Understanding the Selective Tax for Brazil

The Brazil government has proposed a regulation to impose a category of tax called selective tax (IS), which is levied on certain categories of goods and services such as those considered harmful to health or the environment. The selective tax is calculated on top of the net price and is not included in its own taxable basis, but in the taxable basis of the components of VAT including State and City Level Tax - Goods and Services (IBS) and Federal Contribution - Goods and Services (CBS). During the transition period towards adoption of the complete Brazil tax reform, this tax will also be included in the taxable basis of ICMS.