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[BUSINESS] · Brazil · 100 sources

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Brazil Congress approves fuel tax cuts and multi-sector incentives

The Brazilian Congress has advanced a major legislative package, PLP 114/2026, which aims to mitigate the impact of rising international energy prices caused by geopolitical tensions in the Middle East. The bill, which has passed both the Chamber of Deputies and the Senate, provides for federal tax reductions on diesel, biodiesel, gasoline, ethanol, and aviation kerosene.

Beyond fuel, the expanded legislation includes significant fiscal incentives for other sectors. This includes up to R$ 5 billion in tax credits for the domestic fertilizer industry through 2031, incentives for critical minerals and rare earths, and tax benefits related to the 2027 Women's World Cup. To protect the biofuels sector, the text mandates that if gasoline tax reductions reach 30% or more, ethanol taxes must be reduced to zero. Additionally, the project provides up to R$ 1.2 billion in aid for ethanol producers.

To offset the loss in tax revenue, the government will utilize the increased revenue from oil and gas royalties. The bill also introduces fiscal safeguards, including mechanisms to limit public spending growth if a deficit is projected, potentially impacting the constitutional minimum for health spending.

Separately, the federal government has regulated the opening of the free energy market to low-voltage consumers. This transition will begin for industries and businesses in November 2027, and for residential consumers in November 2028, allowing them to choose their electricity providers.

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BNDES · Brazil · Brazilian Chamber of Deputies · Brazilian Congress · Brazilian Senate · Chamber of Deputies · Companhia Nacional de Abastecimento · Conab · FIFA · Laércio Oliveira · Luiz Inácio Lula da Silva · Marussa Boldrin

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