Impacts of Tax Reform on the Oil and Gas Sector

The new rules affect taxation, tax credits, contracts, and planning for companies in the oil and gas sector

By Fabiana Soares

The Tax Reform marks a profound change in the consumption tax system.

Specifically for the oil and gas industry, which is characterized by long supply chains, high levels of investment, and strong integration among exploration, production, transportation, and marketing activities, the impacts must be analyzed through a technical and integrated review of the new rules.

The implementation of the IBS (Tax on Goods and Services) and CBS (Social Contribution on Goods and Services) consolidates the principle of full non-cumulative taxation, allowing, in theory, for broader use of tax credits. However, in the O&G market, this approach coexists with specific regimes and exceptions that maintain operational complexity.

In this context, it is essential not only to understand the new rules but also to be able to translate them into robust contracts, integrated systems, and consistent fiscal governance, ensuring economic predictability in a regulatory transition environment that is still taking shape.

Impacts on the tax burden

Below, we highlight some issues that companies should keep on their radar, as well as impacts that should be taken into account:

Regular and Specific Tax Regimes

Transactions involving crude oil and natural gas tend to fall under the general tax regime, while processed gas, classified as fuel, will be subject to different rules and taxed under the specific tax regime.

Article 172 of Law No. 214/2025 classifies transactions involving the following fuels under the specific regime: gasoline and its derivatives, anhydrous fuel ethanol, diesel oil and its derivatives, biodiesel (B100), liquefied petroleum gas (LPG), including liquefied gas derived from natural gas (LNG), hydrated fuel ethanol (EHC), aviation kerosene, and fuel oil.

Processed natural gas, biomethane, and natural gas for vehicles (NGV), in turn, pursuant to Article 259 of Decree No. 12,955/2026, will be subject to the specific tax regime as of January 1, 2033. Until then, they are, in principle, considered to remain under the regular tax regime.

How credits are handled

Since the IBS and CBS introduce the concept of full non-cumulativeness, the definition of credits becomes clearer in a certain sense, reducing the risks caused by subjectivity under the previous regime.

Companies with diverse operations will need to follow the appropriate calculation methods based on the type of product and the applicable tax regime. Another key point is to pay attention to the variables based on the destination state and municipality (rather than the state and municipality of origin).

Tax benefits for the oil and gas sector

One change brought about by the Reform is the elimination of tax benefits at the state and municipal levels, which must be monitored to allow for re-planning.

In this context, the ICMS Tax or Financial-Tax Benefits Compensation Fund (although not exclusively for the O&G sector) aims to compensate companies that will lose exemptions, incentives, and benefits with the gradual phase-out of the ICMS. RFB Ordinance No. 635/2025 regulates the criteria, requirements, and eligibility process for the Fund. It is essential to pay close attention to the requirements and limitations for obtaining such compensation, with payments scheduled only from 2029 to 2032. In any case, this is a way for companies to maintain financial stability in the face of the loss of benefits they currently enjoy.

The transition to the new model may reduce or eliminate regional advantages that currently influence business decisions.

As expressly mentioned in Law No. 214/2025, Repetro (a special customs regime for the export and import of goods for oil and gas exploration and production activities) remains a key component for investments in the sector, maintaining the incentive framework for assets related to exploration and production activities.

Exports

For exports, exemption from the IBS/CBS is maintained. In transactions equivalent to sales for the specific purpose of export, where the company does not export directly but sells to a third party that will carry out the export, the exemption remains in effect provided certain requirements are met.

Selective Tax Impact

O&G companies will be impacted by the creation of the Selective Tax (IS), effective as of 2027, as it is expected to apply to the extraction of mineral resources. The IS rates on these resources will not exceed 0.25% for such transactions. This is a cumulative tax that does not generate tax credits.

There are still many uncertainties regarding how the IS will be calculated, reported, and remitted on tax documents, which requires close monitoring of the regulations and technical notes.

Key points

Adapting to the new system requires a comprehensive review of contracts and operational structures. Supply contracts, charter agreements, equipment leases, cost-sharing arrangements, and transactions between related parties are likely to be affected, particularly with regard to pricing, the pass-through of taxes, and mechanisms for economic and financial rebalancing.

The lack of clarity regarding future tax rates reinforces the need for flexible clauses and contractual review mechanisms, with an emphasis on cooperation among business partners.

The importance of reviewing tax systems is also noteworthy. The correct allocation of tax credits, the tracking of transactions, and the adaptation of electronic documents will be essential to avoid a loss of tax efficiency.

There is also a need to fill many gaps, requiring us to await supplementary regulations for further details regarding taxation in the O&G sector. For an industry characterized by a long-term perspective, this delay in defining regulations and the lack of predictability tend to be critical.

At the same time, based on what has already been established in legislation and with the support of partners in the tax and legal fields, it is essential that the company take steps to anticipate the impact on its operations, maintaining a proactive stance and a preventive approach in light of the changes to come.

Consulting services for adapting to Tax Reform

Domingues e Pinho Contadores supports businesses in their transition to the new tax system. Count on our team to help you plan strategies that ensure compliance and to guide your company in adopting best tax practices: dpc@dpc.com.br.