The effects of the ICMS levy on oil and gas extraction were suspended by an injunction provided by the judge of the 11th Court of Public Treasury.

The Judge of the 11th Court of Public Treasury granted an injunction, dated March 21, 2016, based on the fact that during the original acquisition of oil and gas there is no transfer of ownership  at the time of extraction. Therefore, the oil extraction cannot be considered an ICMS tax event.

In this context, the decision  recognizes that the extraction cannot be characterized as movement of merchandises for ICMS purposes, according to section 155, item II of the Brazilian Constitution.

The decision also took into account that only the Complementary Law of General Rules No. 87/1996 can define ICMS tax events and its calculation basis, and therefore Law No. 7,183/2015 has directly violated the Brazilian Constitution.

Finally, please note that the decision only affects the parties  involved in the Lawsuit and it is not applicable to others taxpayers not listed as a Plaintiff.

View the entire decision.

Visit us at Tauil & Chequer

Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."

© Copyright 2016. Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.