contacts transfer pricing for the energy industry in - pwc · 2015-08-15 · profile of tax...

Service recharges/Time writing Financing

Transfer pricing

governa nce

People

ControlsProcess

Tech

nology

Identification of all TP

Trigger Events

Validation, Control and

Review

FunctionalAnalysis and

High-levelTP Policy

TP Implementation

/production

Assessment and Selection

of Final TPPolicy

BusinessLogic

Documentation

Core TP Documentation

1. In

dust

ry p

racti

ce

2. Transfer pricing and WH

T

3. Current economic climate

Service recharges/Time writing – We can help you with the design, implementation and defence of your Service recharges/Time writing TP policy. This includes identification of the cost base and classification of costs to be recharged to service recipients, identification of benefits received, which aims to support deductibility for recipients of the charges and execution of benchmarking using commercially available databases and a review of internal comparable data.We can also help you manage your value chain in a tax effective manner, taking into consideration key value drivers, as well as the impact of the latest BEPS developments.Defending a tax authority challenge – We can help you be prepared in case of disputes by identifying and managing tax risks from the outset.Setting up TP policies that comply with the arm's length principle – We can help you with:• Coordinating TP planning advice, including health checks

to identify and analyse priorities and develop policies;• Resolving particularly complex TP problems and

implement solutions across your markets; and• Advance pricing agreements and rulings to agree the

pricing policy with the tax authorities in advance.

Quasi-equity is used to finance local Exploration and Development operations. A common issue with this funding is whether tax authorities will accept arguments for interest free lending to affiliates. In Africa and Middle East, this can also have Withholding Tax (WHT) implications on deemed interest payments in certain locations.In order to assess whether some or all of the funding would have been provided in the form of a loan at arm’s length, it is necessary to consider all of the facts and circumstances including:• The borrowing company’s production projections and

projected net cash flows from assets with proven reserves;

• The nature and terms of the funding, including the purpose of the loan, the quantum of the loan, the specific uses to which the funding was put by the borrowing entity and any other relevant terms; and

• Any existing third party funding within the group, including examples where third party funding has been sought and declined and the reasons.

Contacts

Then Now

Alan McCraeHead of UK Energy Tax

T: +44 (0) 20 7213 4004E: alan.h.mccrae@uk.pwc.com

Mohamed SerokhPartner, Middle East Transfer Pricing Leader

T: +971 (0) 4 304 3956E: mohamed.serokh@ae.pwc.com

Pierre V. Tchol KaldjobTP, Co-ordinator

T: +44 (0) 20 7804 4917E: pierre.v.tchol.kaldjob@uk.pwc.com

Szymon WlazlowskiDirector, TP, Energy & Utilities

T: +44 (0) 20 7212 1889E: szymon.wlazlowski@uk.pwc.com

Victoria HorrocksPartner, TP, Energy & Utilities

T: +44 (0) 20 7804 7084E: victoria.horrocks@uk.pwc.com

Africa – Oil and Gas contactsOur offer

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

150416-101525-DC-OS

Country Representative Email TelephoneAngola Pedro Calixto pedro.calixto@ao.pwc.com +244 923 418 127

Cameroon Nadine Tinen nadine.tinen@cm.pwc.com +237 77 93 71 58

Congo Emmanuel Le Bras emmanuel.lebras@cg.pwc.com +242 06 658 36 36

Cote d'Ivoire Dominique Taty d.taty@ci.pwc.com +225 20 31 54 67

Equatorial Guinea Sebastien Lechene sebastien.lechene@ga.pwc.com +240 333 091 434

Ethiopia Steve Okello steve.x.okello@ke.pwc.com +254 20 285 5116

Gabon Laurent Pommera laurent.pommera@ga.pwc.com +241 07 12 25 88

Ghana George Kwatia george.kwatia@gh.pwc.com +233 302 761 500

Guinea Mohamed Lahlou mohamed.lahlou@gn.pwc.com +224 30 45 14 43

Kenya Titus Mukora titus.mukora@ke.pwc.com +254 20 285 5395

Liberia George Kwatia george.kwatia@gh.pwc.com +233 302 761 500

Madagascar Andriamisa Ravelomanana andriamisa.ravelomanana@mg.pwc.com +261 20 22 217 63

