ARTICLE DISCUSSES THE APROVAL OF THE FINAL TEXT OF MP 795/17 (CONVERTED INTO THE LAW 13.586/17) AND THEIR TAX IMPLICATIONS
On December 13th, 2017, Congress approved the final text that converted the Medida Provisória (Provisional Act) 795/17 into Law, having its sanction on December 29th, 2017 and numbered as 13.586/17. With the new Law, the legislation about the exploration and production of oil and natural gas was consolidated, granting federal tax exemption when the goods, their inputs and/or parts are to remain permanently in the country or, while maintaining the exemption given by Decree, when the permanence is temporary.
The maintenance of the exemption of federal taxes until 2040 had already been granted by the Decree 9.128/17, for temporary admissions with economic use for the oil and gas industry.
Based on the conversion text and in the Extension Decree, Customs had already issued a Normative Instruction (IN) in which it ruled on the matter. With the publication of Law 13.586/01, a new Normative Instruction was issued by Customs (numbering 1.780), which, in addition to revoking the previous IN, definitively disposes of the new set of rules, including modifications to the INs of the current Repetro and Temporary Admission regimes.
The set of standards (Provisional Act converted into Law, Decree and Normative Instruction) grants tax benefits that the oil and natural gas industry has been asking for, but also represents a loss of opportunity to give the sector clearer legislation and greater legal certainty.
As I wrote on the occasion, the Provisional Act, now converted into a Law, could have given greater legal certainty to the special regimes that are necessary for the activities of the oil and gas industry.
It would suffice to provide that there would be exemption from federal taxes for both definitive imports and those for temporary admission with economic use, including inputs for industrialization in Brazil, provided they were intended for use in the exploration and production of oil. Now the exemption to definitive importation is in Law and the Temporary Admission is in Decree.
The Law authorizes Customs to regulate the matter and determine its converage, being that it opted to do by Normative Instruction. It regulates, among other things, about the lists that may or may not be covered by the exemption. IE, if a Normative Instruction can change the scope of the Law, where is the legal security that the industry needs? A Normative Instruction can be modified quicker than a monocratic Law and may cause an entire planning that need years to be effective stay at the mercy of a lower regulation.
If those simplifications could contain in the Provisional Act converted into Law, would then all legal security concerning the exemption of federal taxes because be literally and fully contained in the Law as determines the Constitution. At the same time in which the Executive Power could, through the Normative Instruction, further simplify the process of these exemptions using Specials Regimes that already exist, like the Temporary Admission and Bonded Warehouse.
The extinction of the Repetro Regime, that itself doesn’t exist and uses from others Regimes existing procedures, would be a natural consequence.
In fact, Repetro makes only a bureaucratic step in the temporary or definitive import of goods for the oil and gas industry because uses other Regimes and exist just to grant a license to companies that intends to have this exemption, requesting documents that could be ordered only when Customs clearance of goods required such.
As a rule, when the Customs Regulation deals with exemption from federal taxes, is not a requirement the prior qualification, because the evidence of the purpose to which the goods are intended is generally made at the time of customs clearance.
When creating the Repetro, and now the Repetro-Sped, a bureaucratic obstacle that requires the parties to submit the time-consuming process is created, when the entire industry and the Brazilian society ask exactly to be simplified the procedural formalities.
Although the Normative Instruction (IN) establishes that in thirty days the license will be granted for the regime’s beneficiary, the same IN provides that the deadline may be interrupted for fulfillment of requirements, which serves as a reason for the non-compliance with the deadline, being remembered that, for this granting system to work, it requires to be effected by the expedition of a Declaratory Act.
To complicate matters, the new IN text requires the presentation of a larger number of documents. The exemption from presentation of contracts or of its registered translation, although well intentioned, doesn’t solves the issue that there a law that requires, which can make be requested at any time.
The Repetro and the new Repetro-Sped also brings variations regarding other Special Regimes because they ask for guarantee for the Customs Clearance of the goods to be exempted, what is unnecessary given the size of the companies in the oil and gas industry.
On the Special Regime of Temporary Admission, Drawback, Bonded Warehouse, Recof or any other Special Regime the guarantee is asked and in almost all is discharged even the Formal Responsibility Term, being suffice such declaration in the supplementary information of the import declaration.
The Brazillian Law is clear to punish the false claim of an exemption requested, and can configure up to crime for false declaration. Isn’t it enough?
Another huge difference between the concessions which follow the general rule and granted by “Special Regimes” of Repetro and Repetro-Sped is that the Normative Instruction creates a supervisory Group located in Brasília and not in one of the places where there is greater concentration of exemptions for the oil and gas industry, i.e. monitor the admission processes of equipment that have the exemption or “suspension to be converted into exemption”.
If Articles 376 and 458 of the Customs Regulations were repealed, there would be no Repetro and the Laws dealing with exemption would apply, meaning that when the import was temporary the Temporary Admission Regime would be applied, having no need or qualification to the Repetro nor guarantee to be given. Customs could edit norms regulating the Temporary Admission and the control of exemptions, provided that within the limits of the Law.
The IN issued by Customs extrapolates the Law when making demands on the charter contract value and form of contracting FPSOs in order to grant exemption from federal taxes, in which case a lower norm is restricting the scope of Laws, if using of the discretionary power to link fiscal activity to a normative instruction and not to a Law.
Another extrapolation is the requirement of transfer of ownership to the granting of exemption contained in the IN and not in the Law’s text.
The extrapolation aforementioned is perhaps greater, if we take into account that Custom Auditors are driven to fulfill a Manual available on the Internet, which is updated directly on Customs website without a prior notice to the interested parties, having no legal provision that bind as a complementary standard.
If Customs considers that the Manual is a complementary standard they should edit an Ordinance clarifying the fact and explaining where will be the publication, informing that the Manual has been updated, preferably as all standards are published in the Brazilian Government Official Gazette. Finally, despite my comments, we have a set of regulations in force that benefits the national industry of exploration and production of oil and gas, and we have to meet while they remain.
In others articles I’ve been describing the major innovations of the legislation about the oil and gas industry. The good news is that the new IN came complete and modifying, in necessary, the IN of the “old Repetro” and Temporary Admission, which are still in force.
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AllAboutComex Team