Provisional Measure No. 795/2017 And Decree No. 9,128/2017: Alterations In Tax Treatment Of Oil And Natural Gas Exploration And Development Activities And Extension Of REPETRO´S Term Until 2040

On August 18, 2017, Provisional Measure No. 795 ("MP 795/2017") was published, providing for alterations concerning the tax treatment applicable to oil and natural gas exploration and development activities, as well establishing a special tax regime for the oil and gas industry.

In summary, among the innovations introduced by MP 795/2017, it is verified:

(I) Regarding Corporate Income Tax ("IRPJ") and Social Contribution on Net Profit ("CSLL"):

the possibility of deducting in full from the total expense, in the relevant calendar year, of expenditures in the activities of exploration and production of oil and natural gas, for purposes of calculation of real profit (taxable income) and calculation basis of CSLL, previously provided for in Article 416 of RIR nominally only for Petróleo Brasileiro S.A. ("Petrobras"). rules related to the deduction of depletion expenses connected with development activities, and, especially, the possibility of accelerating depletion of assets formed until December 31, 2022, by applying the rate determined by the unit-of-production method ("MUP") multiplied by 2.5. (II) Regarding the Withholding Income Tax ("IRRF") on revenues related to charter or leasing of maritime vessels when the charter/lease and service agreements are executed simultaneously:

establishment of new maximum percentages for each type of vessel (which are: 70% for vessels with floating systems of production and/or storage and offloading; 65% for vessels with rig systems for drilling, completion, wells maintenance; and 50% for other types of vessels), that shall be observed as of January 1, 2018, for purposes of applying zero tax rate; establishment that the charter or lease agreements of vessels related to activities of transportation, handling, transfer, storage and regasification of liquefied natural gas shall represent 60% of the total value of the agreements for the levy of IRRF at zero tax rate; detailing of the concept of related legal entities for purposes of compliance with such percentages; clarification of the levy of IRRF on the entire remittance of values to foreign charter company benefiting from privileged fiscal regime or domiciled in a low tax jurisdiction; bringing express provision that the application of those percentages does not encompass the reclassification of charter or lease agreement for purposes of CIDE and PIS/Cofins-imports; recognition of the retroactive application of percentages previously fixed by Law No...