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Ajuste Sinief No. 3/18: new tax treatment for transactions with NG through pipelines

12Abr2018Apr12,2018
Tax

CONFAZ published on April 4, 2018, Ajuste Sinief No. 3/18 , introducing a different ICMS treatment and invoicing obligations for transactions and transportation of Natural Gas (“NG”) through pipelines. 

Such treatment was one of the main topics addressed during the “Gas to Grow” project and a step towards the development of the NG market in Brazil as a competitive and multi-player industry, considering Petrobras’ recent divestment program that reduced its role in the pipeline network. 

In general terms, this different treatment is based on the contractual flow of NG obligations (as opposed to the physical flow, which has generally been the relevant event for the application of ICMS and issuance of invoices) and on the adoption of an electronic system, the so called “Information System”, for the control of information related to the movement (entrance and delivery) of NG.

Ajuste Sinief came into force on the date of its publication, but it will become effective on the first day of the month subsequent to the publication of an “Ato Cotepe ICMS”, which will approve and regulate the Information System.

GENERAL RULES 

NG transactions and NG transportation services will be taxed based on their points of entry and delivery and their respective contractual values; the physical flow of the NG will be disregarded for tax purposes.

Invoices may be issued monthly up to the 5th business day of the month subsequent to the triggering event (this invoicing procedure does not interfere with the relevant date set forth in the legislation for the collection of ICMS).

Invoices must consider the volume of NG measured at the entry and delivery points and expressed by energy units at the request of suppliers and recipients and confirmed by transportation providers, as indicated in the relevant contract.

Different rules apply for ancillary obligations, particularly regarding the issuance and completion of electronic invoices, which depend on whether the party contracting the NG transportation service is the supplier or the recipient and whether it involves one or more providers of NG transportation services and interconnection of pipelines.

Suppliers, recipients and transportation service providers must verify if the transactions at the entry and delivery points are in accordance with the provisions in Ajuste Sinief and are jointly liable for potential ICMS due in respect of invoices not received or invoices received but in breach of the rules established in Ajuste Sinief.

This different tax treatment is limited to transactions and services executed by suppliers, recipients, and transportation service providers which operate through pipelines, accredited and listed in a specific Ato Cotepe ICMS, and located in the following states: Alagoas, Amazonas, Bahia, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraíba, Paraná, Pernambuco, Rio de Janeiro, Rio Grande do Norte, Rio Grande do Sul, Santa Catarina, São Paulo and Sergipe.

In order to benefit from the tax treatment established in Ajuste Sinief, the taxpayer must submit certain information through the Information System. Up to December 31, 2018, which was defined as the transitional period, preceding the creation of the Information System, users of pipelines must submit monthly reports, in accordance with rules that will be defined in Ato Cotepe ICMS. However, for contracts signed before Ajuste Sinief was published and which are still valid, the volume of gas must be measured based on the measurement unit contractually agreed. 

STORAGE OF NG IN PIPELINES 

The pipeline stock corresponds to the sum of the minimum volume required to start the movement of NG and the difference between the volume received and delivered in the transportation facility within a certain period.

Such minimum volume of NG may be delivered by the party contracting the transportation service (in which case invoices must be issued, without ICMS, for the delivery and return of NG), or acquired by the transportation services provider (in which case the NG supplier must issue an electronic invoice in accordance with the relevant legislation).

EXTRAORDINARY LOSSES

Extraordinary losses that release NG into the air due to damage, accidents or other problems in the transportation facility and which are a result of actions or omissions of the transportation service provider create certain obligations of the transportation service provider, which must: (i) ascertain the losses each month; (ii) discriminate losses proportionally to each contractor of the transportation service, having regard to the contractual terms and conditions; and (iii) by the 5th business day of the month following the event, issue to each party contracting the transportation services, invoices without ICMS and containing the information required by Ajuste Sinief. 

The contracting party to the transportation services must issue, by the 5th business day of the second month following the event which caused the loss, invoices containing the indication of the ICMS due, pursuant to specific information required by Ajuste Sinief.

FORCE MAJEURE AND ACTS OF GOD 

For losses resulting from events not within the control of the parties, the position is the same as that relating to extraordinary losses (above), in that the transportation service provider must: (i) ascertain the losses each month; (ii) discriminate losses proportionately to each contractor of the transportation service, having regard to the contractual terms and conditions; and (iii) by the 5th business day subsequent to the event, issue to each party contracting the transportation services, invoices without ICMS and containing the information required by Ajuste Sinief. 

The contracting party to the pipeline transportation services, must issue, by the 5th business day of the second month following the event, invoices without ICMS and write-off the respective ICMS tax credit.


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