Government publishes provisional measure establishing Selective Tax rates and complementary regulations for 2027

On November 4, Provisional Measure No. 1,399/2026 was published, establishing the rates and complementary regulations for the Selective Tax (Imposto Seletivo – “IS”) for 2027, within the framework of the gradual implementation of the Brazilian Tax Reform. The new regulations will take effect on February 2, 2027.

The provisional measure covers, among other items, vehicles, aircraft, vessels, tobacco products, alcoholic beverages, sugar-sweetened beverages, extracted mineral products and betting pools and lottery activities, in addition to regulating relevant aspects of the importation, calculation, and payment of the IS.

Key highlights include:

Vehicles

The provisional measure sets base rates of 6.3% for vehicles classified under NCM heading 87.03 and 3.9% for certain cargo vehicles, subject to adjustments based on energy source and propulsion technology, energy efficiency, power, structural performance, driver-assistance technologies and recyclability. A conversion factor of 1.21 will also apply to the initial rate resulting from these adjustments.

The IS rate may be reduced to zero for certain purchases made by persons with disabilities, persons with autism spectrum disorder and taxi drivers, as well as for vehicles that meet the requirements for classification as a sustainable version. Trucks, as defined by the provisional measure, are not subject to the IS, while pickup trucks are expressly excluded from the concept of trucks.

Beverages

For 2027, the final ad valorem rates vary according to the product, including 2.6% for certain sugar-sweetened beverages, 4.2% for malt beers and percentages ranging from 8% to 24% for different categories of alcoholic beverages.

The provisional measure also establishes specific treatment for small alcoholic beverage producers, with reductions of 40%, 20% or 10% in the ad valorem rate, depending on the total volume of alcohol supplied.

Tobacco products

For cigarettes and cigarillos specifically identified by the provisional measure, the IS will consist of a 66.7% ad valorem rate and a specific amount of BRL 3.50. For the other tobacco products covered by Annex IV, the final ad valorem rate will be 37.5%.

Aircraft, vessels, and mineral products

The provisional measure establishes a final rate of 6.8% for the aircraft covered by the measure, 12% for motor boats classified under subheading 8903.3, and 7.8% for the other motorized recreational or sports vessels specified in the regulation. In 2027, certain transactions will be subject to a zero rate or a 50% reduction, while the IS levied on extracted mineral products will be reduced to zero.

Imports

One of the key provisions of the provisional measure is the introduction of additional factors applicable to the IS on imports. When the tax base corresponds to the customs value plus Import Duty, factors of 1.17 for vehicles, vessels and aircraft, and 1.45 for alcoholic and sugar-sweetened beverages will apply cumulatively with the conversion factors applicable to the corresponding product.

Assisted tax calculation

The Brazilian Federal Revenue Service (“RFB”) may make assisted IS calculations available based on electronic tax documents and other available information. The taxpayer’s confirmation or adjustment of the calculation will imply acknowledgment of the debt and the formal establishment of the tax credit. In the absence of a response within the prescribed period, the calculated balance will be presumed correct, and the tax credit will be deemed constituted.

Payment and split payment

IS liabilities may be extinguished through payment by the taxpayer or responsible party, split payment, offsets related to returns or compensation. In the event of cancellation of the tax document, the taxpayer will be entitled to offset the corresponding IS amount, subject to future regulation.

Betting pools and lottery contests

For 2027, the provisional measure establishes a 0.5% rate for betting pools and lottery contests, subject to the specific regulations applicable to this category.

Next steps

Although the new regulations will only take effect on February 2, 2027, the provisional measure already requires attention from companies potentially subject to the IS, particularly with respect to product tax classification, calculation of effective rates, import transactions, pricing, issuance of tax documents, and the configuration of systems, including enterprise resource planning (ERP) systems.

The Executive Branch is expected to submit to the National Congress, by May 31, 2027, a bill establishing the rates applicable from 2028 onward. For reduction purposes, the provisional measure also provides that estimated IS revenue must be taken into account when calculating the CBS reference rate for 2027.

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Demarest’s Tax team is closely monitoring the regulation of the Brazilian Tax Reform and remains available to clarify any questions and assess the impacts of Provisional Measure No. 1,399/2026 on your company’s operations.