Government relaxes rules for ethanol producers benefiting from subsidies and extends deadline.
A new regulation recently published by the federal government promises to bring relief to ethanol producers. Decree 13127/2026, published in an extra edition of the Official Gazette of the Union, not only extends the validity period of the economic subsidy intended for the sector, but also simplifies the requirements for proving the application of discounts.
The measure, originally scheduled to last for 30 days starting September 16, now extends until October 9, with the possibility of further extensions at the discretion of the Ministry of Finance. This flexibility aims to ensure that ethanol, an important Brazilian biofuel, maintains its competitiveness against gasoline, keeping pace with any tax reductions on the petroleum derivative.
New Compliance Rules
One of the most significant changes introduced by the new decree lies in how producers must demonstrate the use of the subsidy. Previously, it was mandatory to deduct the exact amount of the subsidy from the selling price and detail the discount on electronic invoices. From now on, the focus shifts to reporting the final price of the subsidized fuel, making it easier for the government to monitor.
The requirement to state on invoices that the producer has joined the economic subsidy program remains, but the complexity of demonstrating the discount is significantly reduced. This change seeks to streamline the administrative process and reduce bureaucracy for companies in the sector.
Origin of the Subsidy and Economic Impact
The ethanol subsidy is part of a broader package of measures regulated by Decree 13119/2026, which in turn details Complementary Law 235/2026. This legislation, stemming from the Fuels Bill (PLC 114/2025), authorized the compensation of tax reliefs with extraordinary revenues from the oil and gas sector.
In total, BRL 1.2 billion has been allocated for direct subsidies to ethanol producers. Additionally, BRL 750 million in PIS/Cofins tax balances has been made available for compensation, reinforcing financial support for the sugarcane and ethanol sector.
The extension and simplification of the rules represent an important step toward the stability and competitiveness of Brazil’s biofuel market. These adjustments are expected to facilitate mill operations and contribute to maintaining attractive prices for the final consumer, aligning the ethanol sector with national energy strategy.
