Tax Policies in Brazil: Taxation of Oil, Natural Gas and Minerals Brazil – Russia Dialogue:...

R E I D IR E I D I

Tax Policies in Brazil: Taxation Tax Policies in Brazil: Taxation

of Oil, Natural Gas and of Oil, Natural Gas and

MineralsMinerals

Brazil – Russia Dialogue: Economic Policy

Challenges

International policy workshop

June 2012

04:54:58

Federal Constitution

Relevant information for understanding the National Tax System

04:06:20

Political-administrative structure of Brazil

04:06:20

According to Federal Constituition from Brazil:

The Federative Republic of Brazil, formed by the indissoluble union of the states and municipalities and of the Federal District, is a legal democratic state and is founded on…

Art. 1, CF

04:06:20

04:06:20

26 states

a Federal District

5565 municipalities

04:06:20

Taxation and Budget

The National Tax System

General Principles

04:06:20

The governmental entities and entities owned by the Government in any of the powers of the Union, the states, the Federal District and the Municipalities shall obey the principles of lawfulness, impersonality, morality, publicity, and efficiency, and also the following ...

Art. 37, CF

04:06:20

The Union, the states, the Federal District and the municipalities may institute the following tributes:I – taxes;II – fees, by virtue of the exercise of police power or for the effective or potential use of specific and divisible public services, rendered to the taxpayer or made available to him;III – benefit charges, resulting from public works.

Art. 145, CF

04:06:20

Whenever possible, taxes shall have an individual character and shall be graded according to the economic capacity of the taxpayer, and the tax administration may, especially to confer effectiveness upon such objectives, with due respect to individual rights and under the terms of the law, identify the property, the incomes and the economic activities of the taxpayer.

Paragraph 1, Art. 145 CF

04:06:20

A supplementary law shall:

I – provide for conflicts of competence concerning tax matters between the Union, the states, the Federal District and the municipalities;

II – regulate the constitutional limitations on the power to tax;

Art. 146 CF

04:06:20


III – establish general rules concerning tax legislation, especially with regard to:

a) the definition of tributes and their types, as well as, regarding the taxes specified in this Constitution, the definition of the respective taxable events, assessment bases and taxpayers;

Art. 146 CF04:06:20


III – establish general rules concerning tax legislation, especially with regard to:

b) tax liability, assessment, credit, limitation and laches;

c) adequate tax treatment for the cooperative acts of cooperative associations.

Art. 146 CF04:06:20


III – establish general rules concerning tax legislation, especially with regard to:d) the definition of a differentiated and favorable tax treatment to be given to micro and small businesses, including special or simplified tax regimes in the case of the tax set forth in article 155, II , the contributions set forth in article 195, I, and paragraphs 12 and 13, and the contribution referred to in article 239.

Art. 146 CF04:06:20

The supplementary law referred to in item III, d, may also establish a single regime for the collection of taxes and contributions owed to the Union, the States, the Federal District, and the Municipalities, with due regard for the following:

Sole paragraph, Art. 146 CF

04:06:20

I – it shall be optional for the taxpayer;II – different eligibility requirements may be established for each State;III – payment of said tributes shall be unified and centralized, and the distribution of the share of funds belonging to the respective units of the Federation shall be immediate, any withholding or establishment of conditions being forbidden;IV – collection, control, and claiming of payment may be shared by the units of the Federation, a single national roster of taxpayers being adopted.

Sole paragraph, Art. 146 CF

04:06:20

A supplementary law may establish special criteria for taxation, with a view to preventing imbalances in competition, without prejudice to the power of the Federal Government to establish, by law, rules for the same purpose.

Article 146-A04:06:20

The Union shall have the exclusive competence to institute social contributions regarding intervention in the economic order and the interest of categories of employees or employers, as an instrument of its activity in the respective areas, observing the provisions of articles 146, III, and 150, I and III, and without prejudice to the provisions of article 195, paragraph 6, as regards the contributions mentioned in the latter article.

