Tax Reform: Provisional Measure Establishes Selective Tax Rates for 2027
Provisional Measure No. 1,399/2026 establishes the Selective Tax rates and supplementary rules applicable to calendar year 2027, under a gradual implementation framework
In brief
The Provisional Measure entered into force on the date of its publication and will produce effects as of February 2, 2027, in compliance with the 90-day constitutional waiting period applicable to the IS. The framework will remain in effect until the law establishing the rates applicable from 2028 onward takes effect.
In addition to the rates, the Provisional Measure sets forth rules on imports, zero-rate and non-taxation scenarios, as well as rules relating to the assessment and payment of the new tax.
In more detail
Tax rates
In general terms, for vehicles, aircraft, vessels, tobacco products, alcoholic beverages and sugar-sweetened beverages, the Provisional Measure uses the IPI rates in force on the date of its publication as a reference or, in the case of vehicles, base rates adjusted according to specific criteria. Conversion factors are applied to the initial rates to account for differences between the IPI and IS tax bases.
The main rates established by the Provisional Measure are:
- Vehicles: passenger cars under NCM heading 87.03 are subject to a base rate of 6.3%, while cargo vehicles under the NCM headings and codes 8704 specified in the Provisional Measure are subject to a base rate of 3.9%. The base rate is adjusted according to propulsion, energy efficiency, power, safety and recyclability criteria and multiplied by a conversion factor of 1.21.
- Aircraft: 6.8%.
- Motorized recreational or sporting vessels: 12% for motorboats and 7.8% for other vessels.
- Sugar-sweetened beverages: 2.6%.
- Alcoholic beverages: rates range from 4.2% for malt beer to 24% for certain alcoholic beverages classified under NCM heading 22.08, depending on the product and its tariff classification.
- Tobacco products: for the cigarettes and cigarillos specified in the Provisional Measure, an ad valorem rate of 66.7% and a specific rate of BRL 3.50 per pack of 20 units; for other covered tobacco products, an ad valorem rate of 37.5%.
- Extracted mineral resources: zero rate through December 31, 2027.
- Prediction contests: 0.5%.
For imports of tangible goods, when the tax base corresponds to the customs value plus Import Duty, an adjustment factor of 1.17 for vehicles, aircraft and vessels and 1.45 for alcoholic and sugar-sweetened beverages will apply cumulatively with the conversion factor. In all other cases, the adjustment factor will be 1.00.
The Provisional Measure also authorizes the Federal Executive Branch to reduce the conversion and adjustment factors, subject to a minimum of 1.00 and the criteria set forth in the measure.
Zero rate and non-taxation
- Zero rate: the Provisional Measure establishes a zero rate for vehicles purchased by persons with disabilities or autism spectrum disorder and by taxi drivers, provided that the benefit is recognized by the Brazilian Federal Revenue Service, as well as for vehicles with a sustainable version registered with the Ministry of Development, Industry, Trade and Services (MDIC) under the Mover Program, and for vessels and aircraft that meet sustainability standards.
- Non-taxation: the IS does not apply to trucks with a gross vehicle weight of 3,500 kg or more, except pickup trucks, or to vehicles, aircraft and vessels with specific technical characteristics intended exclusively for operational use by the Armed Forces or public security agencies.
Transitional rules for 2027
- Through December 31, 2027, the Provisional Measure establishes specific rules for certain products and transactions, including reducing to zero the specific rates applicable to alcoholic beverages and tobacco products, except for the cigarettes and cigarillos specified in the measure.
- For small producers of alcoholic beverages, the Provisional Measure provides reductions of 10%, 20% or 40% in the ad valorem rate, based on the total volume of alcohol supplied in the preceding calendar year, subject to a limit of 250,000 liters.
- For tobacco products with a regulated retail sale price, the reference value will correspond, through December 31, 2027, to 15% of the retail sale price.
Supplementary rules for the IS
- Assisted assessment: the Brazilian Federal Revenue Service may present the IS balance based on electronic tax documents and information relating to the settlement of tax liabilities, through an assisted assessment mechanism similar to that established for IBS and CBS purposes. Confirmation or adjustment by the taxpayer constitutes an acknowledgment of the tax liability. If the taxpayer does not respond within the applicable period, the assessed balance will be presumed correct and the tax credit will be deemed constituted.
- Settlement of tax liabilities: IS liabilities may be settled through payment by the taxpayer, split payment, payment by the liable party, deductions relating to returns or offsetting pursuant to Articles 73 and 74 of Law No. 9,430/1996.
Next steps
The Provisional Measure must be reviewed by the National Congress in order to be converted into law and may be amended during the legislative process.
Under the Provisional Measure, the Federal Executive Branch must submit to the National Congress, by May 31, 2027, a bill establishing the IS rates applicable as of January 1, 2028.
In parallel, the Federal Government announced the submission of a proposed constitutional amendment to allow the temporary continuation of the IPI on goods that are harmful to health or the environment until the IS begins to produce effects.
Companies should assess the impact of the new rules on their operations and implement the necessary adjustments for the introduction of the IS.
