International Tax Services IADC International Tax Seminar Tax issues affecting the drilling industry in West Africa June 5, 2015

Transcription

1 International Tax Services 2015 IADC International Tax Seminar Tax issues affecting the drilling industry in West Africa

2 Presenters Gilles de Vignemont Tax Partner, Head of African Tax Group, USA Emuesiri Agbeyi Tax Director, African Tax Group, USA Robert E. Smallwood Tax Director, Head of Tax, Liberia 2

3 Agenda 1. Nigeria tax developments 2. Liberia tax developments 3. Senegal tax developments 4. Other West Africa Countries 5. Conclusion 3

4 Nigeria tax developments 4

5 Nigeria tax developments Non resident companies (NRCs) to file full tax returns July 2014 : FIRS announced intention for NRCs to file returns on actual basis in line with Section 55 of CITA. Nov 2014: FIRS confirms the new requirements would take effect from 2014 tax year (i.e FY) Timeline Jan 2015: FIRS released a public notice on the filing requirements. Actual filing by NRCs to start from 2015 tax year (i.e FY) Pre 2015 tax year Deemed - 6% of turnover Simple tax computations Statement of turnover From 2015 tax year Actual - 30% of profits Transfer Pricing Documentation & Form Income tax and capital allowance computations Self assessment forms Audited financial statements The new filing requirement increases compliance burden for affected taxpayers There are uncertainties about the implementation and impact on the tax positions 5

6 What should NRCs be concerned about Content and Nature of Financial Statements Audit requirements Tax issues Capital allowance issues Attribution of profits (and assets and liabilities) Intra company charges 3 wks and allocations Others e.g. timing and extensions 6

7 What should you be doing? Compliance due date for many NRCs is 30 June. Only a few weeks away. 3 weeks Get moving Consult further with: - Tax advisors - FIRS - Industry groups Take steps to comply: - TP/Attribution analysis - Financial statements - Tax computations 7

8 Nigeria tax developments Transfer pricing WHT on time/bareboat charter 5% or 10%? Tax authorities insist on a higher rate putting pressure on operators to manage challenge risk by simply deducting at the higher rate irrespective of the contractual arrangement Delays in issuance of WHT credit notes and impact on cash flows Cabotage levy 2% of contract value. Whether rigs are vessels under the Act and impact of court cases Review of tax incentives (Pioneer status) 8

9 Nigeria tax developments (continued) Recent court cases Tripartite arrangements and subcontracts require review/restructuring of Nigeria entry. Impact of the court decisions may not be significant with the transition to actual filing. However, FIRS insisted that it reserves the right to still tax on deemed profit so efficient contract structuring is important. E-filing: Introduction of electronic filing of tax returns and online payment of taxes Taxation of individuals working on rigs offshore or in the free trade zone 9

10 Nigeria tax developments (continued) Petroleum Industry Bill Long awaited bill but still no indications of an early passage Proposed significant changes in fiscal regime e.g. taxation of gas for upstream operators Discretionary powers for the Minister of Petroleum Resources Proposed petroleum Host Communities Fund Recent elections were largely peaceful. Not certain if new administration will hasten passage of the bill but new ruling party is optimistic about effecting changes. 10

11 Liberia 11

12 Overview Liberia s Acreage Liberia Basin consists of 30 concessionary blocks. 17 blocks from continental shelf to water depths between meters. 13 blocs considered ultra deep with water depths of as much as 4500 meters. Major players: Anadarko, ExxonMobil, Chevron, African Petroleum Courtesy: National Oil Company of Liberia: website 12

13 Regulatory framework Liberia Revenue Code of 2000 as Amended Petroleum Sharing Agreements The National Oil Company Act of 2000 Petroleum Law of 2002 The Liberia Extractive Industry Transparency Initiative Act 2009 (LEITI) 13

14 Regulatory framework (continued) Item Corporate Income Tax 25% Good and Services Tax (GST) Tax Impact Generally, 7% but typically exempt Customs duties Generally exempt for items used for petroleum operations, customs user fee may be assessed. WHT on Services 15% (10% for resident) 6% - paid by operator Employee Income Taxes (PAYE) Resident (Graduated 0%-25%), Nonresident 15% 14

15 Key considerations Reporting and compliance Tax a. Permanent establishment b. Individual tax obligation - rotators Labour and immigration Maritime Law Lack of Clear Guidance Law vs Practice Inconsistent application Lack of written guidelines 15

16 Issues on the horizon >>> Looking Ahead. 1 Restructured Government 2 Agencies Liberian Revenue Authority NOCAL Pending new petroleum law, local content, reporting obligations, etc.) 3 Aggressive tax assessment and 4 enforcement action Impact of Ebola on sector short and long term 16

17 Senegal 17

18 Oil sector is evanescent in Senegal Petroleum Code dated January 8 th, Main players are Kosmos, Cairn, ConocoPhillips. E&P companies are still at exploration stage. Oil activities carried out through contractual agreements: - Risk service contract ( RSC ) - Production sharing contract ( PSC ) 18

19 Hot topics in the drilling industry E&P companies enjoy large tax exemptions (specially during the exploration phase). These exemptions are not extended to drilling companies. No deemed profit tax regime/30% corporate income tax. Business license tax? 20% WHT on services provided by non-resident companies? 19

20 Hot topics in the drilling industry (continued) Royalty definition under domestic legislation vs DTA signed by Senegal (including Mauritius Treaty). Permanent Establishment definition under domestic legislation vs DTA signed by Senegal (including Mauritius Treaty). No specific exemption for mobilization/demobilization. Lack of written guidelines. 20

21 Other West African countries 21

22 Other West African countries Gabon New Petroleum Law in Deemed profit tax regime just renewed for 2 years (2015 and 2016)/same rates will apply. OCAM treaty non longer in force/mauritius DTA signed. 22

23 Other West African countries Congo DTA with Mauritius in force (0% on royalties 0 to 5% on dividends). OCAM DTA no longer in force. BPT for ATE regime reduced from 2.002% to 1.502%. Business licence tax. Audits by immigration services («Mbata ya Bakolo»)/issues with rotators. 23

24 Other West African countries Cameroon VAT exemptions certificates for services/goods directly linked to the oil and gas operations. Tax authorities slow in delivering these certificates. 24

25 presence in Africa In Africa Member firms in 33 countries with over 8,500 people. We have the largest footprint of professional services all the firms on the African continent. All our African firms are locally-owned. Provide a range of professional business advisory services to the public and private sectors throughout the continent. Committed to the development and prosperity of the African people and economies. oil and gas tax guide for Africa. 25

26 Questions? 26

27 Thank you PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. refers to the United States member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see for further details. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.