extra taxation of companies in the energy sector...ordinance no 5/2013 approving some special...

Extra taxation of companies in the energy sector Ana Puşcaş

20 March 2013

1 © 2013 KPMG Tax SRL, a Romanian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.

Agenda – Extra taxation

1. Energy package

2. Oil&Gas taxation around the globe

3. Case study – UK



1. Energy package




Energy package

Ordinance no 5/2013 approving some special taxation rules for activities with a monopoly character in the electricity and natural gas sectors (“Ordinance 5/2013”)

Ordinance no 7/2013 approving the taxation of additional revenues derived following the deregulation of the natural gas price (“Ordinance 7/2013”)

Ordinance no 6/2013 approving a special taxation rule for companies in the natural resources (excluding natural gas) exploitation sector (“Ordinance 6/2013”)

General aspects – limited application: 1 February 2013 to 31 December 2014

Due on a monthly basis

Declared purpose – collect funds to the state budget, to fund subsidies to be offered to vulnerable consumers and state funded projects


Extra taxation – gas

Ordinance no 7/2013 approving the taxation of additional revenues derived following the deregulation of the natural gas price (“Ordinance 7/2013”)

Taxpayers: companies which extract and sell natural gas in Romania (onshore and offshore)

Details: 60% tax on the additional income derived from deregulation.

Formula:

Additional tax due = 0.60 * (additional income – royalty * additional income - investment in upstream sector)


Extra taxation – crude petroleum

Ordinance no 6/2013 approving a special taxation rule for companies in the natural resources (excluding natural gas) exploitation sector (“Ordinance 6/2013”)

Taxpayers: specific activities, including extraction of crude petroleum

Details: 5% of the turnover registered by companies subject to this tax


Extra taxation

What next?

Will the new energy package cease to exist after 31 December 2014?

How will the new royalties system look like?



1. Energy package




Oil&Gas taxation around the globe

How is this taxed?

- royalties – e.g. Russia, US, Canada, Brazil, Nigeria - sharing – e.g. African countries

- extra taxation – of difference between the market price vs costs / limit profitability rate, e.g. Australia, Norway, UK

- other – state owned, local contingents



Country Tax (%) Amount Comments

Australia Royalties 0% - 12.5% Corporate Income Tax 30%

Resource rent tax 40% Canada Royalties 10% - 45% Corporate Income Tax 10% - 16% Denmark Corporate Income Tax 25% 70% Hydrocarbon tax Netherlands Royalties 0% - 8%

Income Tax Rate 25% CIT - 20% for the first 200.000 EUR Surface Rent Tax 703 euros/sq km Production areas

State Profit Share levy 50% Norway Income Tax Rate 28% Onshore tax regime Marginal Tax Rate 78% CIT - 28%, special tax 50% - offshore tax regime Romania Royalties 3.5% - 13.5%

Extra Taxation 60% of additional income / 0.5%* turnover Limited application Corporate Income Tax 16% UK Corporation Tax Rate 30%

Supplimetary Charge Rate 32% Petroleum Revenue Tax Rate 50% USA Royalties 12.5% - 30% Onshore

18.75% Offshore Corporate Income Tax 35%

Severance Tax Depends on the state

•Data as of 2012, except Romania •Source : IBFD



1. Energy package





Rates of taxation on North Sea oil production

Year Petroleum

revenue tax Corporation

tax Supplementary

charge Royalties 1975-76 75% 52% — 12.5% 1976-77 75% 52% — 12.5% 1977-78 75% 52% — 12.5% 1978-79 75% 52% — 12.5% 1979-80 75% 52% — 12.5% 1980-81 75% 52% — 12.5% 1981-82 75% 52% — 12.5% 1982-83 75% 52% — 12.5% 1983-84 75% 50% — 12.5% 1984-85 75% 45% — 12.5% 1985-86 75% 40% — 12.5% 1986-87 75% 35% — 12.5% 1987-88 75% 35% — 12.5% 1988-89 75% 35% — 12.5% 1989-90 75% 35% — 12.5% 1990-91 75% 34% — 12.5% 1991-92 75% 33% — 12.5% 1992-93 75% 33% — 12.5% 1993-94 50% 33% — 12.5% 1994-95 50% 33% — 12.5% 1995-96 50% 33% — 12.5% 1996-97 50% 33% — 12.5% 1997-98 50% 31% — 12.5% 1998-99 50% 31% — 12.5% 1999-00 50% 30% — 12.5% 2000-01 50% 30% — 12.5% 2001-02 50% 30% — 12.5%

Rates of taxation on North Sea oil production

Year Petroleum

revenue tax Corporation

tax Supplementary

charge Royalties 2002-03 50% 30% 10% 12.5% 2003-04 50% 30% 10% — 2004-05 50% 30% 10% — 2005-06 50% 30% 20% — 2006-07 50% 30% 20% — 2007-08 50% 30% 20% — 2008-09 50% 30% 20% — 2009-10 50% 30% 20% — 2010-11 50% 30% 20% — 2011-12 50% 30% 32% — 2012-13 50% 30% 32% —

•HM Revenue & Customs website



Lessons learned

- not retrospective - royalties or extra taxation

- surcharges – backed-up by deduction, such as R&D, indefinite carry forward of losses, etc.

- transparency

© 2013 KPMG Tax SRL, a Romanian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative("KPMG International"), a Swiss entity. All rights reserved. PDC no.8229.

The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

Ana Pușcaș Manager, Taxation Services [email protected]

mailto:[email protected]

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