On August 18, 2017 an executive order whereby tax benefits are granted to taxpayers engaged in hydrocarbon operations (the “Order”) was published in the Federal Official Gazette. The Order grants benefits to permit holders engaged in hydrocarbon exploration and extraction.
Due to the downward adjustment in international hydrocarbon prices and the improvement in extraction conditions, the applicable tax regime has become flexible through the granting of a tax benefit which consist in allowing permit holders to set deduction limits for costs, expenses and investments in calculating the percentage entitled to be received in shared profits, according to the percentages set out in the Order, which are higher than those set out in the Hydrocarbon Revenue Law.
The tax benefit may be obtained through prior favorable ruling to the validation request submitted by the permit holder to the Treasury Department, which must be answered no later than 60 business days following the date of the request, after confirming the fulfillment of the requirements set forth in the Order.
The permit holder must file the validation request during the first quarter of the relevant fiscal year. For 2017 fiscal year, it may be filed within the three months following the effective date of the Order (August 21, 2017).