On Thursday (10/1), Petrobras' Board of Directors approved the company's adhesion to the ICMS interest reduction and debt penalty programs (amnesties) in the states of Espírito Santo and Rio de Janeiro. The decision to adhere to the amnesties was based on the management of risks associated with litigation and is in line with the strategy of generating value through the management of contingencies and, in the case of Rio de Janeiro, is subject to the publication of a state law that fully incorporates the rules set forth in ICMS Agreement 51/2020.

Approved by the Agreements ICMS 146/2019 (ES) and 51/2020 (RJ) of the National Council for Farm Policy (CONFAZ), the programs of the two states will guarantee the closure of contingencies in the total amount of R $ 4.3 billion. The disbursement by Petrobras will be R $ 2 billion (updated until 09/30/2020), which will allow the company to save 57% of the total amount. About 70% of this amount will be paid in October 2020 and the remainder in monthly installments until December this year.

In Rio de Janeiro, adherence to the program will be materialized through a tax conduct adjustment term (TACT) to be signed with the State Government, conditioned to the publication of the law internalizing the ICMS 51/2020 agreement. The agreement involves the disbursement of Petrobras to the state of Rio de Janeiro of R $ 1.8 billion for the closure of contingencies related to the collection of ICMS and fines in the internal consumption operations of diesel bunker oil by the maritime units chartered by the company. In addition, a reduction of the ICMS calculation base to 4.5% was approved for “internal supplies” of marine diesel oil, thus reaching a definitive solution to the root cause of these contingencies.

In Espírito Santo, upon payment of R $ 208 million, tax debts will be closed due to differences in the appropriation of ICMS credits on property, plant and equipment and differences in ICMS in operations that occurred until 2011 from the Gas Treatment Unit in Linhares / ES.

Tax contingencies selected for adherence are incorporated into the financial statements for the year 2019, through note 19 (Legal proceedings and contingencies - item 19.3 - Legal proceedings not provisioned).