The Government of the State of Rio de Janeiro sanctioned Law 7.183 of 12/29/2015, published on 12/30/2015, which regulates the tax rate on Operations Relative to Circulation of Goods and on Performance of Services for Interstate and Intercity Transportation and Communication (ICMS) levied on oil transfer operations from the oil wells to the concessionaire.

In accordance with its Article 2, the taxable event will occur immediately after the oil extraction, and when the goods pass through the Production Measuring Points.

The tax, which will be levied on the 18% tax rate, will have as tax base the price of reference of the oil, based on the weighted average of the oil sale price charged by the concessionaire in normal market conditions, or its minimum price stipulated by the National Agency of Petroleum, Natural Gas and Biofuels (ANP), whichever is higher.

The article 5 clarifies that the taxpayer is the oil trader, manufacturer, producer or extractor, regardless of whether or not it is the direct concessionaire and for purposes of collection and definition of the responsible establishment, the location of operation shall be considered as the one in which after the oil extraction the measurement had occurred in its standard condition.

The law was created due to the dissatisfaction of the Government of the State of Rio de Janeiro with ICMS tax levy rules on oil production, since oil is the only product levied at destination, while the other products are levied at origin. In addition, the State of Rio de Janeiro has been suffering with the oil price reduction that caused a drop in the revenues from oil royalties and determined market shares.

A determined company association criticized the creation of the new law not only due to the heavy burden imposed, but also for reinstating in the legal system of the State a similar collection once introduced by the Law no. 4,117/2003, and which till then, awaited the trial of its constitutionality by the Supreme Court (Direct Action for the Declaration of Unconstitutionality – ADI 3019). With the publication of the Law no. 7,183/2015, the Law no. 4,117/2003 was expressly repealed.

The new law no. came into force on the date of its publication, but its effects will be  produced after a lapse of time of 90 days.

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