Petrobras loses billionaire tax case

Oil and gas giant Petrobras on Thursday lost a final appeal at Carf, Brazil’s tax appeals court, which upheld a BRL 6.5 billion (USD 1.2 billion) back tax bill on profits from its unit in the Netherlands.

This was the first Carf session after the government’s tie-breaking vote in the court was codified into law. The rule stipulates that in the event of a tie in tax appeals, members representing the Public Treasury can break the deadlock in favor of the federal government.

Petrobras can no longer appeal the decision at Carf, but could do so in the court system. The company’s press office tells The Brazilian Report that it is “assessing the appropriate measures in relation to the decision.”

Brazil and the Netherlands have a treaty to avoid double taxation. However, attorneys for the federal government argued that Petrobras earned profits in Brazil because of its foreign operations, which are not covered by the treaty.

Carf has issued similar rulings in cases involving other large companies. 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. 

Petrobras began expanding its operations in the Netherlands in late 2013, precisely to reduce taxes and costs under the double taxation agreement.

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