Brazil: Tax law changes, for oil and gas industry | KPMG | GLOBAL

Brazil: Tax law changes, incentives for oil and gas industry

Brazil: Tax law changes, for oil and gas industry

Tax law measures offering incentives for taxpayers in the oil and gas industry were enacted with the publication of Law 13,586 in the official gazette in late December 2017. The federal tax authority of Brazil in January 2018 issued “Normative Instructions” (Instrução Normativa) as guidance for implementing the new tax law.

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In Brazil, a “Provisional Measure” (Medida Provisória—MP) is an “act” issued by the president, with the authority of law until later approved by Congress. The Provisional Measure is effective as from its date of publication for a 60-day period, but it may be extended for an additional 60-day period (for a total of 120 days) on a request from Congress. The new tax law—Law 13,586—reflects Medida Provisória 795 (August 2017) in providing tax incentives for the oil and gas industry. Read TaxNewsFlash-Americas

Among the measures or incentives for the oil and gas sector are the following:

  • New rules for exploration and production activity expense deductions 
  • Changes to the rules for exemption from withholding tax for “charter contracts”
  • An extension of a program (REPETRO*) that suspends through 2040 the tax on goods imported into Brazil when used in the exploration, development, and production of oil, natural gas, and other hydrocarbons

*REPETRO is a special system providing benefits on the import and export of goods used in activities of research, exploration, development, and economic exploration of oil and gas in Brazil. Companies that have authorization or concessions to conduct these activities in Brazil may benefit from the REPETRO system, provided certain requirements are met, including authorization from the federal tax authorities. The tax benefits can include exemptions from import tax and from social contributions (for example, PIS and COFINS).

Read a January 2018 report (Portuguese) prepared by the KPMG member firm in Brazil

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