Art. 149

04:06:20

The social contribution taxes mentioned in the head paragraph of this article, as well as the contribution taxes regarding intervention in the economic domain:

I – shall not be levied on export earnings;

II – shall be also levied on the importation of foreign products or services;

Paragraph 2, Art. 149

04:06:20

The social contribution taxes mentioned in the head paragraph of this article, as well as the contribution taxes regarding intervention in the economic domain:

III – may have the following rates:a) ad valorem rates, having as basis the proceeds, gross revenues, or the value of the transaction, and, in the case of importation, the customs value;b) specific rates, having as basis the unit of measurement adopted. Paragraph 2, Art. 149, CF04:06:20

Limitations on the Power to Tax

(some important)

04:06:20

Without prejudice to any other guarantees ensured to the taxpayers, the Union, the states, the Federal District and the municipalities are forbidden to:

I – impose or increase a tribute without a law to establish it;

Art. 150, CF

04:06:20

II – institute unequal treatment for taxpayers who are in an equivalent situation, it being forbidden to establish any distinction by reason of professional occupation or function performed by them, independently of the juridical designation of their incomes, titles or rights;

Art. 150, CF

04:06:20

III – collect tributes:

a)for taxable events that occurred before the law which instituted or increased such tributes came into force;

b) in the same fiscal year in which the law which instituted or increased such tributes was published (there are some exceptions);

Art. 150, CF04:06:20

V – establish limitations on the circulation of persons or goods, by means of interstate or intermunicipal tributes, except for the collection of toll fees for the use of highways maintained by the Government;

Art. 150, CF

04:06:20

It is forbidden for the Union:

I – to institute a tribute which is not uniform throughout the entire national territory or which implies a distinction or preference regarding a state, the Federal District or a municipality to the detriment of another, it being allowed to grant tax incentives for the purpose of promoting the balanced social and economic development of the various regions of the country; Art. 151, CF

04:06:20

Federal Taxes

04:06:20

The Union shall have the power to institute taxes on:

I – importation of foreign products;II – exportation to other countries of national or nationalized products;III – income and earnings of any nature;IV – industrialized products;

Art. 153, CF

04:06:20

The Union shall have the power to institute taxes on:

V – credit, foreign exchange and insurance transactions, or transactions relating to bonds or securities;VI – rural property;VII – large fortunes, under the terms of a supplementary law.

Art. 153, CF

04:06:20

The income tax:

I – shall be based on the criteria of generality, universality and progressiveness, under the terms of the law;

Paragraph 2, Art. 153, CF

04:06:20

The industrialized products tax:

I – shall be selective, based on the essentiality of the product;

II – shall be non-cumulative, and the tax due in each transaction shall be compensated by the amount charged in previous transactions;

III – shall not be levied on industrialized products intended for export;

Paragraph 3, Art. 153, CF04:06:20

The industrialized products tax:

IV – shall have its impact reduced, as set forth by law, in the case of purchase of capital goods by a taxpayer who is liable to pay such tax.


04:06:20

State and Federal District Taxes

04:06:20

The states and the Federal District shall have the competence to institute taxes on:

I – transfer by death and donation of any property or rights;

Art. 155, CF

04:06:20


II – transactions relating to the circulation of goods and to the rendering of interstate and intermunicipal transportation services and services of communication, even when such transactions and renderings begin abroad;

Art. 155, CF04:06:20


III – ownership of automotive vehicles.

Art. 155, CF

04:06:20

The circulation of goods tax shall observe the following:

I – it shall be non-cumulative, and the tax due in each transaction concerning the circulation of goods or rendering of services shall be compensated by the amount charged in the previous transactions by the same or by another state or by the Federal District;


The circulation of goods tax shall observe the following :

II – exemption or non-levy, except as otherwise determined in the law:

a) shall not imply credit for compensation relative to the amount due in the subsequent transactions or renderings of services;


04:06:21


II – exemption or non-levy, except as otherwise determined in the law:

b) shall cause the annulment of the credit for the previous transactions;Paragraph 2, Art. 155, CF

04:06:21


III – it may be selective, based on the essentiality of the goods or services;


04:06:21


IV – a resolution of the Federal Senate, on the initiative of the President of the Republic or of one-third of the Senators, approved by the absolute majority of its members, shall establish the rates that apply to interstate and export transactions and rendering of services;


04:06:21


V – the Federal Senate may:

a) establish minimum rates for domestic transactions, by means of a resolutionon the initiative of one-third and approved by the absolute majority of itsmembers;



V – the Federal Senate may:

b) establish maximum rates for the same transactions to settle a specific conflict involving the interest of the states, by means of a resolution on the initiative of the absolute majority and approved by two-thirds of its members; Paragraph 2, Art.

