After months of negotiations with the affected sectors, the federal government published, on Wednesday (4), Provisional Measure (MP) 1,399/2026, which establishes the rates of the Selective Tax (IS), known as the “Sin Tax”.
Created by the tax reform, the tax will apply to products and services considered harmful to health or the environment, such as cigarettes, alcoholic beverages, soft drinks, vehicles and certain betting activities.
The charge is scheduled to begin in February 2027, with temporary percentages that should remain in effect until December of the same year. From 2028 onwards, the tax will have definitive rates, which will still be discussed by the federal government and the National Congress.
The measure establishes specific rules for each product category, including criteria related to the alcohol content of drinks and the energy efficiency of vehicles. Check out what changes and how taxation will work.
What is the tax?
The Selective Tax is a federal tax created by the Tax Reform with the aim of discouraging the consumption of goods and services that cause negative impacts on health or the environment.
Popularly known as the “Sin Tax”, the IS will be applied in addition to other taxes provided for in the new Brazilian tax structure.
Among the products and activities subject to charging are:
Cigarettes and other smoking products;
Alcoholic drinks;
Sugary drinks, such as soda;
Motor vehicles;
Aircraft and vessels;
Certain mineral goods, such as oil, iron ore, coal and natural gas;
Prediction contests, such as lotteries and betting types;
Fantasy sports, a form of virtual sports competition.
The tax may be levied on the production, extraction, commercialization or import of products covered by the legislation. The charge will be made once throughout the economic chain, with no possibility of using credits from previous operations.
What are the rates?
The MP establishes temporary percentages for the period from February to December 2027. As a rule, the rates were defined based on the taxation currently applied by the Tax on Industrialized Products (IPI).
Check the predicted percentages for each category:
Product or activity Tax Rate Cigarettes and cigarillos 66.7% on 15% of the price + R$ 3.50 per twenty Other smoking products 37.5% Sugary drinks 2.6% Malt beers 4.2% Wines and other fermented drinks 8% Vermouths and similar drinks 12% Port and Madeira wines 16% Alcoholic drinks with a higher content 14% 16% Refreshing drinks with an alcohol content of less than 8% 16% Sugarcane rum, except molasses 20% Other distilled drinks 24% Prediction competitions (games of chance) 0.5% Airplanes and helicopters 6.8% Motor boats 12% Other pleasure or motor sport boats 7.8%
Source: MP 1,399/2026
In the case of cigarettes and cigarillos, taxation includes a percentage portion and a fixed portion of R$3.50 per twenty, corresponding to a pack of 20 units.
For alcoholic beverages, the charge varies according to the product category and alcohol content. The proposal is that drinks with a higher alcohol concentration are subject to higher taxation.
Vehicles
Car taxation will have a different system from other categories. For passenger cars, the MP establishes a base rate of 6.3%, which can be adjusted according to technical and environmental characteristics.
The definition of the final percentage will take into account five criteria:
Power source and propulsion technology;
Energy efficiency;
Vehicle power;
Structural performance and driving assistance technologies;
Recyclability.
After applying the adjustments provided for in the measurement, the result will be multiplied by the conversion factor of 1.21.
In practice, vehicles with more sustainable characteristics may receive reductions in taxation, while certain models may have increases. The final rate, therefore, will not be the same for all cars.
For light commercial vehicles, the expected base rate is 3.9%, also subject to adjustments.
Zero rate
The provisional measure establishes special conditions for certain vehicles and categories of buyers.
Among the expected zero-rate cases are:
People with disabilities (PCD): vehicles purchased by people with disabilities;
People with ASD: cars purchased by people with Autism Spectrum Disorder;
Taxi drivers: vehicles used by professional drivers in the rental category, in accordance with the conditions set out in legislation;
Sustainable vehicles: models that meet the sustainability criteria and have the registration required by the measure;
Trucks: vehicles with a total gross weight equal to or greater than 3,500 kilograms, except pickup trucks;
Armed Forces and public security: aircraft, vessels and vehicles intended for the operational use of these bodies, subject to legal conditions.
The MP also provides for a zero rate for certain mineral assets during the 2027 transition period.
When does billing start?
The Selective Tax will be implemented gradually, in stages that accompany the transition of the Tax Reform.
Here's what the calendar will look like:
Until December 2026: the current IPI taxation model remains;
January 2027: the government intends to maintain the incidence of IPI on products covered by the Selective Tax, upon approval of a Proposed Amendment to the Constitution (PEC);
February to December 2027: Selective Tax collection begins, with temporary rates;
From January 2028: the permanent model should come into force, with definitive percentages.
The government must submit to the National Congress, by May 31, 2027, a bill with the rates that will be applied from 2028 onwards.
What changes in 2028?
The rates established for 2027 are temporary and were defined, as a rule, to maintain the level of taxation currently applied by the IPI.
From 2028 onwards, the percentages may be changed according to the permanent rules of the Selective Tax.
This means that products such as cigarettes, alcoholic beverages and vehicles may have increases or reductions in taxation, depending on the rates approved by the National Congress.
The government's intention is to use the tax as an instrument to discourage the consumption of products that are harmful to health and the environment.
Furthermore, the extraction of mineral goods, such as oil, iron ore, mineral coal and natural gas, will have a zero rate during 2027. The definitive taxation of these products must also be established later.
Why replace the IPI?
The replacement of the Tax on Industrialized Products with the Selective Tax is part of the reorganization of federal taxes on consumption promoted by the Tax Reform.
With the change, the IPI will have its rates reduced to zero for most products, preserving the exceptions provided for in the legislation related to the Manaus Free Zone.
While the IPI has a broader impact on industrialized products, the Selective Tax will have a specific focus on goods and services considered harmful to health or the environment.
For 2027, the government's forecast is to raise R$41.9 billion with the new tax, according to the Annual Budget Law Project (PLOA).
The transition should occur gradually, with mechanisms designed to avoid sudden changes in the tax burden during tax replacement.
