Brazil's Selective Tax Reshapes Classic Car Landscape
Brazil's new Imposto Seletivo tax, effective February 2027, will exempt 12 specific 1.0-liter manual models and includes special rates for disability-adapted vehicles, directly impacting classic car classification and ownership costs.
The Brazilian government has published a provisional measure that will reshape the tax environment for vehicles, including classic cars. Provisional Measure No. 1,399/2026 2026, establishes the Imposto Seletivo (IS), a new selective tax set to take effect on February 2, 2027. This tax aims to discourage consumption of polluting goods and will apply specific rates to motor vehicles based on environmental and safety criteria, partially replacing the existing IPI system.
Tax rates are calculated using conversion coefficients derived from the current industrial product tax. The IS structure uses a base rate of 6.3% for automobiles and 3.9% for light commercial vehicles. The government intends for the revenue from this new tax to be offset by a reduction in the base rate of the Contribution on Goods and Services, maintaining overall tax neutrality.
Key implementation timeline and legislative requirements
The Imposto Seletivo is scheduled to begin on February 2, 2027. Its implementation, however, is contingent on congressional approval. The provisional measure must be ratified by Brazil's Congress by the end of December 2026. If this deadline is not met, the tax could face significant legal uncertainty and may not take effect as planned.
Exemptions and special categories for classic vehicles
The new tax framework includes specific exemptions that are highly relevant for collectors and buyers. Twelve vehicle models equipped with 1.0-liter engines and manual transmissions will be entirely exempt from the IS. This list encompasses several popular entry-level models.
| Manufacturer | Model | Variants Exempted |
|---|---|---|
| Chevrolet | Onix | MT, MT Turbo, Eco |
| Chevrolet | Onix Plus | MT, MT Turbo, Eco |
| Citroën | Basalt | Feel |
| Citroën | C3 | Live Go, Live Plus, Feel Plus |
| Fiat | Argo | Drive 1.0 |
| Fiat | Mobi | Like, Trekking |
| Hyundai | HB20 | Comfort 1.0 MT, Limited 1.0 MT |
| Hyundai | HB20S | Comfort 1.0 MT, Limited 1.0 MT |
| Renault | Kardian | Vibe |
| Renault | Kwid | Evolution, Techno, Outsider |
| Volkswagen | Polo | Track, Robust, TSI 1.0 MT |
| Volkswagen | Tera | 1.0 MPI |
Also, the IS establishes a zero tax rate for vehicles purchased by taxi drivers, individuals with disabilities, and people with autism spectrum disorder. This provision effectively continues the benefits previously offered under the Carro Sustentável program. The tax rate on mineral resource extraction will remain at zero until the end of 2027.
Tax structure and revenue neutrality approach
The selective tax applies different base rates depending on vehicle type. Passenger automobiles face a 6.3% rate, while light commercial cargo vehicles are subject to a 3.9% rate. The government's stated goal is tax neutrality, meaning the new revenue from the IS will be counterbalanced by lowering the CBS rate elsewhere. Additional import factors are set at 1.17 for vehicles, vessels, and aircraft, and 1.45 for alcoholic and sugar-sweetened beverages.
The future of this tax now rests with Brazil's legislature. For the Imposto Seletivo to be applied as scheduled in 2027, Congress must approve Medida Provisória 1.399/2026 by December 2026.
