On June 16, 2020, State Law No. 8,890/2020 was published, revoking Decree No. 46,233/2018 and regulating the transactions performed with goods used in oil and gas exploration and production activities, according to ICMS Agreement No. 03/2018 with the adjustments of CMS Agreement No. 220/2019.
The law is effective until December 31, 2040.
New Tax Treatments Under the Law
In summary, the following tax treatments were created:
a. Reduction of the ICMS calculation basis on the import and local acquisition of permanent goods applied in the exploration and production of oil and natural gas under REPETRO-SPED and REPETRO-INDUSTRIALIZAÇÃO so that the tax burden is equivalent to 3% without ICMS credits. In this scenario, ICMS will be collected by Rio de Janeiro State in cases where the economic use of the goods is executed in this State, according to federal legislation.
b. ICMS deferral on local transactions performed by a manufacturer of final goods, duly qualified in REPETRO, with goods used in the exploration, development and production of oil and natural gas activities.
c. ICMS deferral on local transactions performed by the intermediate manufacturer, duly qualified in REPETRO, with goods to be supplied directly to the manufacturer of final goods.
d. ICMS exemption on interstate transactions performed by a manufacturer of final goods, duly qualified in REPETRO, with goods destined to the activities of exploration, development and production of oil and natural gas.
e. ICMS exemption on interstate transactions performed by the intermediate manufacturer qualified in REPETRO, with goods to be supplied directly to the manufacturer of final goods.
f. ICMS exemption on the imports of temporary goods to be used in the exploration and production of oil and natural gas, under REPETRO-SPED.
g. ICMS exemption on the export transactions, including fictitious export, of goods manufactured in Brazil, by a legal entity duly qualified in REPETRO-SPED, to be subsequently imported on a temporary or permanent basis and used in oil and natural gas exploration and production activities.
h. ICMS exemption on the transactions executed prior to the export, thus considered the transactions performed by an intermediate manufacturer, duly qualified in REPETRO-SPED, including imports, with goods to be directly supplied to the legal entity that will perform the export.
Write-off of Credits
The law establishes the write-off of ICMS credits related to transactions prior to the interstate transactions performed by manufacturers of final and intermediary goods.
To use these new tax treatments, the following are mandatory, including for events that occurred prior to the law’s effective date (June 16, 2020): a) withdrawing administrative appeals and judicial actions and b) expressly and irreversibly waiving any administrative or judicial right that questions the levy of ICMS on the importation of goods or merchandise without transfer of ownership.
Application for these tax treatments must be made in accordance with the rules that will be created by the federal executive branch, which will also regulate the procedures required for the effectiveness of the regimes.
For more information about the topics raised in this Legal Update, please contact our Tax team.