President Luiz Inácio Lula da Silva signed the law that paves the way for tax cuts on fuels in 2026. The sanction was published this Friday in the Official Gazette. The new law does not automatically reduce taxes, but authorizes the government to use extra revenue obtained from high oil prices to offset the loss of tax revenue if it decides to exempt diesel, biodiesel, gasoline, ethanol or aviation kerosene from taxes.
The measure was proposed to contain the impact of the war in the Middle East on fuel prices. Normally, an exemption needs to be compensated by creating or increasing another tax. However, in 2026, the government may use for this purpose the extraordinary revenue from royalties and special participations from oil exploration.
Lula kept the "jabutis" added by Congress — provisions unrelated to the original proposal. Among them are benefits for ethanol producers, fertilizers and critical minerals, in addition to measures related to the 2027 Women's World Cup.