155, CF04:06:21


VI – unless otherwise determined by the states and the Federal District the domestic rates for transactions concerning the circulation of goods and the rendering of services may not be lower than those established for interstate transactions;


04:06:21


VII – the following shall be adopted for transactions and rendering of goods and services to end-users located in another state:

a)the interstate rate, when it is incumbent upon the recipient to pay that tax;

b)Paragraph 2, Art. 155, CF

04:06:21


VII – the following shall be adopted for transactions and rendering of goods and services to end-users located in another state:

b) the internal rate, when it is not incumbent upon the recipient to pay that tax;


04:06:21


VIII – in the case of subitem “a” of the preceding item, the tax corresponding to the difference between the internal and the interstate rate shall be attributed to the state where the recipient is located;


04:06:21


IX – it shall also be levied:


04:06:21

a) on the entry of goods or products imported from abroad by an individual or corporate body, even in the case of a taxpayer who does not pay such tax on a regular basis, regardless of its purpose, as well as on services rendered abroad, and the tax shall be attributed to the state where the domicile or the establishment of the recipient of the product, good, or service is located;



IX – it shall also be levied:

b) on the total value of the transaction, when goods are supplied with services not included in the power to tax of the municipalities;


04:06:21


X – it shall not be levied:

a) on transactions involving goods to be shipped abroad, nor on services to be delivered to parties abroad, and tax charges and credits in preceding transactions involving such goods or services shall continue in effect;


04:06:21



b) on transactions transferring petroleum, including lubricants, liquid and gaseous fuels derived therefrom, and electric energy to other states;c) on gold, when defined in law as a financial asset or an exchange instrument;


04:06:21



d) on communications services in the modes of sound broadcasting and sound and image broadcasting which are available for reception by the public free of charge;


04:06:21


XI – its assessment basis shall not include the amount of the tax on industrialized products when the transaction carried out between taxpayers and concerning a product intended for industrialization or sale represents a taxable event for both taxes;


04:06:21


XII – A supplementary law shall:

a) define its taxpayers;b) provide for tax substitution;c) regulate the system of tax compensation;


04:06:21



d) establish, for purposes of collection of the tax and definition of the responsible establishment, the location of the transactions concerning the circulation of goods and the rendering of services;


04:06:21



e) exclude from levy of the tax, in exports to other countries, services and other products other than those mentioned in item X, a;f) provide for the event of maintenance of a credit for services and goods remitted to another state and exported to other countries; Paragraph 2, Art. 155, CF04:06:21



g) regulate the manner in which, through deliberation by the states and the Federal District, tax exemptions, incentives and benefits shall be granted and revoked;


04:06:21



h) define the fuels and lubricants on which this tax shall be levied only once, regardless of its purpose, in which case the provision of item X, b, shall not apply;


04:06:21



i) stipulate the assessment basis so as to include the amount of the tax, also in the event of importation of goods, products, or services from abroad.


04:06:21

In the event of item XII, h, the following shall apply:

I – in transactions involving lubricants and petroleum-derived fuels, the tax shall be attributed to the state where consumption takes place;


04:06:21


III – in interstate transactions involving natural gas and its by-products, and lubricants and fuels not included in item I of this paragraph, when it is not incumbent upon the recipient to pay the tax, such tax shall be attributed to the state of origin;


04:06:21


IV – the tax rates shall be defined by joint decision of states and the Federal District, under the terms of paragraph 2, XII, g, with due regard for the following:

a) they shall be uniform throughout the national territory, and they may be different for each product;


04:06:21

b) they may be specific, according to the unit of measurement adopted, or ad valorem, levied on the value of the transaction or on the price the product or a similar product would be sold for in free competition circumstances;


04:06:21


IV – the tax rates shall be defined by joint decision of states and the Federal District, under the terms of paragraph 2, XII, g, with due regard for the following:c) they may be lowered and restored to their original levels, and the provision of article 150, III, b, shall not apply there to.


The rules for the enforcement of the provisions of paragraph 4, including those concerning the collection and assignment of the tax, shall be established by joint decision of states and the Federal District, under the terms of paragraph 2, XII, g.


