![Brazil Brazil](https://cdn-www.bnamericas.com/img/flags/BRAZIL.jpg)
How the regulation of Brazil’s tax reform affects the energy sector
![How the regulation of Brazil’s tax reform affects the energy sector](https://cdnimg.bnamericas.com/wXJvdxZCZTRvSVIxtyWMJLtfJXJyqSQVkFAyJewDkgBrGWrPzHZQIXbYwCYMtOre.jpg)
Approved by Brazil’s lower house on Wednesday, the bill regulating Brazil's tax reform maintained the selective tax on oil and natural gas exports.
This tax will be applied to products that are harmful to health and the environment.
On the other hand, parliamentarians approved the 100% cashback for the CBS (contribution on goods and services) tax on energy and natural gas for low-income consumers.
A local expert told BNamericas that the tax reform should be beneficial for the energy sector, although it is still unclear if certain taxes will effectively be reduced.
Alongside the goods and services tax (IBS), the selective tax and the CBS will replace the current PIS, Cofins, ICMS, ISS and, partially, the IPI taxes.
The bill, which amends the government's original proposal, will now be analyzed by the senate, where the oil and gas industry hopes to achieve an exemption from the selective tax.
In a press release, petroleum and natural gas association IBP warned that imposing the selective tax would result in an increase in the costs of goods and services in the production chains with consequent inflationary pressure, reduce the competitiveness of Brazilian exports and impact the revenue of oil- and gas-producing states and municipalities.
The organization, which represents the country's main oil and gas producers and fuel distributors, estimates the impact on revenues from special participations, a type of royalty that is only taxed after operating and tax costs have been deducted, at 8 billion reais (US$1.5bn) a year.
IBP said that the sector does not rule out filing legal action if the selective tax is implemented.
Tiago Severini, a customs and tax partner at law firm Vieira Rezende, said that it is still unclear how the selective tax will be levied.
"There’s a separate PLP [supplementary bill] to deal with these rules," he told BNamericas.
Still, the tax reform will be beneficial for the energy sector mainly because it simplifies the tax system, he said.
"It will only be possible to assess the effective [tax] reduction once the whole system’s up and running. But, in principle, it should remain the same for E&P and fuels, and be reduced for electricity," said Severini.
Severini considers the CBS cashback a good idea, but he added that the amount returned will relate to the last operation.
"This way, for it to work well, non-cumulative taxation along the productive chain would have to be complete," he said. And since this is not the case, all exporting industries should continue to accumulate credit.
"It will be cheaper for consumers if energy and gas are imported or produced entirely in Brazil by companies that don't also export," he said.
“Regarding hydroelectric generation, for example, there will be a significant reduction in the tax burden, but for thermal, or even wind and solar, there must be a trade-off between inefficiency and benefit, leaving the actual price reduction for the end consumer uncertain.”
Subscribe to the leading business intelligence platform in Latin America with different tools for Providers, Contractors, Operators, Government, Legal, Financial and Insurance industries.
News in: Oil & Gas (Brazil)
![Can Brazil unlock the economic potential of the Amazon rainforest?](https://cdn-www.bnamericas.com/img/sectors/oilgas_2.jpg)
Can Brazil unlock the economic potential of the Amazon rainforest?
BNamericas spoke with two of the most prominent independent experts on the Amazon to find out.
![Petrobras reduces 2024 capex projection](https://cdn-www.bnamericas.com/img/sectors/oilgas_1.jpg)
Petrobras reduces 2024 capex projection
Brazil's state-run oil firm now plans to invest between US$13.5bn and US$14.5bn this year.
Subscribe to Latin America’s most trusted business intelligence platform.
Other projects in: Oil & Gas (Brazil)
Get critical information about thousands of Oil & Gas projects in Latin America: what stages they're in, capex, related companies, contacts and more.
- Project: Pajeú 1 Photovoltaic Plant (Bahía, 27,136 MW)
- Current stage:
- Updated:
3 months ago
- Project: Juruá Thermoelectric Plant - CGA (Amazonas, 3,168 MW)
- Current stage:
- Updated:
5 years ago
- Project: Serra do Mel III (Old Serra do Mel IX)
- Current stage:
- Updated:
2 years ago
- Project: Field Piaçabuçu
- Current stage:
- Updated:
1 month ago
- Project: Field Rio Joanes
- Current stage:
- Updated:
1 month ago
- Project: Field Lagoa Parda Sul
- Current stage:
- Updated:
1 month ago
- Project: Block Bumerangue
- Current stage:
- Updated:
1 month ago
- Project: Nossa Senhora de Fátima Thermoelectric Plant
- Current stage:
- Updated:
1 month ago
- Project: FPSO Maria Quitéria (Parque das Baleias)
- Current stage:
- Updated:
1 month ago
- Project: Arapaçu Field
- Current stage:
- Updated:
1 month ago
Other companies in: Oil & Gas (Brazil)
Get critical information about thousands of Oil & Gas companies in Latin America: their projects, contacts, shareholders, related news and more.
- Company: Lwart Soluções Ambientais S.A.  (Lwart Soluções Ambientais)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: SSOil Energy S.A.  (SSOil Energy)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Chevron Brasil
-
Chevron Brasil is the Brazilian unit of US firm Chevron, and is engaged in the exploration, production, manufacture, transportation, refining, storage and trading of crude oil, ...
- Company: ExxonMobil Exploração Brasil Ltda.  (ExxonMobil Exploração Brasil)
-
ExxonMobil Exploração Brasil Ltda. is a Brazilian exploration and production subsidiary of international oil and gas corporation ExxonMobil opened in 2000 in Rio de Janeiro. In ...
- Company: Infotec Brasil Consultoria E Planejamento Ltda.  (Infotec Brasil)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Grupo Bravante
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: BP Energy do Brasil Ltda.  (BP Energy do Brasil)
-
BP Energy do Brasil Ltda., a local subsidiary of British oil company BP, focuses on exploration, production and distribution of crude oil and natural gas, with operations also i...