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)