On December 17, 2019, ICMS Agreement No. 220/2019 was published, amending ICMS Agreement No. 03/2018, which authorized the Brazilian states and the Federal District to reduce the ICMS calculation basis or to exempt ICMS on the importation and on the local acquisition of goods used in the exploration and production of oil and natural gas under the special customs regimes of Repetro, Repetro-Sped and Repetro-Industrialização.
Summary of the Main Changes
ICMS Agreement No. 220/2019 (the “Agreement”) introduced several changes, the main ones being the following:
- §3 was added in the first clause in order to set forth that in the importation of and in the intrastate or interstate acquisition of permanent goods, the purchasers are responsible for collecting the ICMS due on the transaction subject to REPETRO-SPED with the reduction of the calculation basis so that the tax burden is equivalent to 3%, without the corresponding credit. In the event that the exploration block or production field where the goods will be used is not defined, the ICMS will be suspended until the exit of the goods for their economic use by the purchaser, which will be responsible for the ICMS payment.
- The ICMS suspended will be due added by monetary restatement, without fines and/or interest, and counted from the moment that the goods enter the purchaser's establishment.
- Clause 1-A was added, giving the states additional authority to regulate the transactions under Repetro-Industrialização
Clause 1-A: Additional Powers for the States
With Clause 1-A, states now have the authority to:
(i) defer or suspend the ICMS levied on intrastate transactions performed by final manufacturers subject to the benefits of the Agreement and duly enrolled, with goods used in the research activities, exploration and production of oil and natural gas;
(ii) exempt the ICMS levied on interstate operations carried out by final manufacturers, subject to the benefits of the Agreement and duly enrolled, with goods intended for the exploration operation, development and production of oil and natural gas;
(iii) defer or suspend the ICMS levied on intrastate operations performed by the intermediate manufacturers, subject to the benefits of the Agreement and duly enrolled, with goods to be directly supplied to the final manufacturer; and
(iv) exempt the ICMS levied on interstate operations performed by the intermediate manufacturer, subject to the benefits of the Agreement and duly enrolled, with goods to be directly supplied to the final manufacturer.
Other Points Worth Noting
- The abovementioned benefits can be granted to imports performed from intermediate and final manufacturers.
- In order to be eligible for these benefits, the goods in the aforementioned transactions must be exempt from federal taxes, due to exemption, suspension or zero tax rate.
- Clause 3 was also amended in order to characterize "previous transactions" ("operações antecedentes") as transactions performed by the intermediate manufacturers, provided that they are preceding the exports with subsequent import under Repetro-SPED.=
- Thus, this amendment to Clause 3 withdrew the states’ authorization to exempt from the ICMS the sale of permanent goods manufactured in the country to legal entities therein domiciled, inside or outside the State where the manufacturer is located, which are to be admitted in Repetro-SPED.
- §2 of Clause 3 was revoked, cancelling the states’ authorization to exempt the ICMS in transactions:
(i) Involving the equipment, machinery, ancillary items, pieces, materials and other goods to be used as inputs in the manufacturing and assembly of floating systems and production or drilling platforms, as well as their modular units to be processed, manufactured or assembled in manufacturing units;
(ii) Involving hulls and modules to be used as inputs in the construction, repair and assembly of floating systems and production or drilling platforms; or
(iii) Carried out under Special Customs Regimes, with suspension of payment, and that can show proof of compliance according to specific federal legislation.
- Clause 5 was amended so that the manufacturers of final goods and intermediate goods are included as beneficiaries of the ICMS Agreement No. 03/2018 as long as they were previously qualified at REPETRO-INDUSTRIALIZAÇÃO regime.
- The list of the beneficiaries of the Agreement will be published by means of a COTEPE ACT.
This Agreement will be effective on the date of its publication, but it is not applicable to the State of Minas Gerais and to the Federal District.