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In brief

On 3 August 2021, Congressman Celso Sabino (PSDB-PA) submitted an amendment to Bill of Law # 2,337/2021 (second phase of Tax Reform), putting forward a 1.5% increase in the Financial Compensation for the Exploration of Mineral Resources (“Compensação Financeira pela Exploração de Recursos Minerais” or CFEM) rate on iron, cooper, bauxite, gold, manganese, kaolin and nickel operations.

According to the novel wording, CFEM’s revenues will be fully transferred to the states and municipalities, and no portion of such revenues will be transferred to the federal government. If the Brazilian Congress approves the substitute bill without amendments, the CFEM rate will rise from 4% to 5.5% on operations involving the above-mentioned minerals.

In a statement about the new substitute bill, Congressman Celso Sabino argued that since legal entities shall enjoy a corporate income tax (IRPJ) reduction by virtue of such reform, the CFEM rate increase would be a “fair measure.”

CFEM’s rate increase and the shift on the distribution of its revenues have been proposed as measures to counterbalance the tax reform impact on states’ and municipalities’ finances.

However, besides increasing the cost incurred by mining entities, the proposed changes to the CFEM legislation also strike for being alien to the scope of Bill of Law # 2,337/2021, the subject matter of which is the corporate income tax reform. Indeed, as already acknowledged by the Brazilian Supreme Court, the CFEM has a royalty rather than a tax nature, being an “original public revenue” (ADI # 4,606; ADI # 6,233; and RE # 228.800). In this sense, if approved, questions may arise with respect to its constitutionality while introducing CFEM changes.

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*In cooperation with Trench Rossi Watanabe, a Brazilian law firm.


Maria Fernanda Furtado is a Principal in Baker McKenzie's Rio de Janeiro office.


Joaquim de Paiva Muniz is a partner and head of the arbitration team of Brazil. Joaquim has an LL.M. from the University of Chicago and is the chair of the Arbitration Commission of the Rio de Janeiro Bar (OAB/RJ) and coordinator of arbitration courses of the Rio de Janeiro Bar, including a lato sensu graduate course. Joaquim is an officer of the Brazilian Arbitration and Mediation Center, which is the largest of its kind in Rio de Janeiro, as well as an author of many books, including the Arbitration Law of Brazil: Practice and Procedure (Juris Publishing, 2nd Edition 2015) and Curso Básico de Direito Arbitral (Juruá, 4rd Edition 2017).


André Sarian joined the Firm in 2015. He concentrates on administrative law and corporate, contractual and regulatory matters especially related to the Oil and Gas Industry. He has been providing legal assistance to a great variety of clients of different sectors of the Oil and Gas Industry, including upstream, midstream and downstream areas. His practice includes drafting and reviewing typical contracts of the Oil and Gas Industry, consulting on regulatory issues and advising clients on tender procedures and interactions with regulatory agencies, especially the Brazilian National Agency of Petroleum, Natural Gas and Biofuels - ANP.

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