Petrobras informs that on August 18, 2017, the Provisional Measure No. 795 was published for the oil and gas industry, in addition to Decree No. 9.128, which extended the special customs regimen for the export and import of goods intended for research activities and extraction and exploration of oil and natural gas reserves  – REPETRO until 2040, in order to provide greater predictability to the standards applicable to the oil and gas industry in the country and encourage investments in the sector.

The new legislation provides for the following:

i) Deductibility of the calculation basis of the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profits (CSLL) of investments made in the exploration and production phases of oil and natural gas:
(a) Revokes Decree Law No. 62, dated November 21, 1966, which provided for the immediate deduction of all investments made in the exploration, production development and oil production in the calculation basis of taxes on income;

(b) Allows investments made in exploration and production to be immediately deductible in the years in which they are incurred. However, the expenses associated with assets formation for the production development should be deducted according to the method of units produced, and it can be calculated at an accelerated rate, 2.5 times, until December 2022. The amendment of the legislation grants greater legal certainty for the oil and gas industry.

Petrobras has disputes in the amount of R$ 15.6 billion related to this matter in its financial statements (ITR) for the 2nd quarter of 2017, as described in explanatory note 29.3. Contingent liabilities.

ii) Taxation by Withholding Income Tax (IRRF) on remittances abroad for the payment of vessels chartering:

(a) Amends, as of January 1, 2018, the limits of charter agreements, whose remittances abroad are subject to the reduced IRRF rate of zero, increasing the tax burden applicable to these agreements;

(b) However, it recognizes the historical way of hiring adopted by the industry, making it possible to close a significant portion of the company’s litigation associated with such matter, upon payment of the difference between the limits established for IRRF, added default interests, with amnesty of default and exofficio fines, provided that all administrative and legal suits are dropped.

Petrobras has disputes in the amount of R$ 52.7 billion in its financial statements (ITR) for the 2nd quarter of 2017, as described in explanatory note 29.3. Contingent liabilities.

iii) Proposal to adapt the terminology used in the special tax regime for profits earned abroad by subsidiaries that carry out chartering activities, lease of goods or services related to the exploration and production of oil and natural gas, established by Law 12.973, dated May 13, 2014.

iv) Amendment, as of January 1, 2018, of the REPETRO system and creation of the special regime for the acquisition and industrialization of goods that request definitive permanence in the country, intended for the exploration and production of oil and natural gas. REPETRO is now limited to temporary admission goods, exempt from paying federal taxes until 2040. For goods that will remain permanently in the country, a new regime was established to ensure tax relief on import and acquisitions within the domestic market, until December 2022.

Petrobras understands that the new taxation model will have positive effects for the oil and gas industry, clarifying important concepts, reducing litigation and providing greater legal certainty and stability, in addition to encouraging new investments.
 
It is important to note that the new legislation is still subject to the approval of the National Congress and the regulation of the Brazilian Federal Revenue Service. After which, it will be possible to evaluate its financial impacts.

Facts deemed relevant will be disclosed to the market in a timely manner.