04:06:21

Municipal Taxes

04:06:21

The municipalities shall have the competence to institute taxes on:

I – urban buildings and urban land property;

Art. 156, CF

04:06:21


II – inter vivos transfer, on any account, by onerous acts, of real property, by nature or physical accession, and of real rights to property, except for real security, as well as the assignment of rights to the purchase there of;

Art. 156, CF

04:06:21


III – services of any nature not included in article 155, II, as defined in a supplementary law;

Art. 156, CF

04:06:21

The tax of service set forth in item II:I – shall not be levied on the transfer of goods or rights incorporated into the assets of a corporate body to pay up its capital, nor on the transfer of goods or rights resulting from the merger, incorporation, division or dissolution of corporate bodies, unless, in such cases, the predominant activity of the purchaser is the purchase and sale of such goods or rights, the lease of real property or leasing; Paragraph 2Art. 156, CF

04:06:21

The tax of service set forth in item II:

II – is within the competence of the municipality where the property is located.

Paragraph 2Art. 156,

CF

04:06:21

As regards the tax of service established in item III of the head paragraph of this article, a supplementary law shall:I – establish its maximum and minimum rates; (maximum 5% - LC 116)II – exclude exportations of services to other countries from levy of the said tax;III – regulate the manner and conditions for the granting and revocation of fiscal exemptions, incentives, and benefits. Paragraph 2Art. 156,

CF

04:06:21

THE GENERAL PRINCIPLES OF

ECONOMIC ACTIVITY

deposits, under exploitation or not, and other mineral resources 04:06:21

Mineral deposits, under exploitation or not, and other mineral resources and the hydraulic energy potentials form, for the purpose of exploitation or use, a property separate from that of the soil and belong to the Union, the concessionaire being guaranteed the ownership of the mined product.

Art. 176, CF

04:06:21

The prospecting and mining of mineral resources and the utilization of the potentials mentioned in the head paragraph of this article may only take place with authorization or concession by the Union, in the national interest, by Brazilians or by a company organized under Brazilian laws and having its head-office and management in Brazil, in the manner set forth by law, which law shall establish specific conditions when such activities are to be conducted in the boundary zone or on Indian lands.


04:06:21

The owner of the soil is ensured of participation in the results of the mining operation, in the manner and amount as the law shall establish.


04:06:21

Authorization for prospecting shall always be for a set period of time and the authorization and concession set forth in this article may not be assigned or transferred, either in full or in part, without the prior consent of the conceding authority.


04:06:21

Exploitation of a renewable energy potential of small capacity shall not require an authorization or concession.


04:06:21

The following are the monopoly of the Union:

I – prospecting and exploitation of deposits of petroleum and natural gas and of other fluid hydrocarbons;

II – refining of domestic or foreign petroleum;

III – import and export of the products and basic by-products resulting from the activities set forth in the preceding items;

Art. 177, CF04:06:21


IV – ocean transportation of crude petroleum of domestic origin or of basic petroleum by-products produced in the country, as well as pipeline transportation of crude petroleum, its by-products and natural gas of any origin;

Art. 177, CF

04:06:21


V – prospecting, mining, enrichment, reprocessing, industrialization, and trading of nuclear mineral ores and minerals and their by-products, with the exception of radioisotopes whose production, sale, and use may be authorized under a permission, in accordance with letters b and c of item XXIII of the head paragraph of article 21 of this Federal Constitution.

Art. 177, CF

04:06:21

The Union may contract with state-owned or with private enterprises for the execution of the activities provided for in items I through IV of this article, with due regard for the conditions set forth by law.


04:06:21

The law referred to in paragraph 1 shall provide for:

I – a guarantee of supply of petroleum products in the whole national territory;

II – the conditions of contracting;

III – the structure and duties of the regulatory agency of the monopoly of the Union.


04:06:21

The law shall provide with respect to the transportation and use of radioactive materials within the national territory.


04:06:21

The law which institutes a contribution tax of intervention in the economic domain regarding activities of importation or sale of petroleum and petroleum products, natural gas and its by-products, and fuel alcohol shall include the following requirements:


04:06:21

I – the contribution rate may be:

a)different for each product or use;

b) lowered and restored to its original level by an act of the Executive Branch, and the provision of Article 150, III, b (in the same fiscal year), shall not apply there to;


04:06:21

II – the proceeds from the collection of the contribution shall be allocated:

a)to the payment of price or transportation subsidies for fuel alcohol, natural gas and its by-products, and petroleum products;

b) to the financing of environmental projects related to the petroleum and gas industry;

c) to the financing of transportation infrastructure programs.


04:06:21

SOCIAL SECURITY

GENERAL PROVISIONS

04:06:22

Social welfare comprises an integrated whole of actions initiated by the Government and by society, with the purpose of ensuring the rights to health, social security and assistance.

