Petrobras Relocates Offices to Holland for Lower Taxes

Petroleo Brasileiro (Petrobras), the world’s most indebted oil company, has announced that it will sell assets in Africa and relocate operational staff such as geophysicists and financial administrators to the Netherlands in order to benefit from lower taxes and reduce its overseas costs.

Petrobras will continue to operate its African ventures from the Netherlands, whereas before they were controlled locally, or from Rio de Janeiro.

According to KPMG, the Netherlands is one of thirty countries with whom Brazil has a double-taxation agreement, meaning that Petrobras will only pay a 25% tax, compared to 35% in Brazil, or 40% if it were to move operations to the US.

Rodrigo Jacobina, a lawyer from Rio de Janeiro, explained to Bloomberg that “in Holland, companies with certain corporate structures and under certain circumstances have significant tax reductions on income.”

Currently some of Brazil largest exporters are fighting the government over new attempts to tax profits made by foreign subsidiaries, with Jacobina confirming that the Supreme Court is currently discussing whether Petrobras should pay taxes on foreign dividends.

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One way that Brazilian firms are starting to avoid the domestic taxes, is by hiring drilling equipment from foreign companies. Auro Rozenbaum, an analyst at Banco Bradesco, said that the oil companies “lease the platforms from companies based in Holland. They do this to avoid taxation.”

Petrobras is currently looking to reign in its overseas costs in order to retain its investment-grade credit rating as it begins to develop the largest group of crude oil discoveries made in the past decade. Almir Barbassa, CFO of Petrobras, said that the company would increase the rate of asset sales during the second half of the year.

Petrobras has also announced asset sales in Brazil, Colombia, and the US, to a total of $2.5 billion.

Frank McGann, from the Bank of America Corp, claimed that “this suggests a more practical and dedicated focus on maximizing portfolio returns. We are encouraged that Petrobras is now taking a broader view towards its portfolio.”

Petrobras is the worst performing company amongst global oil producers, losing 22% over the past year.

By. Joao Peixe of Oilprice.com