# Brazil Sets ‘Sin Tax’ Rates for 2027, With Cigarettes at 66.7% and Alcohol at Up to 24% *New excise tax takes effect in February, covering soft drinks, vehicles and gambling. Extracted minerals, including oil and iron ore, will face a zero rate during the first year.* - Published: 2026-11-05 - Section: Insights - URL: https://brazilstockguide.com/insights/brazil-sets-sin-tax-rates-for-2027-with-cigarettes-at-66-7-and-alcohol-at-up-to-24/ ![](https://i0.wp.com/brazilstockguide.com/wp-content/uploads/2026/11/Mesa-de-Bar-com-Cerveja-e-Jogos%D5%B5%D5%A1%D5%AF.png?fit=1536%2C1024&ssl=1) **By Brazil Stock Guide —** Brazilian President Luiz Inácio Lula da Silva’s government has set the rates for a new selective excise tax, widely known as the “sin tax,” which will take effect on February 2, 2027. The levy will cover cigarettes, alcoholic beverages, soft drinks, vehicles, aircraft, boats and gambling activities. Extracted minerals, including oil and iron ore, will face a zero rate during the first year of implementation. The rules are contained in Provisional Measure 1,399, published in an extraordinary edition of Brazil’s Official Gazette. The Selective Tax, known locally as *Imposto Seletivo*, was introduced under the country’s 2023 tax reform to discourage consumption of products considered harmful to public health or the environment. According to the government, the rates established for 2027 are designed to broadly preserve the existing tax burden under the Industrialized Products Tax (IPI), which the new levy will replace for the affected categories. The percentages apply to tax bases defined by law and do not necessarily represent the share of the final retail price paid by consumers. #### Cigarettes, Alcohol and Soft Drinks Cigarettes will be subject to a 66.7% ad valorem tax, calculated as a percentage of the applicable tax base, plus a fixed charge of R$3.50 per pack of 20 cigarettes. Other tobacco and smoking products covered by the measure will face a 37.5% rate, without the additional fixed charge applied to cigarettes and cigarillos. Alcoholic beverages will be taxed at different rates depending on their classification. Malt beer will face a 4.2% rate, while standard wines and certain fermented beverages will be taxed at 8%. Vermouth will carry a 12% rate, and fortified wines, including Port, Madeira and Sherry, will be taxed at 16%. Certain sugarcane spirits, including categories covering cachaça, Brazil’s traditional distilled spirit, will face a 20% rate. Other spirits, depending on their classification, will be taxed at rates of up to 24%. The measure also provides preferential treatment for small alcoholic beverage producers. Depending on their annual production volume, smaller breweries, wineries and distilleries may qualify for tax-rate reductions ranging from 10% to 40%, subject to specific eligibility requirements. Soft drinks and other sugar-sweetened beverages falling within the categories specified by the measure will face a 2.6% rate. The levy forms part of the government’s broader effort to tax products associated with health risks, although the initial rates largely reflect the existing IPI framework during the transition. #### Vehicle Taxes Will Reflect Environmental Performance Brazil’s automotive industry will be subject to a variable tax structure based on vehicle characteristics. Passenger cars will have a base rate of 6.3%, adjusted upward or downward according to fuel type, energy efficiency, engine power, safety features and recyclability. A conversion factor of 1.21 will then be applied to the adjusted rate. Electric vehicles and certain ethanol-powered or flex-fuel hybrid models may qualify for lower rates, while vehicles powered exclusively by gasoline or diesel will face additional charges. The measure also provides a zero rate for certain environmentally sustainable models certified by Brazil’s Ministry of Development, Industry, Trade and Services. Tax exemptions will also apply to qualifying vehicles purchased by people with disabilities, individuals with autism spectrum disorder and taxi drivers, provided they meet the legal requirements. Trucks with a gross vehicle weight of at least 3,500 kilograms will be excluded from the tax. Pickup trucks, however, will not qualify for this exemption, regardless of their weight. Aircraft covered by the measure will face a 6.8% rate, while certain motorboats will be taxed at 12%. Other motor-powered recreational and sports vessels will carry a 7.8% rate. Aircraft and boats powered by electric motors or other technologies that produce no direct carbon dioxide emissions may qualify for a zero rate. #### Mining Gets a Zero Rate, While Gambling Faces 0.5% One of the most significant provisions for Brazil’s commodities sector is the decision to set the tax rate on extracted minerals at zero through December 31, 2027. The measure effectively shields products such as crude oil, iron ore, natural gas and coal from the new levy during the transition period. These commodities fall within the broader scope of mineral products covered by the Selective Tax framework. The decision highlights the temporary nature of the initial rules. Although the tax is intended partly to discourage environmentally harmful activities, the effective taxation of extracted minerals will be left to the next phase of the reform, when permanent rates are expected to be established. For lotteries and other legally defined betting activities, including certain forms of gambling, the government has set a 0.5% rate. The Selective Tax will apply separately from other taxes and sector-specific regulations governing these activities. The measure also introduces adjustment factors for imported goods, intended to account for differences between the taxable bases of domestic and foreign products. Certain imported alcoholic and sugar-sweetened beverages will be subject to a factor of 1.45, while imported vehicles, aircraft and boats will face a factor of 1.17. These multipliers will be used in determining the applicable Selective Tax rates under the rules established by the legislation. #### Government Aims to Keep Overall Tax Burden Unchanged Brazil’s Finance Ministry maintains that the gradual introduction of the Selective Tax should not increase the country’s overall tax burden in 2027. Under the tax reform framework, projected revenue from the new levy will be incorporated into the calculation of the reference rate for the Contribution on Goods and Services (CBS), a new federal consumption tax, allowing that rate to be reduced accordingly. The Selective Tax will take effect on February 2, 2027, to comply with Brazil’s constitutional requirement that certain tax changes observe a minimum 90-day period between publication and enforcement. To avoid a gap in taxation during January, the government has also announced plans to submit a constitutional amendment extending the application of the existing IPI to affected products until the new tax takes effect. The framework established by the provisional measure is temporary. By May 31, 2027, the executive branch must submit legislation to Congress setting the permanent Selective Tax rates, which are scheduled to take effect on January 1, 2028. The provisional measure has immediate legal force but remains subject to congressional approval. Lawmakers may amend the rates and conditions during the legislative process. For companies operating in the affected sectors, the main change in 2027 will be the transition to a new taxation framework, which will not necessarily translate into immediate retail price increases. The larger debate over the actual cost of Brazil’s “sin tax” for businesses and consumers is likely to come when Congress considers the permanent rates for 2028 and beyond. --- Source: Brazil Stock Guide, https://brazilstockguide.com/insights/brazil-sets-sin-tax-rates-for-2027-with-cigarettes-at-66-7-and-alcohol-at-up-to-24/