Art. 194, CF

04:06:22

It is incumbent upon the Government, as provided by law, to organize social welfare, based on the following objectives:

I – universality of coverage and service;

II – uniformity and equivalence of benefits and services for urban and rural populations;

Sole paragraph , Art. 194, CF

04:06:22


III – selectivity and distributiveness in the provision of benefits and services;

IV – irreducibility of the value of the benefits;


04:06:22


V – equitable participation in funding;

VI – diversity of the financing basis;


04:06:22


VII – democratic and decentralized character of administration, by means of a quadripartite management, with the participation of workers, employers, retirees, and the Government in the collegiate bodies.

Sole paragraph , Art. 194, CF04:06:22

Social welfare shall be financed by all of society, either directly or indirectly, as provided by law, with funds coming from the budgets of the Union, the states, the Federal District and the municipalities and from the following welfare contributions:

Art. 195, CF

04:06:22

I – of employers, companies, and entities defined by law as being comparable to companies, assessed on:

a)the payroll and other labour earnings paid or credited, on any account, to individuals who render services to them, even when there is no employment bond;

b) income or revenues;

c) profits;Art. 195, CF

04:06:22

II – of workers and other persons insured by social security, no contribution being assessed on retirement pensions and other pensions granted by the general social security scheme referred to in article 201;

Art. 195, CF

04:06:22

III – on the revenues of lotteries;

IV – of importers of goods or services from other countries, or of other parties defined by law as being comparable to such importers.

Art. 195, CF

04:06:22

The law may institute other sources intended to guarantee the maintenance or expansion of social welfare, with due regard to the provisions of article 154, I.


04:06:22

The welfare contributions set forth in item I of the head paragraph of this article may have differentiated rates or assessment bases, according to the economic activity, the intensive use of labour, the size of the company, or the structural situation of the labour market.


04:06:22

The law shall define the sectors of economic activity for which the contributions stipulated under the terms of items I, b; and IV of the head paragraph, shall be non-cumulative.


04:06:22

The provision of paragraph 12 shall also apply in the case of gradual replacement, either total ou partial, of the contribution stipulated under the terms of item I, a, by the contribution due on income or revenues.


04:06:22

Federal Taxes

Relevant for O & G

04:06:22

IRPJ – Company income tax. Applies to company profits

CSLL – Company contribution on net profit

IOF – Tax on financial operations. Applies to loans, financing and other financial operations, and shares

04:06:22

IPI – Tax on industrialized products. Charged to industries

Cide – Contribution for intervention in the economic domain. Applies to petroleum and natural gas and their derivatives, and upon fuel alcohol.

04:06:22

Cofins – Contribution for the financing of social security. Charged to companies

PIS/Pasep – Programs for social integration and formation of a public servant’s patrimony. Charged to companies

04:06:22

INSS – National Social Security Institute. Percentage of each employee’s salary charged to a company and the employee for health care. The value of the contribution varies according to the range of activities

FGTS – Time of service guarantee fund. Percentage of the salary of each employee who has signed a work logbook, deposited by the company04:06:22

IRPJ

Corporate income tax is charged on net taxable income.

The main methods to calculate corporate income tax on profits foreseen by legislation are: actual profit and presumed profit.

04:06:22

IRPJ

Actual profit system

It applies at a basic rate of 15%, plus a surtax of 10% on annual income that exceeds R$ 240,000.00 (U$120.000,00) per year.

04:06:22

IRPJ


Under this system, net taxable income corresponds to the company’s net book profit, with certain inclusions and deductions provided by the Brazilian legislation.

04:06:22

IRPJ


Usually deductible expenses are all items related to the ordinary business of a company and necessary to maintain its source of income.

04:06:22

IRPJ

Presumed profit system

Brazilian companies may elect to presumed net profits, provided they:

do not have total revenues in the preceding year higher than R$ 48 million (U$24 million);

are not financial institutions;04:06:22

IRPJ


Brazilian companies may elect to presumed net profits, provided they:

do not earn foreign profits, income or gains;

do not qualify for an exemption or reduction of the corporate income tax.04:06:22

IRPJ


the percentage for the revenues derived from the sale of products is 8%, while the percentage for service revenue is 32%.

The choice is made annually, at the beginning of the year and may be renewed every year.04:06:22

IRPJ

from the perspective of income tax, there are no specific provisions for companies involved in Oil & Gas industry

04:06:22

CSLL

created to fund social and welfare programs and is paid in addition to the corporate income tax.

is a tax levied on net taxable income and is applied at a rate of 9%.

