Tax obligations of zarubezhneft group companies
In addition to such macroeconomic factors as changes in oil prices and the Ruble’s exchange rate, taxation has a substantial effect on the activity of Zarubezhneft Group. The tax and other compulsory accruals in the revenue of the Exploration and Production segment is 45%.
Zarubezhneft Group’s tax and other compulsory payments are calculated and paid in strict compliance with the applicable legislation of the Russian Federation, Bosnia and Herzegovina, and Vietnam.
The subsidiaries of Zarubezhneft JSC completely fulfill their obligations to pay taxes, levies, duties, insurance contributions to local, regional and national budgets and to non-budgetary funds of the Russian Federation.
A substantial increase of tax payments in 2019 is primarily related to the growth of expenditures on mineral extraction tax (MET) under the current tax policies. Furthermore, in 2019 a new damper mechanism was implemented, which increases the tax burden by more than 250 RUB per ton on average in case of no Downstream segment in the Company.
It should be separately noted that in the second half of 2019, per amendments to the Russian Tax Code, the MET was permanently modified to add a Kk coefficient of 429 RUB per ton, which was previously valid until 2022 and was implemented as a temporary measure to replenish the Russian Federation’s budget.
The structures of tax payments for the Exploration and Production segment and the Service and Other Assets segment have significant differences, which is related to branch-specific taxes in the Exploration and Production area (MET, export customs duties on oil, royalty and profit petroleum of the country under the Kharyaga production sharing agreement (PSA)).
Mineral extraction tax, income tax, and royalty make up the highest share in the structure of compulsory payments of production companies under the Kharyaga PSA (KPSA).
The primary burden of the service segment companies is VAT, social contributions and income tax.