Special Customs Regime for Suspension of Taxes in Brazil

Know more about REPETRO and other special customs regime


The beneficial tax regime for goods in the research and production of oil and natural gas fields was introduced in 1999, by Decree No. 3.161/1999, as a means to foster the development of the newly opened Brazilian oil & gas industry. It was first regulated by Normative Instruction No. 87/2000 (September 1st, 2000), and now the regime follows the dispositions of Normative Instruction No. 1.781/2017. Such special tax regime will be in force until December 31st, 2040.

REPETRO aims primarily to reduce the tax burden on companies involved in exploring and extracting oil and natural gas through the total suspension of federal taxes (II, IPI, PIS, COFINS and AFRMM) due on local purchase or importation of selected equipment and spare parts used in the upstream activities. In this context, REPETRO-SPED allows for tax optimized industrialization and direct import of goods for the E&P industry.


The main features of REPETRO-SPED are:

  • Paper exportation of equipment locally manufactured sold to a foreign-based entity;
  • Paper exportation of parts and spare parts, acquired locally or from abroad, destined to main equipment;
  • Permanent importation and local acquisition of final equipment with suspension of Federal taxes upon the operation;
  • Temporary admission for economic purposes with suspension of federal taxes during the period the assets remain in Brazil;
  • Temporary admission for economic purposes with payment of Federal taxes proportionally to the period the assets remain in Brazil; and
  • Importation or acquisition in the local market of raw materials, intermediate products and packaging materials to be used in the final equipment.(Repetro-Industrialização)

Please note that the Brazilian IRS has not issued yet a new Regulatory Instruction to regulate the Repetro-Industrialização regime, although the Decree No. 9,537 was published on October 24, 2018. The Decree indicates that qualification of regime will be ruled by Brazilian IRS.

The imported items eligible for REPETRO-SPED regime are listed in the Annexes I and II to Normative Instruction RFB No. 1.781/2017. The Annex I addresses the items that can only be subject to REPETRO-SPED if imported permanently, under a purchase and sale agreement, whilst the Annex II lists the items that may be subject to the regime whether imported permanently or temporarily.

Specifically regarding FPSO’s and platforms, although classified as permanent items, they may be imported under Temporary Admission inasmuch as:

  • the asset is temporally used in production tests or in anticipated production, in exploration field or block, up to 4 (four) years, with no possibility of extension;
  • the leasing or rental agreement is connected with the contract of service provision to operate the platform or unit, and contracting parties are non-related parties of operator.

With respect to the modality encompassing the temporary admission with suspension or proportional payments of Federal taxes, the regime will not be applicable if:

  • the total value of the instalments exceed the value of the assets (with certain rules for relieving the restriction), including when it is carried out between companies of the same economic group;
  • the contract presents a purchase option of the goods;
  • the contract does not present a complete individualization of assets or unit value for each asset;
  • the items subject to leasing or rental agreement connected with the contract of service provision are not imported by the leasing payer.
  • the service contract includes the supply of consumables during the provision of services.

Although the REPETRO-SPED is in force as from 2017, the previous REPETRO regime rules will also be in force until December 31, 2020. Items imported under REPETRO can be transferred to REPETRO-SPED until June, 30, 2019, based on simplified procedures.

ICMS Exemption/Taxable Basis Reduction – REPETRO-SPED

ICMS (tax on the movement of goods and services) Convention No. 3/2018 provides the ICMS tax treatment for goods brought into Brazil under REPETRO-SPED. It authorizes the States to grant ICMS exemption or reduction of the calculation basis related to goods destined for O&G research, exploration or production activities, allowing Brazilian states to:

1) Reduce to 3% the ICMS rate on imports or local acquisitions of permanent items under REPETRO-SPED regime applied on exploration and production activities.*

2) ICMS exemption on imports of temporary items under REPETRO-SPED regime.*

3) Exemption of ICMS on paper exportation and the subsequent import under temporary admission, on the local sales of final equipment and on previous operations.** 

* Benefits 1 and 2 are also applicable for spare parts to be directly applied into the main goods and the tools used directly in the maintenance of goods.

** With respect to benefit 3, it is also applicable for: machinery, equipment, accessories, spare parts used as inputs in the construction and installation of floating systems and production or drilling platforms, as well as their modular units to be processed, industrialized or assembled in industrial units; and to hulls and modules, when used as inputs in the construction, repair and assembly of floating systems and production or drilling platforms.

Considering that REPETRO-SPED was created to replace REPETRO, the ICMS Convention No. 03/2018 brought transitional rules. In this sense, the Convention authorizes the State to grant ICMS exemption on importation of goods (permanent or temporary), prior to December, 2017, which occurred under REPETRO and will be transferred to REPETRO-SPED.

Temporary Admission for Economic Purposes

In case the good is not eligible for REPETRO, it could be imported with taxes suspension granted by Temporary Admission Regime, whereby the goods intended for economic use in Brazil can be imported on a temporary basis. Economic use considers the allocation of goods for the production of other goods, i.e. oil, gas, and other hydrocarbons, or other equipment, as well as provision of services to third parties. This special customs regime allows the entry of certain goods in Brazil, with a specific purpose and for a certain term, with partial suspension of the customs taxes due on importation, with a commitment that the goods' ownership remains with the foreign entity.

Normative Instruction No. 1.600 published by Brazilian tax authorities in December 14th, 2015 regulates the regime. It provides partial exemption of II, IPI and PIS/COFINS-Importation. Under this regime, these taxes are charged at 1% per month (up to 100%) of the total tax due for the period the good remains in Brazil. The outstanding balance is suspended until its re-exportation.

The suspension period corresponds to the term stipulated on the lease or service contract or on the rental or loan agreement.  An exception is made for goods remaining in Brazil for less than 6 months, which are subject to a minimum of 6% of the amount of taxes due.

Moreover, the regime’s beneficiary must sign a Responsibility Term, assuming full accountability for tax payments in case of noncompliance with the corresponding rules.

Additionally, a guarantee of the amount due is required. According to the new legislation, this guarantee can be granted by (i) cash deposit of the full amount, (ii) indication of reputable guarantor or (iii) customs insurance.

According to the new rules, the following can be considered a reputable guarantor: a financial institution; other legal entity that has net assets of at least five times the value of the security to be provided or greater than R$ 10,000,000.00 (ten million Reals); or individuals whose net worth is at least five times the value of the security to be provided.

In relation to State taxation, ICMS applicable to this case will vary according to the State where the operation is performed, and may or may not follow the same treatment as the Federal Taxes (1% per month of the tax due up to 100% during the time the asset remains in Brazil).


Other Special Customs Regime

In regards to the upstream sector, other special customs regimes are available for specific operations. These regimes may reduce tax burden or improve taxpayer’s cash flow. They are:

  • Integrated Drawback – suspension or exemption;
  • Manufacturing Bonded warehouse for Oil and Gas assets;
  • Certified Bonded Warehouse for Export (DAC);
  • Temporary admission for manufacturing purposes.

Please note that those regimes can only be applied in certain specific operations, and need to be analyzed on a case-by-case basis.

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