Extra taxation of companies in the energy sector Ana Puşcaş 20 March 2013
Agenda Extra taxation 1. Energy package 2. Oil&Gas taxation around the globe 3. Case study UK 1
Agenda Extra taxation 1. Energy package 2. Oil&Gas taxation around the globe 3. Case study UK 2
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 3
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) 4
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 5
Extra taxation What next? Will the new energy package cease to exist after 31 December 2014? How will the new royalties system look like? 6
Agenda Extra taxation 1. Energy package 2. Oil&Gas taxation around the globe 3. Case study UK 7
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 8
Oil&Gas taxation around the globe 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 9
Agenda Extra taxation 1. Energy package 2. Oil&Gas taxation around the globe 3. Case study UK 10
Oil&Gas taxation around the globe Rates of taxation on North Sea oil production Petroleum Corporation Supplementary Year revenue tax tax 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 Petroleum Corporation Supplementary Year revenue tax tax 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 11
Oil&Gas taxation around the globe Lessons learned - not retrospective - royalties or extra taxation - surcharges backed-up by deduction, such as R&D, indefinite carry forward of losses, etc. - transparency 12
Ana Pușcaș Manager, Taxation Services apuscas@kpmg.com 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).