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Brazil: Conversion into law of amendments to the oil and gas tax framework

27 February 2018

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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:

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 navigation support.
  • 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 suspension.
  • 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 converted law.

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 following:

  • 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 Mark Conomy

Jaime Andrade ( and Mark Conomy (

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