New tax rules for oil and gas industry

Companies should be aware, as joining the installment of debts related to the difference due of withholding tax under PGFN should be required by the end of January.

Domingues e Pinho Contadores (DPC) reference in accounting and tax outsourcing for oil and gas companies, warns of recent changes in the industry's tax rules. With expertise in the regulatory, accounting and tax aspects of day-to-day operations, DPC has the necessary expertise to assist national and multinational companies in this business area to leverage and establish your operation in the country.

Complex issues permeate the oil and gas segment when it comes to the tax area and accounting procedures in Brazil. To extract the full potential of this market, companies, in addition to constantly investing in more efficient technologies and better management practices, should follow the regulatory changes of the activity and improve cost and tax control.

This market, according to IBP data, should move around BRL 285 billion in the country between 2017 and 2020, which corresponds to 59% of the Brazilian industry's investment prospects. These estimates, coupled with signs of recovery in the economy, the auctions of areas for exploration and the policy favorable to the segment, once again move the industry that tries to recover from the crisis that has hit the Brazilian market.

The recent extension of Repetro, a tax regime that suspends the collection of federal taxes on the importation of oil and gas equipment, especially exploration platforms, is one of the good points for companies. On December 29, Provisional Measure 795 was sanctioned by President Michel Temer (converted into Law No. 13.586 / 2017), extending the term of the special regime from 2020 to 2040.

The Provisional Measure also allows the tax debts of companies in the oil and gas industry (which have activities directly linked to the exploration) to be paid in up to 12 months through 2018. As of these changes, the government's expectation is the collection of BRL 18 billion over the next two years.

Furthermore, oil companies also celebrate the reduction of Social Contribution on Net Income (CSLL) and Income Tax of Legal Entities (IRPJ).

With the new time of market and the package of changes in legislation, the industry earns incentives for the expansion of investment and even for new players entering the oil exploration.

Follow the recent changes in legislation impacting the oil and gas industry:

1 - Law No. 13.586/2017

As a result of the conversion into law of Provisional Measure 795/2017, Law 13.586 provides for the tax treatment of exploration and development activities in the field of oil or natural gas; establishes a special tax regime for the exploration, development and production of oil, natural gas and other fluid hydrocarbons activities.

2 - RFB Normative Instruction No. 1778/2017

This Normative Instruction came to regulate the tax treatment of exploration and development activities and production of oil and natural gas that is dealt with in Law 13,586 / 2017.

3 - RFB Normative Instruction No. 1780/2017

By this Normative Instruction, the payment and installment of debts related to the Withholding Income Tax Rate (IRRF) referred to in art. 3 of Law No. 13,586 / 2017, with a 100% reduction in fines for late payment and automatic fine.

4 - RFB Normative Instruction No. 1781/2017

It provides for the special customs regime for economic use destined to goods to be used in the exploration, development and production of the oil and natural gas deposits (Repetro-Sped), Normative Instruction 1743/2013 was repealed and altering procedures related to the subject, among them the possibility of qualification until Dec-31-2040.

5 - PGFN Ordinance No. 21/2018

This ordinance deals with the payment and installment of debts related to the Withholding Income Tax Rate (IRRF) due to the partial reduction of said tax, in the event of simultaneous execution of a charter or lease of seagoing vessels and a service contract related to the exploration and production of oil or natural gas, entered into with legal entities linked to each other, 3 of Law No. 13.586 / 2017. The application must be submitted by Jan-31-2018.

See the full text about the tax changes for the oil and gas industry here.

It is necessary to plan

The oil area in Brazil faces a strong political interference, in a complex field when it comes to regulatory norms, legislation and taxes. In this way, long-term planning and constant attention to regulatory, accounting and tax aspects is the key to successful business. Acting in accordance with local accounting principles and international accounting standards and within well defined organizational processes, DPC has the expertise to assist national and multinational companies in this industry. DPC specialists are able to assist you in the specific tax requirements and taxes due, so that does not fall on these companies the burden of unnecessary taxation.

Domingues e Pinho also has an advanced unit in Macaé, on the north coast of Rio de Janeiro, to better assist clients in the implantation of businesses in this area.