The State of Rio de Janeiro has just enacted, through Law # 7,183, of 12.29.2015, published yesterday on the Official Gazette, a controversial levy of the State VAT-like tax (Imposto sobre Operações Relativas à Circulação de Mercadorias e Serviços - "ICMS") on the transfer of crude oil from the extracting wells to the respective concessionaire.
In the past, the State of Rio de Janeiro had already intended to tax crude oil extraction with the enactment of Law # 4,117, of July 27, 2003 ("Lei Noel"), that was challenged through a direct unconstitutionality lawsuit filed by the Federal Public Attorney (ADI # 2,019-1). Now, Law # 7,183/2015 revokes Law # 4,117/2003 and imposes the tax no longer on the extraction itself, but on the physical circulation of crude.
The new charge becomes effective as of March 29th, 2016, and is based on the volume of oil extracted in each period times the highest amount in Reais per cubic meter (R$/m3) between, on one hand, the minimum price set forth by the National Oil Agency (Agência Nacional do Petróleo – "ANP") and, on the other hand, the weighted average of the sales prices adopted by the concessionaire under ordinary market conditions.
At a glance, this burden seems to conflict with what Brazilian Constitution establishes for purposes of such State taxation, namely, operations where transfer of title occurs, pursuant to settled case law from the Supreme Court.
Additionally, new Fees for Environmental Control, Monitoring and Enforcement are created: (i) concerning oil and gas exploration and production activities ("TFPG"), as per Law # 7,182, also dated December 29th, 2015, and published yesterday; and (ii) on the generation, transmission and distribution of electric energy ("TFGE"), pursuant to Law # 7,184, of December 30th, 2015, published today. Both laws become effective after 90 days from their publication.
The TFPG shall initially correspond to R$ 2,71 per oil barrel extracted or equivalent gas unit, being this amount restated annually.
To the TFGE the following amounts per megawatt-hour (MWh) are set forth, also subject to annual restatement, as per the type of energy: (i) R$ 5,50 if thermonuclear; (ii) R$ 4,60 if thermoelectric from natural gas, diesel and coal; e (iii) R$ 4,10 if hydroelectric.
We are at your disposal to present the legal grounds we hold exist to challenge these impositions in judicial courts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
