The Selective Tax (Imposto Seletivo): Brazil's New 'Sin Tax' Explained
Short answer. Brazil’s tax reform created the Selective Tax (Imposto Seletivo) — a federal “sin tax” on goods and services harmful to health or the environment. Its purpose is to discourage consumption (extrafiscal), not to raise revenue, and it begins being charged in 2027, alongside the new IBS/CBS dual VAT.
What it is and why it exists
Introduced by EC 132/2023 and regulated by LC 214/2025, the Selective Tax is a federal, single-incidence tax that targets specific harmful categories. Its logic is extrafiscal — to steer behavior — so it sits on top of the dual VAT rather than replacing any of it. [Source: CF/1988 art. 153, VIII (added by EC 132/2023); LC 214/2025 — Planalto]
What it covers
The tax applies to a list defined in law, with notable categories including:
- Tobacco products and alcoholic beverages;
- Sugary drinks;
- Fossil fuels;
- Vehicles, vessels and aircraft (with environmental/efficiency criteria);
- Mineral extraction (with a cap of 0.25% for minerals);
- Lotteries and fantasy sport.
The triggering events include production, extraction, sale, auction, the manufacturer’s own consumption, and importation — and the tax is charged once, at the first supply. [Source: LC 214/2025 — Planalto]
When it starts
The Selective Tax begins to be charged in 2027, the same year CBS starts — within the broader 2026–2033 reform transition. [Source: LC 214/2025; gov.br/fazenda — Reforma Tributária]
Practical takeaway
For most foreign companies, the Selective Tax is sector-specific: if your product line does not touch the harmful categories, it will not change your burden. But if you deal in tobacco, alcohol, sugary drinks, fuels, vehicles or mining, model it as a distinct layer on top of IBS/CBS from 2027, and confirm the specific rates per product as they are regulated.
FAQ
What is the Imposto Seletivo? A federal “sin tax” on goods and services harmful to health or the environment, created by the tax reform.
What does it tax? Categories such as tobacco, alcohol, sugary drinks, fossil fuels, vehicles/vessels/aircraft, mineral extraction (capped at 0.25%), and lotteries/fantasy sport.
When does it start and does it replace the VAT? It starts being charged in 2027 and sits alongside IBS/CBS — it does not replace them.
Sources
Official sources reviewed for this brief: the constitutional basis of the Selective Tax (EC 132/2023), its regulation (Lei Complementar 214/2025), and the Ministry of Finance’s tax-reform portal.