Repetro-Sped is a federal tax and customs regime granted by the federal government to transactions performed by the oil and gas industry. Repetro-Sped allows the use of the following customs regimes, with suspension of federal taxes, as long as the asset and/or equipment is used in the exploration and production of oil and gas in Brazil:
- Export of assets and equipment manufactured in Brazil and sold to foreign entities, without the item needing to physically leave the Brazilian territory, and subsequent import on a temporary or definitive basis, with suspension of federal taxes (the so-called "fictitious export");
- Export of spare parts, without the exported item needing to physically leave the Brazilian territory, and destined to assets and equipment already imported on a temporary or definitive basis, with suspension of federal taxes;
- Permanent import of assets and equipment listed in Annexes I and II of the Normative Instruction RFB No. 1,781/2017, with suspension of federal taxes;
- Temporary import for economic use of assets and equipment listed in the Annex II of the Normative Instruction RFB No. 1,781/2017, without the payment of federal taxes;
- Temporary import with the payment of federal taxes proportionally to the time that the asset will stay in the country; and
- Import and domestic purchase of raw materials, inputs or packing materials to be fully used in the manufacturing of assets and equipment to oil and gas exploration and production in Brazil—the so-called "Repetro-Industrialização."
Following the federal policy as set forth in Repetro-Sped regulations, in 2018, the National Council of Fiscal Policy ("Confaz"), through ICMS Convention No. 03/2018, authorized the states to reduce the calculation base and/or exempt the equipment imported through the Repetro-Sped regime from the ICMS.
In this context, the Rio de Janeiro State has enacted Decree No. 46,233/2018 on February 6, 2018, effective as of February 1, 2018, to ratify terms and conditions of the ICMS Convention No. 03/2018, which means that Rio de Janeiro, since 2018, grants reduction of the calculation base and/or exemption of ICMS for Repetro-Sped transactions.
Later, in 2019, due to the fact that federal tax authorities regulated Repetro-Industrialização through Normative Instruction RFB No. 1,901/2019, Confaz, through ICMS Convention No. 220/2019, amended ICMS Convention No. 03/2018 in order to reflect the new regulations for ICMS purposes for Repetro-Industrialização.
Due to such fact, in order to ratify the terms and conditions of the new rules of the amended ICMS Convention No. 03/2018, the Law Proposition No. 1,771 ("PL 1,771") was created. Such PL 1,771, in the beginning (original version), intended to reflect the new rules set forth in ICMS Convention No. 03/2018 with modifications of ICMS Convention No. 220/2019. However, during the sessions for discussion of such PL 1,771, some congressmen alleged that Rio de Janeiro should not grant exemptions or suspension of ICMS, especially due to the financial crisis that the state is facing, and proposed some amendments to the PL 1,771.
Amendment No. 31 to the PL 1,771 proposed that the State of Rio de Janeiro should not grant any tax incentive or benefit to Repetro-Sped operations or to the oil and gas industry. In addition, Amendment No. 33 intends to tax Repetro-Sped operations with a 12% tax rate for interstate transactions and with an 18% tax rate for international transactions (imports).
The PL 1,771, with the proposed amendments (including No. 31 and 33), was voted at ALERJ (Rio de Janeiro Assembly) on June, 10, 2020 (extraordinary session). The PL 1,771 was approved, maintaining the calculation basis reduction and/or ICMS exemption to the transactions under the Repetro-Sped regime, and the amendments 31 and 33 were excluded from its text.
The final text will be forwarded to the Rio de Janeiro State Governor for approval or veto.
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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.
Originally published 12 June 2020