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Oil Companies Express Strong Concern About Proposal That Increases Contribution to the Temporary Budget Fund in Rio de Janeiro and Warns of Impacts on Competitiveness.
Companies linked to the oil and natural gas chain in Brazil reacted to the proposal from the government of the State of Rio de Janeiro that foresees an increase in the contribution to the Temporary Budget Fund (FOT). In a statement released this Monday (01), the sector expressed “strong concern” about the effects of potential changes, especially regarding investments and tax predictability.
The statement is signed by representative entities of the segment, including the Brazilian Institute of Oil and Gas (IBP) and the Brazilian Association of Oil Goods and Services Companies (Abespetro). The organizations evaluate that the timing chosen to discuss the topic is particularly sensitive for the industry.
Proposal Foresees Graded Increase in the Contribution to the FOT
Currently, the deposit in the Temporary Budget Fund is already mandatory for companies that benefit from tax incentives related to the Tax on Circulation of Goods and Services (ICMS). However, the project under discussion proposes to gradually increase the percentage of this contribution starting in 2027.
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According to the presented schedule, the increase will be 10 percentage points per year. Thus, the expected rates would be 40% in 2027, 50% in 2028, 60% in 2029, 70% in 2030, 80% in 2031, and 90% in 2032. This last year precedes the entry into force of the rules of the Tax Reform.
In practice, this means that, by the end of the period, oil companies may return almost the entirety of the tax incentives granted by the state.
Government Forecasts Billion-Dollar Revenue Increase
According to estimates from the state government, the reduction of tax incentives could result in an increase in revenue of approximately R$ 1.27 billion as early as 2026. The proposal has been under consideration in the State Legislative Assembly of Rio de Janeiro (Alerj) since August and is expected to start being voted on later this week.
The project, however, raises concern in the productive sector, which evaluates direct impacts on profit margins and on the state’s attractiveness for new investments in oil and natural gas.
Entities Warn of Unfavorable Environment for the Sector
In the document sent to authorities, the sector was emphatic in highlighting the current context of the industry. “The oil and gas industry emphasizes that the sector already contributes significantly to state revenues and warns that there could not be a worse time to consider increasing the tax burden, as the industry is facing a sharp decline in oil barrel prices and is going through a period of low exploratory activity,” says a passage from the statement.
The entities also warn of the structural effects of the measure. “Thus, the increase in the contribution to the FOT, in addition to further compromising tax predictability, legal security, and long-term investment planning, undermines the competitiveness of Rio de Janeiro.”
Despite the opposing manifestations, the vote on the proposal for the Temporary Budget Fund was included in the Alerj Agenda under urgency. The analysis will occur in discussion and single vote this Tuesday.
If the measure is approved, the increase in the contribution to the FOT will take effect from 2026. Nevertheless, the government must respect the legal deadline of 90 days after the publication of the rule in the Official Gazette.
Exceptions Provided for Tax Benefits Already Granted
The text of the project establishes a specific exception. Taxpayers who already have tax benefits with a defined deadline and mandatory counterparts formalized before the publication of the new rule will not be subject to the progressive increase.
For these cases, the contribution to the Temporary Budget Fund will be fixed at 18.8%. This differentiation seeks to preserve already established contracts, although it does not eliminate the broader concerns of the oil sector regarding the regulatory and tax environment in the state.
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