Mozambique Joao Martins joao.l.martins@mz.pwc.com +258 21 350 400

Namibia Stefan Hugo stefan.hugo@na.pwc.com +264 61 284 1102

Nigeria Taiwo Oyedele taiwo.oyedele@ng.pwc.com +234 805 750 9237

Senegal Pierre Michaux pierre.michaux@sn.pwc.com +221 33 849 05 00

Sierra Leone George Kwatia george.kwatia@gh.pwc.com +233 302 761 500

South Africa Jan-paul Borman jan-paul.borman@za.pwc.com +27 11 797 4260

Tanzania David Tarimo david.tarimo@tz.pwc.com +255 0 22 219 2600

Uganda Francis Kamulegeya francis.kamulegeya@ug.pwc.com +256 0 31 235 4400

Zambia Jyoti Mistry jyoti.mistry@zm.pwc.com +260 97 774 0641

Transfer Pricing for the Energy Industry in Africa and Middle EastDarcy White

Partner, Middle East and Africa Energy Tax Leader

T: +971 (0) 4 304 3113E: darcy.white@ae.pwc.com

With the current economic and energy industry contexts, ensuring effective recharges of costs and efficient funding of operations is key.

Please contact Mohamed Serokh or Darcy White for any transfer pricing matter pertaining to the Middle East.

Recent changes

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26 Apr 2013 3 Apr 2015

NowThen

Uncertain and volatile demand

Abundant supply from both conventional and non-conventional sources

‘Volatile pricing’ around $50 per barrel

Resource-dependent developing countries keen to protect their tax revenues

Profile of tax transfer pricing elevated due to Base Erosion and Profit Shifting (BEPS) actions, communications from NGOs and high-profile cases

Stable supply from (predominantly conventional) sources

High and stable prices

Predictable tax environment

Limited tax transfer pricing risks

High and stable demand for oil and gas (both LNG and dry)

Key TP highlights   Africa Middle East

Con

go

Cot

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Ivoi

re

Equa

tori

al

Gui

nea

Ethi

opia

Fren

ch

Gui

ana

Gab

on

Gha

na

Gui

nea

Con

akry

Guy

ana

Ken

ya

Libe

ria

Mad

agas

car

Bah

rain

3

Egyp

t

Iraq

4

Jord

an 4

Kuw

ait

Leba

non

Liby

a 4

Om

an

Qat

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Saud

i A

rabi

a

UA

E 3

Pale

stin

ian

Terr

itor

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4

Doc

umen

tati

on Statutory TP documentation requirements? – – – – – –

TP documentation recommended in practice? – – – – – –TP documentation must be prepared in country’s official/local language (if other than English)? – – – – – –

Met

hods

TP methods consistent with the OECD Guidelines? – – – – – –

Pan-European comparables generally accepted? – – – NP NP – NP NP NP – –

Foreign comparables generally accepted? – 2 – – – – –

Serv

ices

Intercompany management fees generally tax deductible? – 1 1 1 1 – 1

Specific restrictions on the deductibility of senior executive costs? – – Fees for other intercompany charges generally tax deductible? – –

Mark-up generally allowed? – –

Deb

t

Safe harbour rules for thin capitalisation? 1 – – –

Safe harbour rules for tax deductibility of interest rates? 1 – – –

Limits on interest recharges? – – –

Oth

er

Intercompany service charges subject to WHT? – – –

Intercompany interest charges subject to WHT? – – –

Deemed transfers subject to WHT? – 1 1 1 1 1 – –

Any foreign exchange controls applicable? – – – The above table was populated by undertaking a desktop review of the local legislation in each of the above jurisdictions. It is necessary to contact the local PwC office in each jurisdiction for confirmation and sign-off prior to use this information on live engagements.

1 On a case by case basis as specifics local practices, regulations and requirements may apply2 Middle East and Africa comparables3 There is currently no tax (nor transfer pricing) regime in Bahrain and the UAE and accordingly the above questions are not applicable4 There is currently no transfer pricing regime in these countries and accordingly, transfer pricing questions are not-applicable. However, these countries currently have corporate tax regimesNP Not Preferred