Selective Tax and differentiated regimes in Tax Reform: risks, exceptions and how to prepare

The Selective Tax targets harmful products. Differentiated regimes benefit strategic sectors. Understand how these mechanisms work.

The Selective Tax (IS) is an additional federal tax applied ON TOP of CBS and IBS for products harmful to health or environment. Affected businesses will face significantly higher total tax burden.

What is the Selective Tax?

Also called "sin tax", the Selective Tax (IS) is an additional federal tax on products and services harmful to health or the environment. It aims to discourage consumption and generate revenue for healthcare and environmental policies.

Products Subject to IS

Alcoholic beverages
Tobacco and cigarettes
Sugary drinks
Vehicles (depending on engine/emissions)
Extraction of non-renewable resources (mining)
Other products to be defined by complementary law

IS Characteristics

Extrafiscal

Goal is behavior change, not just revenue generation.

Non-Cumulative

Follows same non-cumulative logic as CBS/IBS (with credits).

Variable Rates

Different rates by product category and harm level.

Progressive Implementation

Gradual rollout alongside general reform timeline.

Differentiated Regimes (Reduced Rates)

To avoid excessive burden on essential sectors, the reform includes reduced CBS/IBS rates for:

Healthcare

60% reduction (effective rate ~10.6% instead of 26.5%): medicines, medical devices, health services.

Education

60% reduction: educational services, courses, training.

Public Transport

40-60% reduction: urban and interstate collective transport.

Culture and Sports

40-60% reduction: artistic, cultural and sports activities.

National Basic Basket

Zero rate: Essential food products for low-income population.

Practical Impacts

For IS-Subject Companies

Higher total tax burden: CBS + IBS + IS
Product reformulation incentive: Lower sugar, smaller engines, greener alternatives
Competitive repositioning: Companies that adapt faster gain market share

For Reduced-Rate Beneficiaries

Significant competitive advantage: Lower costs than sectors at standard rate
Product classification critical: Ensuring all eligible products/services are correctly classified
Documentation: Proper records to justify reduced rate application

Conclusion

Selective Tax and differentiated regimes add complexity but also strategic opportunities. Companies that understand and adapt to these mechanisms early will have clear competitive advantages.