CSLL’s tax base is similar to the tax base of the corporate income tax.

04:06:22

IOF

Focuses on:

Creddit for companies engaged in activities to provide cumulative and continuous advisory services credit, marketing, credit management, risk selection, management of accounts payable and receivable, purchase of receivables resulting from sales market in the long term or provision of services (factoring);

04:06:22

IOF

Credit operations for financial institutions;

Between legal entities or between legal entities and individuals;

Foreign exchange transactions;

Insurance operations by insurers;

04:06:22

IOF

Transactions in securities or securities;

Operations with gold as a financial asset or exchange instrument.Between legal entities or between legal entities and individuals;

Foreign exchange transactions;

04:06:22

IOF

Insurance operations by insurers;

Transactions in securities or securities;

Operations with gold as a financial asset or exchange instrument.

There are no specific provisions for companies involved in Oil & Gas industry04:06:22

IPI

Are immune from the tax:....

Electric power, petroleum, fuels and minerals in the country

04:06:22

IPI

Is defined as “petroleum products” from the processing oil, through the overall process generally known as refining chemically classified as hydrocarbons

04:06:22

CIDE

The Contribution of Intervention in the Economic levied on the importation and marketing of petroleum and its derivatives, natural gas and their derivatives, and ethyl alcohol fuel (CIDE), referred to the arts. 149 and 177 of the Constitution.

04:06:22

CIDE

The Cide will have on imports and the domestic market the following specific rates: Gasoline, R $ 860.00 (U$ 430.00) per m³;(U$ 1.00 = R$ 2.00)

Diesel, R $ 390.00 (U$ 195.00) per m³;

04:06:22

CIDE

The Cide will have on imports and the domestic market the following specific rates:

Aviation fuel, R$ 92.10 (U$ 46.05) per m³;

Other kerosene, R$ 92.10 (U$ 46.05) per m³;

04:06:22

CIDE

The Cide will have on imports and the domestic market the following specific rates:

Fuel oils with high sulfur content, R$ 40.90 (U$ 20.45) per ton;

Fuel oils with low sulfur, R$ 40.90 (U$ 20.45) per ton;

04:06:22

CIDE

The Cide will have on imports and the domestic market the following specific rates: Liquefied petroleum gas, R$ 250.00 (U$125.00) per ton;

Ethanol fuel, R$ 37.20 (U$ 18.60) per m³.

04:06:22

CIDE

Act of the Executive Branch can lowered and restored to its original level

04:06:22

CIDE

Decree 5060 of April 30, 2004

The rates of CIDE are reduced to:

R$ 91.00 (U$ 45.50) per m³ of gasoline and its currents, and

R$ 47.00 (U$ 23.50) per per m³ of diesel and its currents. (Text given by Decree No. 7591 of October 28, 2011)

04:06:22

CIDE

Are reduced to zero tax rates apply to:

Aviation fuel, other kerosene, fuel oils with high sulfur content, fuel oils with low sulfur, liquefied petroleum gas, including that derived from natural gas and naphtha, and ethanol fuel. (Decree No. 7591)

04:06:22

Gasoline and diesel will be more expensive in refineries. Petrobras recently announced an adjustment of 7.83% to 3.94% for gasoline and diesel.

The increase, however, will not impact the price at the pumps because the economic team has zeroed the rate of CIDE (Contribution for Intervention in Economic Domain) for the two fuels.

In a statement, the Ministry of Finance announced a reduction of tax to prevent the increase to reach consumers and affect inflation. The folder did not report the impact of release on the public coffersSource: Agência Brasil, 22, jun, 2012

04:06:22

PIS/Pasep and Cofins

Charged on revenues, on a monthly basis, under two regimes:

Cumulative non-cumulative

0.65% << PIS/Pasep >> 1.65%

3.00% << Cofins >> 7.60%04:06:22


The PIS/Pasep and Cofins non-cumulative regime is mandatory for companies subject to the actual profit method of computing corporate income taxes, with a few exceptions.

04:06:22


Exemple of cumulative system still applies:

For certain entities such as companies under the presumed profit system or to revenues deriving from telecommunications, transport and software development services.

