On December 29 2017, Law 13,586/2017 (dated December 28
2017) was published providing for the conversion of
Provisionary Measure 795/2017 (PM 795/2017) into law. The
amendments include important developments regarding the
taxation of oil and gas arrangements.
By means of background regarding the changes included in
Provisionary Measure 795/2017, please refer to our tax insight
dated October 16 2017: https://pwc.to/2ELVCCb
During the process of conversion into Law 13,586/2017, the
final version of the text included certain modifications to the
previous PM 795/2017, including the following:
- The removal of the previous December 31
2022 limitation in relation to accelerated depreciation
deductions for expenses incurred in exploration and
production of oil and gas deposits – the converted
law provides no limitation.
- The inclusion of a requirement that the
special import regime (providing for the suspension of
payment of federal taxes on assets imported on a definitive
basis and destined for certain activities) should not apply
to the importation of vessels destined for coastal shipping
and domestic navigation, as well as port and maritime
- The removal of the Brazilian tax
authorities' (RFB) power to provide a 12-month extension to
the three-year period the taxpayer has to use the imported
assets (imported on a definitive basis) for the designated
and approved purpose, in order not to lose the import tax
- The inclusion of a requirement that
taxpayers taking advantage of the special federal tax
suspension regime on acquisitions in the domestic market must
use the assets acquired for the designated and approved
purposes within three years, in order not to lose the
suspension. The law provides the RFB with the power to
provide a 12-month extension to this period.
- The special import regimes providing for a
suspension of federal taxes on importations both on a
temporary and definitive basis were extended from July 31
2022 under PM 795/2017 to December 31 2040 under the
On January 2 2018, the RFB also published Normative
Instructions (NI) 1,778/201, NI 1,780/2017 and NI 1,781/2017
(all dated December 29 2017) to regulate the relevant
legislative amendments and Decree 9,128/2017.
More specifically, NI 1,778 provides further detail in
relation to the tax treatment of activities of exploration,
development and production of oil and natural gas from an
operational perspective. It includes how to record these
expenses and how to perform the calculation for the purposes of
determining whether the limits related to tripartite contracts
have been respected. On the other hand, NI 1,780 regulates the
process for the settlement of previous tax disputes relating to
periods before December 31 2014.
Finally, NI 1,781/2017 provides further regulation and
detail in relation to the procedures regarding the special
import regimes (Repetro-Sped). The instruction revokes NI
1,743/2017 and amends NI 1,415/2013 and NI 1,600/2015
– the existing regulations related to this topic. From
a transitional perspective, NI 1,781 confirms the
- Requests concerning Repetro benefits
submitted up to December 31 2017 should be analysed and
judged on the rules in place at the time of the relevant
request (Repetro). Requests after December 31 2017 apply the
legislation that specifically deals with Repetro-Sped.
- Assets admitted up to December 31 2017, or
that fall within the scope of an application submitted by
this date, are subject to the previous Repetro rules until
December 31 2020. These assets may migrate to the rules under
Repetro-Sped following a simplified procedure up until
December 31 2018.
PwC observation: The developments are broad-reaching.
Therefore taxpayers with operations or who are considering
operations in the industry should analyse how the changes could
impact their business.
Jaime Andrade (firstname.lastname@example.org)
and Mark Conomy (email@example.com)