Selective Tax 2027: Rates From Diesel to Electric Vehicles

In 2027, diesel-powered cars will face the highest Selective Tax. A provisional measure published by the government on November 4 sets rates as high as 30% for these models, starting at 2.6% for electric vehicles. For consumers, the change is smaller than it appears: according to tax attorneys interviewed by InfoMoney, the tax burden was calibrated to match current IPI levels, leaving potential price hikes for 2028.

Who Will Pay More Selective Tax in 2027?

Among cars, diesel models. Outside of automobiles, cigarettes and distilled spirits. Provisional Measure (MP) 1,399/2026 starts from a base rate of 6.3% for passenger cars, offering a 2-percentage-point discount for electric and plug-in flex-fuel or ethanol hybrids, and a 12-percentage-point surcharge for diesel vehicles. Accounting for power and efficiency, rates could reach up to 30% for diesel cars, while electric vehicles will start at 2.6%.

The logic relies on a trade-off. Under the tax reform, IPI rates for vehicles will drop to zero in 2027, and the Selective Tax will inherit the rules of the Green IPI, created in July 2025. Because the new tax has a different calculation base, the provisional measure dictates that the percentages be multiplied by 1.21. This move was already signaled by the Ministry of Finance, as we reported when the Ministry defined the rates and postponed the provisional measure until after the runoff election.

On the same table, a diesel car can face more than 11 times the rate of an electric vehicleOur calculation: maximum diesel rate divided by the electric vehicle floor cited in the MP.

The engine type adjusts the base rate upward or downward in the following order:

Pickups pay less than SUVs. Freight transport vehicles, such as pickups, vans, and utility vehicles, carry a base rate of 3.9% with smaller adjustments: diesel adds 2.5 points and gasoline adds 2.25. A diesel passenger car in the same power bracket, such as an SUV, will have a rate of 25.8%. This leads to another question: if the government wants to reward clean cars, why do electric vehicles still face a tax?

Why Do Electric Cars Still Pay Tax?

Because the discount applies to the rate rather than offering a full exemption. According to Portal do Trânsito, the 2-percentage-point reduction alone does not eliminate the tax entirely. Zero tax applies only to those meeting extra requirements, as the tax is also waived for vehicles registered with a sustainable version. Sources disagree on the final figure for a standard electric car: one cites a floor of 2.6%, while another, in a hypothetical example, estimates an electric car would pay 5.2% in Selective Tax. The difference stems from other criteria (power, efficiency) that vary across vehicle versions.

Vehicles purchased by people with disabilities, individuals with autism spectrum disorder, and taxi drivers also receive a zero rate. Additionally, the provisional measure excludes trucks from the Selective Tax. Will window stickers go up in February?

Will Cars, Beer, and Cigarettes Get More Expensive in February?

As a rule, costs will change very little from current levels. The rates take effect on February 1, 2027 (with practical impact starting on February 2) and replicate current IPI levels for beverages and tobacco as well. The jump seen in distilled spirits is an optical illusion: alcoholic beverages previously carried an IPI ranging from 3.9% to 19.5%, and the higher Selective Tax bracket stems from the adjustment factor designed to maintain the existing tax burden.

The detail that could drive up prices lies in how the tax is collected, as attorney Mônica Pereira Coelho, a partner at Barros de Arruda Advogados, explained to InfoMoney:

“The Selective Tax will be collected only once in the supply chain: upon sale by the manufacturer, at import, or upon extraction.”Mônica Pereira Coelho, to InfoMoney

According to Coelho, because the tax does not generate credits for subsequent stages, it functions as a cost and tends to be passed on to consumer prices. Furthermore, the Selective Tax enters the calculation base for other taxes introduced by the reform. Tax attorneys interviewed by Conjur note that the cascading effect on the CBS, IBS, and ICMS was not addressed by the provisional measure. For cigarettes and beverages, our summary of what the government's sin tax provisional measure changes in 2027 details exemptions by product. For investors, however, the primary question centers on the balance sheets of the companies selling these goods.

What Changes for Ambev, Petrobras, and Vale Shareholders?

For Ambev (ABEV3), the short-term outlook has become clearer, which is a positive sign. JPMorgan classifies the proposal as a de-risking event for Ambev, noting that regulation has postponed the definition of taxation based on alcohol content—considered the highest-impact factor—until 2028. The bank calculates that if the CBS rate is set at 11.3%, Ambev would need to adjust beer prices by roughly 1.3% to remain neutral in 2027. Safra estimates that the tax burden on beer sales will rise by 1 to 2 percentage points. The market shrugged off the news: around 11:00 AM on the day the provisional measure was released, shares fell 0.20% to R$ 15.22.

The risk has not disappeared. JPMorgan projects that the tax reform will have a 3% impact on Ebitda for Ambev's Brazilian beer operations through 2033, peaking at 5.4% in 2032. Goldman Sachs points to uncertainties regarding the Manaus Free Trade Zone, which is significant for soft drink manufacturers.

What about diesel at the pump? The 2027 Selective Tax will not apply to fuel. Petroleum, gas, iron ore, and coal are taxed at extraction, with rates reduced to zero through December 31, 2027. For Petrobras and Vale, this represents a reprieve rather than an exemption: according to the Chief of Staff's Office, this relief will last until Congress establishes a permanent regime. Tax attorneys criticize the provisional measure for focusing more on revenue collection than on discouraging consumption, a debate connected to the limits of who the government can tax to raise more revenue. Consequently, the timeline matters more than today's rates.

What Can Still Change and When?

Everything depends on Congress across two upcoming votes. Congress will review the measure and may alter the rates. Afterward, definitive legislation will determine whether 2028 brings a heavier tax burden.

In short, 2027 will be a transition year, with diesel facing higher taxes and everything else remaining largely status quo. The decision that could move product and stock prices is scheduled for late May.