04:06:22


Under the non-cumulative system, taxpayers may generally recognize PIS and COFINS credits corresponding to 1.65% and 7.60% of certain inputs which may be also used to offset future PIS/Pasep and Cofins or other federal taxes due.

04:06:22


The most important products derived from oil and gas are subject to a tax concentration special regime of PIS and Cofins.

Under this special regime, also known as “PIS/Cofins Monofásico”, the contribuitions are levied at specific rates on the sale of certain products derived from oil.04:06:22


Under the regime "PIS/Cofins Monofásico“, The calculation and payment of social contributions are concentrate in one specific taxpayer within the operational chain.

04:06:22


If the calculation is made "ad valorem" shall apply the following rates from PIS/Pasep and Cofins, respectively:

5.08% and 23.44%, levied on gross revenue from the sale of gasoline and its currents, except AVGAS;

4.21% and 19.42%, levied on gross revenue from the sale of diesel and its currents;04:06:22


If the calculation is made "ad valorem" shall apply the following rates from PIS/Pasep and Cofins, respectively:

10.20% and 47.40% levied on gross revenue from the sale of liquefied petroleum gas - LPG derived from oil and natural gas;

04:06:22


If the calculation is optionally done "ad rem" shall apply the following rates from PIS/Pasep and Cofins, respectively:

I - R$ 46,58 e R$ 215,02 per cubic meter of gasolines and its currents, except AVGAS;

04:06:22


If the calculation is made "ad rem" shall apply the following rates from PIS/Pasep and Cofins, respectively:

R$ 26.36 and R$ 121.64 per cubic meter of diesel and its currents;

R$ 29.85 and R$ 137.85 per tonne of liquefied petroleum gas (LPG) and

04:06:22


If the calculation is made "ad rem" shall apply the following rates from PIS/Pasep and Cofins, respectively:

R$ 12.69 and R$ 58.51 per cubic meter of aviation fuel.

04:06:22

INSS

the employer have to pay monthly to the INSS the rate of 20% applied on gross salaries without limits.

04:06:22

INSS

Still need to pay additional insurance from accidents at work and contributions to other government institutions, such as the National Commercial Learning (Senac), Social ServiceTrade (SESC) and Service Support for Micro and Small Enterprises (Sebrae)

The total to be collected for social security is between 27% and 29% of total payroll04:06:22

FGTS

Monthly, the employer shall deposit the equivalent of 8% of total salary of each employee for FGTS purposes.

This amount is deposited in each employee’s name in a separate.

04:06:22

FGTS

the employee may only use this fund in special circumstances, such as retirement or dismissal without just cause.

In any case, the employer must pay the employee 40% of the actual balance of the FGTS account as well as an additional of 10% to the federal government. 04:06:22

States & Municipal Taxes

(Relevant for O & G)

04:06:22

ICMS

A state tax levied on the import of products and transactions involving the movement of goods, inter-municipal and interstate transportation services and communication services.

Tax rates may be selective, based on the essentiality of the goods or services; 04:06:22

ICMS

When transactions involve two different states, the interstate rates are:

7% when the purchaser is located in the states of the North, Northeast and Center West regions or in the state of Espírito Santo;

12% for purchases located in the South and Southeast regions.04:06:22

ICMS

When transactions involve two different states, the interstate rates are:

The difference between the local and interstate rate is to the state of taxpayer

04:06:22

ICMS

Rates may vary depending on the product, taking values as 17%, 25% or other

Usually, ICMS taxpayers are entitled to a tax credit in the amount of the tax paid in the previous transaction and may be offset against future ICMS payables.

04:06:22

ICMS

There are a special tax treatments in regard to ICMS for activities related to the Oil & Gas industry.

the interstate operations involving sale of oil, natural gas and biofuel should be assessed by ICMS only in the State where the product is consumed.

04:06:22

ICMS

Downstream-related activities are usually subject to a tax substitution/concentration system where oil refineries are supposed to compute and collect the ICMS provided in the future operations.

04:06:22

ISS

ISS is a municipal tax levied on the revenues derived from the provision of services.

The services subject to the ISS are listed in Federal Suplementary Law (LC nº 116/03).

04:06:22

ISS

The tax base is the price of the service.

The rates vary from 2% to 5%, according to the municipality where the service provider is located, where the service is provided and the type of the service.

