Petrobras loses another billion-dollar tax case

Oil and gas giant Petrobras has lost an appeal at Carf, Brazil’s tax appeals court, which upheld BRL 9.1 billion (nearly USD 1.8 billion) in tax claims related to ship chartering activities. The amount relates to two cases that began trial in October. 

The tax in question is called Cide and is levied on remittances abroad. Carf understands that Petrobras tried to reduce the basis for calculating the expenses by attributing them to the chartering of oil exploration platforms, which are not taxed, and by recording only 10 percent of the costs as imports of services. 

For the court, both cases involved the importation of services and were therefore subject to Cide.

The company anticipated a possible defeat and set aside the amount. In October, it lost another billion-dollar dispute over back taxes on profits from its unit in the Netherlands. 

At the time, the case was the first to be heard under the new tie-breaking rules, which provide that, in the event of a tie in tax appeals, members representing the Public Treasury will be able to break the deadlock in favor of the federal government. 

These new rules are likely to lead the company to use the court system rather than a final appeal to Carf this time.

The Luiz Inácio Lula da Silva administration expects the Carf rulings to increase revenue, a crucial step for the federal government to meet the bold fiscal targets it has set for itself, starting with a zero primary deficit by the end of 2024. 

The amount due this time would have a residual impact on Petrobras’ dividend payout, but not enough to worry analysts as it does not represent a risk to the state-owned company’s cash flow. Petrobras shares fell almost 1 percent during the day to BRL 42.18, due to the fallout from the case, but began to recover this afternoon and are now trading at BRL 42.35.

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