On December 21, 2020, Law No. 9,148/2020 was published to create a penalty that shall be applied to E&P companies in cases of non-compliance with the thresholds of local content in the State of Rio de Janeiro.

Such indemnity will be due to the State of Rio de Janeiro by the companies that have rights to explore and produce oil and natural gas and that operate in areas in the State of Rio de Janeiro, in the Campos and Santos basins.

The amount to be paid will correspond to the difference between the ICMS rate defined in item I of Article 14 of Law No. 2,657 / 1996 (18%) and the ICMS rate defined in Article 1 of Law No. 8,890 / 2020 (3%), focusing on the minimum mandatory percentage of local content of the Stationary Production Units (UEP), not fulfilled, according to local content certification under the terms of ANP regulations.

The verification of compliance with the minimum mandatory percentage of local content of goods or services under the terms of Law No. 8,890 / 2020 will consider the value of the percentage in the certificate of local content of the Stationary Production Units (UEP) for the execution of production activities in concession contracts, transfer of rights or production sharing, and the minimum mandatory percentage of local content established for the exploration and production contract in which the good or service was used.

If the goods or services are used in more than one exploration and production contract with mandatory minimum percentages of different local content, the portion of the good or service should be allocated to each contract in the proportion in which they were used in each contract.

Such verification will be carried out regardless of the end of the period for calculating the local content commitment established in the exploration and production contracts.

The measure authorizes the Executive Branch to sign an agreement with the ANP so that the certification of local content is issued within one year after the production module goes into operation.

This law will be effective 90 days after its publication.

Originally Published by Mayer Brown, December 2020

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