04:06:22

Taxation of Oil, Natural Gas and

Minerals

04:06:22

Industry activities in exploration and production of Oil

Exploration

Development

Commercial Production

04:06:22

Exploration

And

Development

04:06:22

04:06:22

EXPLORATION and DEVELOPMENT

In these stages of oil production, a large amount of resources are necessary because the activities are quite complex, requiring expensive equipment and considerable time is required to perform them.Among the resources spent, a portion is composed of taxes paid by suppliers of products and services. Taxes as IPI, PIS/Pasep, Cofins, ICMS, ISS and others.04:06:22

As a part of these taxes are entitled to credit in the stage of commercial exploitation, the government has established certain procedures that suspend the collection of some of these taxes, making acquisitions less expensive and reducing the need for resources.

Among the special regimes designed with this feature there is a special customs regime of export and import of goods intended for research and exploitation of deposits of oil and natural gas (Repetro).04:06:22

Repetro

The Repetro applies to the following items:

Vessels intended to research and production of petroleum or natural gas and for the support and storage in these activities.

Electrical machinery, apparatus, instruments, tools and equipment for the research and production of petroleum or natural gas.04:06:22

The Repetro applies to the following items:

Drilling rigs and production of oil or natural gas, as well as for support in these activities.

Vehicles fitted with machinery, apparatus, instruments, tools and equipment for the research and production of petroleum or natural gas.

Structures specially designed to support platforms.04:06:22

The Repetro can be applied also to machines, apparatus, instruments, tools, equipment and other pieces or parts, including spares, intended to:

I - ensure the operability of goods admitted in Repetro;

II - rescue, accident prevention and fire fighting, and

III - protection of the environment.

04:06:22

There are other special tax regimes. Among them:

Repenec

Is Repenec's beneficiary the entity that has approved a project for deployment of infrastructure in the North, Northeast and Midwest, in petroleum refining, petrochemical and production of ammonia and urea from natural gas, for the incorporation of their fixed assets..04:06:23

Is Repenec's beneficiary the entity that has approved a project for deployment of infrastructure in the North, Northeast and Midwest, in petroleum refining, petrochemical and production of ammonia and urea from natural gas, for the incorporation of their fixed assets.

04:06:23

Incumbent upon the Ministry of Mines and Energy to approve project and definition, by decree, the projects that fall within the provisions.

Repenec may be applied to projects registered until 31 december 2010 and approved by June 30, 2011.

04:06:23

In case of domestic sale or importation of machinery, apparatus, instruments and equipment, new, and building materials for use or incorporation in the works shall be suspended:

I - Contribution of the PIS/Pasep and COFINS on revenue from corporate seller, when the acquisition is effected by a legal beneficiary of Repenec;

04:06:23


II - the requirement of the Contribution to PIS/Pasep-Import and Cofins-Import, when the importation is effected by a legal beneficiary of Repenec;

04:06:23


III - Excise Tax - IPI output in the industrial or similar, when the acquisition is made in the internal market by industrial establishment of a legal entity receiving the Repenec;

04:06:23


IV - the IPI on imports when the import is performed by an industrial establishment of a legal beneficiary of Repenec;

V - Import Duty when goods or building materials are imported by a legal beneficiary of Repenec.04:06:23

Another regime

REPORTO

Tax Incentive Regime for Modernization and Expansion of the Port Structure

04:06:23

Will be made with Suspension of the Tax on Industrialized Products - IPI, Contribution to PIS/ PASEP, COFINS and, when appropriate, Import Tax - II, sales and imports of machinery, equipment, spare parts and other goods on the domestic market, when purchased and imported directly by the beneficiaries of REPORTO and intended for its fixed assets for the exclusive use in performing services:

04:06:23

I - loading, unloading, storage and handling of goods and products;

II - additional operational support systems;

III - environmental protection;

IV - security systems and monitoring the flow of people, goods, products, vehicles and vessels;

V - dredging; VI - education and training of workers, including the establishment of training centers Profissional.04:06:23

For a period of 10 years from the effective date of Law in 9432, to January 8, 1997, will not apply the Additional Freight for the Renewal of the Merchant Marine - AFRMM on goods whose origin or whose destination is located in North Port and Northeast, except for single-hull vessels with double bottom for the transport of fuel, whose term is 25 years

04:06:23

THE END

04:06:23

Tax Policies in Brazil: Taxation of Oil, Natural Gas and Minerals Brazil – Russia Dialogue:...

Documents

Transcript of Tax Policies in Brazil: Taxation of Oil, Natural Gas and Minerals Brazil – Russia Dialogue:...