Oil and Gas Tax Guide for Africa 2015
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www.pwc.com/africaOGguide Oil and Gas Tax Guide for Africa 2015 A quick guide to oil and gas tax regimes in some of Africa’s fastest growing countries. Foreword We are proud to present you with the second edition of our Oil and Gas Tax Guide for Africa. Our PwC oil and gas country specialists have provided up to date information on the oil and gas fiscal and regulatory regimes in their countries along with significant developments. We have included information for 19 countries and we plan to expand our coverage to other countries in future editions. If you have any further questions or require detailed advice, please reach out to the country contacts provided in each country summary. I hope you find this publication useful and informative and I look forward to receiving your comments, contributions and feedback. Darcy White Partner – Middle East and Africa Energy Tax Leader, PwC Telephone: +971 4 304 3113 Email: [email protected] Contents Algeria ....................................................................................5 Angola ...................................................................................13 Cameroon .............................................................................25 Egypt .....................................................................................39 Gabon ...................................................................................49 Ghana ...................................................................................61 Ivory Coast ............................................................................74 Kenya ....................................................................................81 Liberia ..................................................................................89 Libya .....................................................................................97 Morocco ............................................................................. 105 Mozambique ...................................................................... 113 Namibia ............................................................................. 124 Nigeria ............................................................................... 138 Republic of Congo .............................................................. 156 Senegal .............................................................................. 162 South Africa ....................................................................... 168 Tanzania ............................................................................ 178 Uganda .............................................................................. 188 Algeria PwC Société d’Avocats Crystal Park A 61, rue de Villiers 92208 Neuilly-sur-Seine Cedex France Contacts Alain Chedal Email: [email protected] Mehdi Bournissa Email: [email protected] Country profile Brief overview of the oil and gas developments in Algeria Algeria’s first commercial oil discovery occurred in 1956 with production beginning in 1958. Algeria currently has proven reserves of 12.2bn barrels and produces at a rate of 1.37m bpd which provides around 35% of the country’s gross domestic product. The country is considered the leading natural gas producer in Africa. All of the country’s proven oil reserves are held onshore and there has been limited offshore exploration. The Algerian territory has been divided into Zones A, B, C and D with specified tax rates applicable in each registered Zone. The hydrocarbon reserves discovered to date in Algeria are contained within approximately 200 oil and gas fields: 73 situated in the Illizi Basin, 57 in the Central Saharan Basin, 34 in the Ghadames-Rhourde Nouss and 31 in the Oued Mya Basin. According to the latest estimations, approximately two-thirds of Algerian territory remains underexplored or unexplored meaning the country is ripe for investment with a high probability of reward. Fiscal regime Oil and gas activities are regulated by the Hydrocarbons code and its texts of application, the Algerian Direct Tax Code and specific provisions of the contracts concluded with Sonatrach (an Algerian government owned company). The Law 86-14 implemented the former Hydrocarbons Code (hereafter referred to as “Law 86-14), which remains applicable to any contracts concluded with Sonatrach before the entry into force of the new Hydrocarbons Code introduced by the Law No. 05-07 in 2005 (hereafter referred to as “Law 05-07). Activities outside the exploration and exploitation (notably well services, pipeline transport etc.) are taxed under the standard tax regime (at a rate between 19% and 26%). www.pwc.com/taxsummaries 5 Algeria Regulators The key regulators in the oil and gas industry include: • Agence Nationale Pour La Valorisation Des Ressources Hydrocarbures (ALNAFT) (Independent Government Agency): ALNAFT promotes the Hydrocarbons industry, manages Algeria Hydrocarbons database, evaluates competitive bids and award exploration and exploitation areas, as well as exploration and exploitation contracts, and approves development plans; • Autorité de Régulation des Hydrocarbures (ARH) (Independent Government Agency): ARH implements and enforces the regulations pertaining to hydrocarbons exploration and production activities in Algeria, including technical regulations as well as regulations pertaining to transportation tariffs, third party access to transportation infrastructures, health, safety and environmental standards. ARH is also responsible for considering applications for pipeline transportation concessions; • Ministry of Hydrocarbons is responsible for the regulation and supervision of oil and gas policy; • Directorate General of Taxes is responsible for tax administration. Forms of contracts Exploration and production agreements provided by the 1986 Hydrocarbons Law includes joint ventures, partnerships, production sharing, and risk service contracts. The 2005 Hydrocarbons Law includes two main instruments: • The Exploration and/or Exploitation Contract (EEC); and • The Pipeline Transportation Licence (PTL). The EEC is concluded between the International Oil Company (IOC) and ALNAFT (the mining title holder) after a bidding process. However, an EEC will also provide that Sonatrach will own a 51% interest in the contract. Law No. 05-07 provides that contract follows an exploration period of a maximum of 7 years and exploitation period of a maximum of 25 years (however, if oil is discovered in the first 7 years, the exploitation period will be proportionately increased). Where the exploitation period is concerned with gas deposits, the period has been extended by 5 years. For unconventional liquid or oil and gas, the exploration period is 11 years with an exploitation period of 30 – 40 years dependent upon the resource. The production period may be extended for up to 10 years. Taxation regime The applicable tax regime is determined by the date of the contract and the Zone in which the field is located. The Algerian fiscal regime applicable to the oil and gas upstream industry is governed either by Law No. 86-14 or by Law No. 05-07 (as amended). 6 PwC Oil and Gas Guide for Africa 2015 Algeria Key taxes under the former regime (Law No. 86-14) • Royalties: Royalties on gross revenues are paid by Sonatrach for the whole A production. The standard royalty rate is 20%, however it can be reduced to 16.25% or 12.5% for Zones A and B respectively. A reduced rate of 10% is also applicable dependant on certain economic and geographical criteria being fulfilled. Sonatrach is liable for the monthly payment of the royalty (article 39 of the law No. 86-14, as amended). • Income tax: Under a product sharing contract (PSC), the payment of income tax is ensured by Sonatrach and included in the foreign partner’s share of hydrocarbon production. • Income tax applies to the foreign company’s share of “profit oil”. Profit oil is calculated as the foreign company’s gross revenue less royalties, transportation costs, depreciation costs and exploitation costs borne by the company. • The profit oil is subject to tax at the rate of 38% which is withheld at source by Sonatrach. Oil companies are not authorised to consolidate all their activities in Algeria to determine their corporate income tax liabilities. • Tax on corporate earnings: This tax only concerns the share of profit oil belonging to Sonatrach. That share amounts to profit oil minus the foreign partner’s share and the corresponding income tax. The maximum tax is 85%. Reduced rates of 75% for Zone A and 65% for Zone B apply. • The Windfall Tax (Tax on exceptional profits (TPE)): TPE applies to exceptional profits on contractas under Law 86-14. When the monthly fixed average of FOB Brent oil exceeds USD 30, a tax rate of 5%-50% is applied to the foreign partners production part. According to article 10 of the Executive Decree 06-440, Sonatrach will be liable for the monthly withholding and the remittance of this tax to the tax authorities, based on the share of production of the Contractor. Key taxes applicable under Law No. 05-07, as amended Surface fee: The surface fee is an annual tax paid per square kilometre of the licenced area. It is not tax deductible and the fee is dependent upon which territorial Zone (A, B, C and D) the operations are conducted. Unconventional oil and gas exploration and production surface fees are calculated in line with Zone A fees. The rates of the surface fee per square kilometre are (in Algerian Dinars (AD)): Exploration period Zone Years 1, 2 Years