Government Sets Selective Tax Rate to Zero for Mining and Oil in 2027

The federal government has set a 0% tax rate for the Selective Tax on mineral extraction throughout 2027. The decision, formalized by Provisional Measure No. 1,399/2026, eliminates the additional tax levy on iron ore, crude oil, and natural gas during the first transition year of the tax reform.

The issuance of Provisional Measure No. 1,399/2026, published by the government in an extra edition of the federal official gazette, established the collection rules for the new tax starting February 2, 2027. For the mineral and hydrocarbon extraction sector, the text zeros out the levy through December 31, 2027, addressing appeals made by operational entities in Brazilian industry.

This temporary exclusion removes an immediate cash outflow from the radar that had concerned shareholders of major commodity exporting companies. Because the taxable event occurs at the moment of mineral extraction, setting the zero rate for 2027 ensures no additional funds will be collected by the government throughout the next fiscal year.

Why Did the Government Zero Out the Selective Tax for Mining in 2027?

The zero rate in the first year responds to formal warnings presented by institutions in the extractive sector. In statements sent to the executive branch, the National Industry Confederation (CNI) and the Brazilian Mining Institute (Ibram) warned that taxing mineral extraction with the Selective Tax right at the launch of the new regime would reduce the competitiveness of Brazilian exports against international competitors in Australia and the Middle East.

Supplementary Law No. 214/2025, which regulates the tax within the new consumption system, included iron ore, its concentrates, crude oil, and natural gas within the scope of the Selective Tax. The legislation set a maximum collection cap of 0.25% on the value of the extracted good. However, the text delegated the authority to define effective rates to the executive branch via provisional measure.

In drafting the regulation, the Ministry of Finance chose to eliminate the levy on the mineral and hydrocarbon sector in its inaugural year. This decision aligns the extractive transition with the schedule adopted for other economic segments, bringing relief to investors in the domestic financial market. If you are following the implementation of the reform, it is also worth checking out the details of the provisional measure on the Sin Tax to understand the impact on other productive sectors.

What Changes for Heavyweight Stocks Like VALE3, CMIN3, and PETR4?

The measure brings immediate operational clarity to the companies with the heaviest weight on the B3. Taxing the levy at the time of extraction created the risk of a direct increase in production costs even before the commercialization or export of commodities. For the state-controlled oil company and the Brazilian multinational miner, the zero tariff preserves EBITDA margins estimated for 2027.

Vale (VALE3) shares had been accumulating downward revisions in operational cash flow projections given the global iron ore scenario. Maintaining the fiscal cost of extraction without additions removes marginal pressure that could further compromise returns to shareholders. This predictability is relevant in a context where the market was already monitoring Vale's dividend outlook relative to its capital expenditure budget.

In the pure-play iron extraction segment, the tax relief protects miners with tighter margins. Recently, we observed CSN Mineração shares surge significantly on the exchange, driven by shifts in the commodities market. The guarantee of a zero tax removes uncertainties surrounding the 2027 cost structure for companies such as CMIN3, Petrobras (PETR4), and Prio (PRIO3).

Is the Exemption Permanent, or Will Mining Pay the Selective Tax in 2028?

Provisional Measure No. 1,399/2026 exempted extraction specifically for the 2027 fiscal year. The legal text does not remove the mining and oil sectors from the roster of activities subject to the Selective Tax established by Supplementary Law No. 214/2025. This is a tax grace period granted by the government to calibrate the reform's revenue collection.

This means that starting in 2028, the rate charged on the sector may be revised by the executive branch. Should the government choose to raise the rate up to the legal cap of 0.25%, the new rate will take effect the following year, pending new regulation via decree or provisional measure. The future scenario will depend on how the government balances the federal budget and the rates set for other sectors under the Selective Tax during the transition process.

How Did the Ibovespa React to the Publication of the Provisional Measure?

The Brazilian stock market received the news positively. On the day the complementary rules were published, the Ibovespa closed up 1.39%, reaching 168,498.45 points. The relief in stock prices was led precisely by companies tied to mineral resource extraction and energy.

The elimination of short-term tax uncertainties unlocks the pricing of companies that carry heavy weight in the stock index. Together, miners and oil companies represent a significant portion of the Ibovespa's theoretical portfolio. When the rule removes potential cost increases for these giants, buying flows from institutional and foreign investors tend to strengthen.

Furthermore, the tax reform movement has been monitored by equity analysts tracking the consolidated fiscal impact on the Brazilian economy. The macroeconomic discussion is broad and includes parallel debates such as discussions around the CBS tax rate in the National Congress, a central element for defining the dual VAT in subsequent years.

What Should Investors Monitor Going Forward?

With the 2027 rule established, the retail investor's focus shifts. Monitoring moves away from immediate tax costs and toward medium-term political negotiations and the operational fundamentals of each company.