicle power/weight — heavier, more powerful vehicles pay more.
This means a Tesla Model 3 imported from the EU (under EU-Mercosur) could pay 0% IS + reduced II, while a V8 luxury SUV pays significant IS even if the II is the same. The reform explicitly rewards green vehicles.
Products NOT subject to IS
If your product doesn't fall into the 6 categories above, there is no IS. This means IPI elimination in 2027 is a pure cost reduction for:
Machinery
IPI 5–15% → 0%
Electronics
IPI 10–15% → 0%
Chemicals
IPI 5–10% → 0%
Textiles
IPI 5–10% → 0%
Furniture
IPI 5% → 0%
Medical devices
IPI 0–5% → 0%