The payment includes 1.2 billion reais in back taxes and 400 million reais in fines and interest, Petrobras, as the company is formally known, said in a statement. The second-quarter charge, after taxes, will be 1.4 billion reais.

The payment comes after Brazil's CARF, a tax-ajudication body in the Finance Ministry, ruled that Petrobras must pay a financial-transaction tax known as the IOF. The tax was levied on Petrobras foreign-subsidiary operations in 2008.

The move raises questions about how much more Petrobras, the world's most-indebted oil company, will have to pay the Brazilian government for tax and other legal judgments.

While the company recently slashed its five-year spending plan by 41 percent to $130.3 billion, some market insiders have suggested the cuts are not enough and Petrobras' financial goals remain unrealistic.

Petrobras, which faced 96 billion reais in unpaid tax claims from Brazil's Federal and state governments in the first quarter, had only set aside 708 million reais, or less than one percent of potential charges, as provisions against tax losses.

After fines and interest, the amount Petrobras said it agreed to pay on Thursday is more than double Petrobras' total provisions for all potential tax liabilities.

The payment is also only 15 percent of the 7.83 billion reais in total Brazilian tax claims for the same IOF financial-service tax for the period 2007-2010. Petrobras did not say if it will have to pay for 2007, 2009 and 2010.

Chief Executive Aldemir Bendine said earlier this month the company planned to increase provisions for tax liabilities, according to a press report.

At the end of the first quarter, Petrobras' tax-judgment provisions had more than doubled to 708 million reais from just 276 million reais.

The Brazilian government, which controls Petrobras, has been looking for ways to increase tax take as a slowing economy reduces revenue and puts its investment grade rating at risk.

Petrobras' tax dispute dates back to 2012 but the firm said it needs to make the payment now to prevent the bill from increasing. Failure to pay could also result in Petrobras being banned from importing oil, natural gas and refined products such as gasoline and diesel fuel, the company said.

(Reporting by Jeb Blount and Stephen Eisenhammer; Editing by Ken Wills and Himani Sarkar)

By Jeb Blount