The Impact of the Amendment to the VAT Refund Regulation Approved by Decree 30/2022, of 23 June

Special VAT Regularization Regime for Companies in the Mining and Oil Sectors, in the production phase

Decree No. 78/2017, of 28 December, which approves the Regulation on the Reimbursement of Value Added Tax, provides in chapter III, the Special Regime for Regularization of VAT by Companies operating in the Mining and Oil Sectors. This regime applies to companies operating in the mining and oil sectors, which are in the production phase and whose exports represent at least 75% of their sales in the previous year.

This regime aims to mitigate the impact of limitations and delays in the reimbursement of VAT to companies in the Mining and Oil sectors, considering their high volume of transactions and consequent accumulation of large VAT credits.

However, the same does not apply to companies that operate in the mining and oil sector and that are not in the production phase and that do not comply with the minimum export volume limit.

In order to ensure the full integration of the Mining and Oil sectors, Decree No. 30/2022, of 23 June, was approved, amending the regime approved by Decree No. 78/2017. The aforementioned changes consist of the additional framework of entities in the Mining and Oil sector under the conditions below:

  • Companies subcontracted by companies in the mining and oil sectors;
  • Companies that, by authorization of the Government, are constituted as entities with a specific object within the scope of the respective concession contracts.

The companies mentioned above may request, if they so wish, the framework of the Special Regime for the regularization of VAT paid by their suppliers of goods and services, provided that they prove:

  1. In the research and prospection phase and the project development phase, to have carried out or to be carried out in the respective year, an investment equivalent to 25 million American dollars;
  2. In the production phase, 75% of its sales from the previous year were destined for exports.

It should be noted that, unlike the previous regime, which was only applicable to companies in the production phase, with the update, companies in the mining and petroleum in the prospecting and research phase.

We consider this special regime favorable insofar as its specific beneficiaries (mining and oil sector companies) do not disburse the VAT paid by their suppliers, thus constituting an advantage in terms of cash flow, with the capital disbursement being replaced by via of issuance of Regularization Notes to the respective suppliers.

On the other hand, through the regularization notes, suppliers are granted the right to regularize, in the periodic declaration, the amount of VAT paid and not paid by the purchaser, subject to the prior approval by the Directorate of Reimbursement Services of the General Directorate of Taxes.

Bearing this framework in mind, we see an advantage for these entities as they no longer register large VAT credits with the Tax Authority, over which there were uncertainties about their recoverability through reimbursement request, improving management of treasury of these companies. 

It is our understanding that the VAT regularization regime through this mechanism is effective for this group of companies, and in our opinion the authorization to be included in this regime should also be extended to other taxable persons who are in a similar situation.


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Sueima Badrú
Tax Manager

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