Governments around the world continue to reassess their tax structures to pursue more strategic objectives despite many having already made essential tax adjustments in response to a low oil price environment, EY says while launching its 2017 Global oil and gas tax guide.
The guide, which summarizes the oil and gas corporate tax regimes in 87 countries including Cyprus, highlights national tax structures and changes made over the last year.
Alexey Kondrashov, EY Global Oil & Gas Tax Leader, says:
"With relative market certainty and a lower-for-longer oil price consensus throughout the sector, attracting oil and gas investment is back on the agenda of several governments. To stay competitive, many countries are evaluating new tax concepts rather than just reducing rates.”
Tax systems in Canada and Mexico are among the most recent to undergo additional changes. In Canada, oil and gas royalties in Alberta have been reviewed. In Mexico, the Government has addressed feedback from companies bidding for oil and gas blocks as part of their ongoing energy reform and made modifications to the fiscal and economic terms of license and production sharing contracts to enhance attractiveness.
Meanwhile, Saudi Arabia has issued a Royal Decree to reduce the corporate income tax rate from 85% to 50% for upstream oil and hydrocarbon producing companies, which could set a new benchmark for attracting foreign investors that, for many countries, may not be easy to meet. Major resource-rich countries in the Middle East and Asia-Pacific are pursuing a similar agenda.
Kondrashov says: "Tax-take remains one of the top considerations for oil and gas investors. Governments of oil- and gas-producing countries must monitor tax structures and revise them accordingly in an era of lower commodity prices and volatility, particularly as some major producing countries have made important adjustments to attract capital. Maintaining investment and interest in oil and gas projects in any country requires a clear fiscal policy and a tax regime that provides competitive returns to investors."
In Cyprus, the fiscal regime that applies to the oil and gas industry consists of a combination of corporate income tax (CIT), capital gains tax (CGT), value-added tax (VAT) and excise duty, whereby upstream oil and gas exploration and exploitation activities are to be undertaken under a production sharing contract (PSC).
Philippos Raptopoulos, EY Cyprus Head of Tax Services, says:
"While Cyprus’ energy industry continues to develop and evolve, the legislation in Cyprus is evolving as well to make doing business in Cyprus competitive for all oil and gas companies. As we progress and explore our EEZ, I am confident Cyprus’ tax regime will develop to further support oil and gas companies so they can execute business strategies that seize opportunities.”
(source: goldnews.com.cy)
