The Rio de Janeiro government recently released Law 7,183/2015, which was published on December 30 2015. The law establishes a value added tax system (ICMS) for operations related to the circulation of goods and on the performance of services for interstate and intercity transport and communication. It will be levied on oil transfer operations between oil wells and concessionaires.

In accordance with Article 2, the taxable event will occur immediately after oil extraction, when the goods pass through the production measuring points.

The tax rate will be levied at 18% and will have as its tax base the oil reference price. This will be based on the weighted average of the oil sale price charged by the concessionaire in normal market conditions or the minimum price set out by the National Agency of Petroleum, Natural Gas and Biofuels – whichever is higher.

Article 5 clarifies that the taxpayer will be the oil trader, manufacturer, producer or extractor, regardless of whether it is the direct concessionaire. Further, for purposes of collection and in order to identify the taxable party, the location of operations will be considered the location in which the oil was measured after extraction.

The law was created due to the Rio de Janeiro government's dissatisfaction with the ICMS levy rules on oil production, as oil is the only product on which ICMS is levied at the destination, rather than the origin, of the product. In addition, the Rio de Janeiro economy has suffered due to the reduction in the price of oil, which caused a drop in revenues from oil royalties and affected market shares.

The new law has been criticised by one company association not only due to the heavy burdens it imposes, but also for introducing a similar collection system to that under Law 4,117/2003, the constitutionality of which was being reviewed by the Supreme Court before the enactment of Law 7,183.(1) However, the publication of Law 7,183 expressly repealed Law 4,117.

The new law will come into effect 90 days after its publication.

For further information on this topic please contact Godofredo Mendes Vianna or Jose Augusto Dias de Castro at Kincaid | Mendes Vianna Advogados by telephone (+55 21 2276 6200) or email ([email protected] or [email protected]). The Kincaid | Mendes Vianna Advogados website can be accessed at


(1) Direct action for declaration of unconstitutionality – ADI 3019.

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