First rates reduction
Further rates reduction



After several uncertainties, the government has finally cut excise tax (IPI) rates for most products by 35% in an effort to boost the Brazilian economy in the wake of the covid-19 pandemic.

IPI is a federal excise tax that is levied on sales of products by manufacturers and other entities held equal to manufacturers by law, as well as on imports and the subsequent resale of imported products.

As an excise tax, IPI is used to promote or discourage the consumption of certain products. Therefore, its rates vary depending on the tariff codes of such products and whether they are considered essential. The rates may be as low as zero or reach higher rates, such as 300% for cigarettes; however, they generally range from 5% to 20%.

IPI rates are established by the IPI taxable products table (TIPI), which is set by a decree.

First rates reduction

On 25 February 2022, the government cut IPI rates by 25% for most products through Decree 10709/2022. These rates had previously been set out in TIPI/2017, which was approved by Decree 8950/2016. Exceptions apply to passenger transport vehicles, to which an 18.5% reduction was granted, and to tobacco products, for which the rates remained unchanged.

Although the IPI cut was received well, it was most likely decided in a rush as it did not consider that TIPI/2017 was to be revoked without the reduced IPI rates on 1 April 2022 (when the new TIPI/2022 entered into force through Decree 10923/2021).

In view of this, several political discussions arose, including over whether the IPI reduction would be extended to TIPI/2022. In this context, the government announced that further reductions could be made.

While the discussions were ongoing, Decree 11021/2022 was published on 31 March 2022, delaying the effective date of TIPI/2022 to 1 May 2022. Subsequently, Decree 11047/2022 was issued on 14 April 2022. This altered TIPI/2022 to provide new IPI rates, equal to those resulting from the reductions provided for by Decree 10709/2022.

Further rates reduction

Finally, when taxpayers were settled with the IPI rates provided by Decree 11047/2022, Decree 11055/2022 was published on 29 April 2022 to provide for further reductions of the IPI rates of TIPI 2022.

As a result, the IPI rates have been generally reduced by 35% in relation to the ones originally stipulated by TIPI/2017 and TIPI 2022. Exceptions apply, for example, to passenger transport vehicles (which maintained the 18.5% reduction) and tobacco products (which suffered no reductions).

TIPI/2022 entered into force on 1 May 2022 with a substantial IPI rate cut.


Although the intentions behind the IPI reduction were good, some controversies and drawbacks arose. The IPI reduction benefits Brazilian industry by reducing companies' tax burden but also applies to imported products. As a result, this increases their competitiveness in the Brazilian market, which is to the detriment of the local industry.

Additionally, the IPI reduction could jeopardise the benefits applicable to manufacturers located in the Manaus Free Trade Zone (ZFM) in the state of Amazonas. These manufacturers generally benefit from an IPI exemption, provided that certain conditions are met.

The state of Amazonas has already taken measures against Decree 10709/2022 by filing Unconstitutionality Declaratory Action (ADI) 7174. The state has also announced that it intends to challenge the latest reduction made by Decree 11055/2022.

Finally, the political party Solidariedade also challenged the IPI reduction through ADI 7153. Justice Alexandre de Moraes of Brazil's Supreme Federal Court granted a preliminary injunction to suspend this tax reduction on products manufactured in the ZFM.

However, the scope of decision remains unclear. For example, it has not been established whether only the products manufactured in the ZFM will be exempt from the IPI reduction. In this case, although the products are exempt from the IPI, they will grant a manufacturer purchaser a credit calculated with the full rate.

The other scenario is that competing products manufactured outside the ZFM will not benefit from the IPI reduction.

The government's reduction or increase of IPI rates is constitutionally authorised and can be freely made. Therefore, this dispute is unprecedented and needs to be closely followed.

For further information on this topic please contact Gabriel Caldiron Rezende at Machado Associados by telephone (+55 11 3819 4855) or email ([email protected]). The Machado Associados website can be accessed at

An earlier version of this article was published on International Tax Review.