Brazil tax reform delays selective tax and prompts corporate restructuring

Brazil is undergoing significant fiscal and structural shifts due to ongoing tax reforms. The government has announced new fiscal rules aimed at restructuring tax policy to increase revenue, promote income distribution, and ensure public account sustainability. These changes include a progressive income tax rate and simplified taxation for small and medium-sized enterprises.

Specifically, the implementation of the Selective Tax (Imposto Seletivo)—often referred to as the ‘sin tax’—has been delayed. Originally intended to begin on January 1, 2027, the tax on products harmful to health or the environment, such as tobacco, alcohol, and certain vehicles, will likely only start in February 2027 or later. This delay stems from the government's failure to meet the legal deadline for publishing specific tax rates.

In response to these shifts, Brazilian entrepreneurs are actively reviewing their corporate holdings. Business leaders are seeking to restructure for greater tax efficiency and legal security, particularly regarding how new rules will impact dividends, profits, and asset management.