Pursuant to CONFAZ ICMS Agreement no. 130, of November 27, 2007 (“Agreement 130/07”), the States and the Federal District were authorized to reduce the ICMS tax basis applicable at the time that assets or goods (specified in the Sole Annex to such Agreement 130/07) cleared through customs where any such assets or goods were imported under the Special Customs Regime relating to Temporary Admission for use in oil and natural gas production facilities pursuant to specific federal rules regulating the Special Import and Export Regime for Oil and Natural Gas Exploration and Production Assets (“REPETRO”) so that the tax burden would be equal to 7.5 percent on a noncumulative basis, or alternatively, at the discretion of the taxpayer, 3 percent, without entitlement to the relevant credit.

In view of the provisions of the Agreement 130/07, in 2008 the State of Espírito Santo (“ES”) regulated the enjoyment of such benefit in the context of the State’s tax system under Decree no. 2160-R, of November 14, 2008, and authorized a reduction in the ICMS tax basis until December 31, 2011, and as such the tax burden was equal to 3 percent in case of customs clearance of assets or goods contemplated by the Sole Annex to Agreement 130/07 imported under the special customs regime relating to temporary admission for use in oil and natural gas production facilities pursuant to specific federal rules regulating REPETRO.

On January 9, 2012, Decree no. 2939-R of January 6, 2012, was published by the Government of ES, and extended the applicable period until June 30, 2012.

The Decree no. 3034-R of June 26, 2012, published on June 27, 2012, extended again until December 31, 2012, the period of reduction in the tax basis in case of customs clearance of assets or goods, as provided in Agreement 130/2007 and therefore in this period the tax burden will be equal to 3 percent.

(1) State Value-added Tax on the Circulation of Goods, Interstate and Intercity Transportation and Communications Services.

For more information, please contact Ivan Tauil, Eduardo Telles or Carolina Bottino.

Observations in this update about Brazilian law are by Tauil & Chequer Advogados. They are not intended to provide legal advice to any entity; any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.