By Brazil Stock Guide – A Brazilian federal court granted an injunction suspending the application of a newly created oil export tax for major international energy companies, including Shell Plc (SHEL), TotalEnergies SE (TTE), Equinor ASA (EQNR), Galp Energia SGPS SA (GALP) and Repsol SA (REP).
The decision, reported by Valor Econômico, was issued by federal judge Humberto de Vasconcelos Sampaio of the 1st Federal Court in Rio de Janeiro, who ordered the immediate halt of the levy as well as any penalties tied to its enforcement.
The tax had been introduced through provisional measure MP 1.340/2026, establishing a 12% charge on oil export revenues. The government framed the measure as a way to offset tax exemptions on diesel, specifically the waiver of PIS/Cofins.
In his ruling, Sampaio questioned the legal nature of the measure, stating that the export tax may have been used primarily as a revenue-generating tool rather than for its traditional extrafiscal purpose. “The sudden imposition of a 12% rate effectively creates a new tax burden, with immediate economic impact and a declared fiscal objective,” he said.
He added that the issue at stake is not a vested right to a specific tax regime, but compliance with constitutional limits on taxation. “What is at issue is the need to respect constitutional constraints when the state alters the nature and purpose of a tax,” the judge wrote.
The companies argued that the measure violated legal certainty principles, citing abrupt changes to the tax framework with direct operational consequences.
Separately, the Brazilian Petroleum Institute (IBP) has considered filing a lawsuit challenging the tax. Petrobras (PETR4), however, did not support the initiative, voting against legal action within the industry group.
Brazil Oil Tax Draws IBP Warning Over Investment Risks
Brazil’s oil industry lobby is warning that a newly introduced export tax risks undermining investment and duplicating an already heavy fiscal burden on the sector, adding to mounting legal and regulatory uncertainty.
The Brazilian Petroleum, Gas and Biofuels Institute (IBP) said the 12% export tax created under provisional measure MP 1.340/2026 imposes an additional burden on an industry that already allocates roughly 70% of its revenue to taxes and government takes. Between 2010 and 2025, the sector contributed more than 1 trillion reais in financial compensations, underscoring its fiscal weight.
According to the IBP, the measure creates an overlap with existing mechanisms such as royalties, special participation and profit oil sharing, which are designed to capture windfall gains. The institute said that with Brent crude at $90 per barrel, these instruments alone would generate at least 50 billion reais in additional revenue—well above the government’s estimated 40 billion reais needed to fund diesel subsidy measures.
The group argues the new levy is primarily revenue-driven. It also warned that the policy could weaken Brazil’s competitiveness and erode legal certainty, particularly in a capital-intensive industry with long investment cycles.
The sector accounts for 53% of Brazil’s trade surplus and 17.2% of industrial GDP, with projected investments of $183 billion through 2031. IBP estimates the industry supports around 445,000 jobs annually, highlighting the broader economic impact of potential disruptions.
The institute said abrupt regulatory changes risk deterring capital needed to sustain production and reserve replacement. It added that policies aimed at mitigating geopolitical shocks should preserve regulatory stability and predictability.
IBP cautioned that without clear rules and prior consultation with industry stakeholders, Brazil risks weakening its position as a strategic global oil supplier and could face declining production capacity, potentially reverting to net importer status over the medium term.