The Regulation of the Specific Regime of Taxation and Tax Benefits of Oil Operations entered into force on 31,st December. Thus, the legislation of 2008 in force was revoked.
The Ministry of Finance shall now approve the procedures, models and forms needed for complying with the obligations defined for that regime.
This regulation establishes the procedures for the application of the specific regime of taxation and tax benefits of petroleum operations, approved in September 2014 and which entered into force on 1st January 2015 and which established that anyone developing petroleum activities is subject to the payment of the Petroleum Production Tax (IPP) and to the specific rules of the Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Colectivas (“IRPC”)).
That regime established the taxation of the petroleum activities as well as the exemption of payment in certain situations, and the negotiation of a 10-year tax stability programme as of the date of approval of a development plan without affecting feasibility and profitability assumptions.
Reporting obligations of a company holding a petroleum right
Every concessionaire holding a petroleum right and residing in Mozambique, should maintain an up-to-date registration of the shareholders who meet the conditions of co-ownership of petroleum rights, and notify the tax administration of any change in such ownership having occurred within or outside the territory of Mozambique.
Every concessionaire shall also prepare and provide tax authorities, as defined in the annex to the regulation, with information relating to gains obtained by residents and non-residents in Mozambique, for purposes of taxation of capital gains. Failure to pay the tax due by the non-resident, beneficiary of the capital gains, determines the assumption, by the concessionaire, whose oil rights have been transmitted; and by the purchaser of these rights, of joint and several liability for the payment of the due tax plus compensatory interest, in legal terms.
The non-compliance with these obligations by the concessionaire will be considered as tax transgressions and punishable under the terms of the applicable legislation.
Tax Benefits Applicable to Petroleum Operations
In order to be able to benefit from the tax benefits of import, the holder must present to the competent authority the exemption request, in a proper form with detailed information of the importer, namely, identification, address and NUIT of the importer, legal disposition supporting such exemption, tariff heading and description, quantity and value of the good to be imported as well as counting of the due duties.
The request to be submitted to the Custom’ Services must be presented together with the global list of the goods to import in a proper form for determining the goods eligible to exemption; with the corresponding invoices, bill of lading and other documents considered relevant. The communication of authorization issued by the Customs’ Services enables the applicant to import, with exemption, the goods mentioned therein.
Revocation and suspension of Tax Benefits
Tax benefits expire when the term for which they were granted expires or when an extinctive sanction is applied and when they are conditioned by the verification of the assumptions of the resolutive condition, the infringement of the imposed obligations, imputable to the beneficiary. Revocation or suspension of the tax benefits implies the automatic application of the general taxation regime established by the Law.
The holders of the right to tax benefits are required to declare, within a period of 30 days, that the situation of fact or of law on which tax benefit is based terminated, unless when such termination is of official knowledge and this situation must be communicated in case of suspension of tax benefits
Petroleum Production Tax – IPP
IPP tax obligation shall be deemed to have been incurred at the moment the oil produced is introduced in the measuring station defined in the concession agreement. This station shall always be located downstream from the processing station in the case of Natural, Oil or Condensed Gas, or from the liquefaction plant in the case of Liquefied Natural Gas.
The taxable base of IPP is the value of the oil produced, including the amount of oil eventually lost due to an oil operation deficiency or negligence.
The holders of petroleum rights must monthly submit to the tax administration, information on oil production and sales until the day 10 of the month following the month of production. In the case concessionaires have not carried out any production or sale, they must be submitted to the tax administration.
The value of the oil produced is determined on the basis of the weighted mean prices at which oil has been sold or alienated in any way, by the producer and its contractors in the month to which the tax to be paid corresponds.
The value of the sale of crude oil obtained by the tax payer is determined on the basis of the FOB price or in accordance with the equivalent conditions at the delivery point.
The value declared on export crude reports to every contract of sale and, in the case of sales to subsidiary companies, it is determined by agreement between the Ministries that jointly oversee Petroleum and Finance sectors and the concessionaire.
The estimated value for the natural gas produced from the plots of the contract area, in case of sales to subsidiary companies, reports to every contract of sale and is determined by agreement between the Ministries that jointly oversee Petroleum and Finance sectors and the concessionaire.
IPP taxes are the following:
- 10% for crude and condensed oil;
- 6% for natural gas en GNL.
These taxes are reduced in 50% when production is addressed to the development of local industry, that means, when the sale is addressed to the National Company of Hydrocarbons (ENH, E.P.), entity designated to manage the oil and gas allotment addressed to the development of the national market and to the industrialisation of the country.
The reduction of the IPP tax must, on one side, be completely reflected in the sale price of the concessionaire to RNH, E.P. and on the other side on the sale price practised by ENH, E.P. to the local industry.
Payment of IPP is carried out by the taxable person until the day 10 of the month following the production's month, based on the statement in its official model.
The payment of tax is carried out by the taxable person by means of a payment slip at the Directorate of Tax Areas or any other entity duly authorised thereto, under the terms of the Law.
IPP payment is generally carried out in cash but it can be paid in kind as a State option, full or in part, upon notification by the tax administration, on a hearing of the competent services of the Ministry overseeing the oil sector.
This payment in kind must be carried out through the delivery of a certain amount of Oil.
Specific Rules of the Income Tax
The taxable person must report the income estimated at the end of each fiscal year for each area of concession contract. The taxable profit of the entities holding oil rights, granted at the light of the oil law is determined autonomously and tax obligations of each concession contract are completely independent between them.
Costs and income derived from recognition concession agreements, from research and production of petroleum, can only be deducted or charged to such recognition concession agreement, of research and production of petroleum, individually, for each fiscal year.
The following should correspond to each concession contract:
- a specific NUIT(single tax identification number), loss compensation in a certain area of the concession contract is not allowed through gains obtained in other area or concession;
- an organised account in an independent form regarding each co-holder and clearly and unequivocally emphasizing individual costs and income.
The expenses supported by the company developing the oil operations in the territory of Mozambique, which cannot be directly granted to a concession of research and production of that company, considering these are general expenses of the company, must be granted to the different research and production concessions of the same company in a proportional way.
These general expenses comprise:
- the amortization of assets-used in the benefit of the different research and production concessions;
- general administrative costs.
The granting of there general costs herein referred to shall be carried out taking into account the value of the assets of research and production concession in the same company.
As regards costs with downstream activities, this regulation establishes that the cost deductible is the cost incurred by the concessionaire with the activities downstream of the delivery point or with services provided in the ambit of the activities downstream from that delivery point.
This cost is in the form of a fee which shall be agreed between the entity responsible for the oil sector and the tax administration. Cost with activities downstream from the delivery point shall be accounted separately from the costs of petroleum operations for the delimitation and autonomy in need.
The concessionaire shall amortise all elements depreciable from the tangible and intangible assets under the terms of the Amortisations Regime.
The amount of tax on income regarding petroleum operations carried out during the fiscal year is determined through the application of the IRPC tax to the estimated taxable income.
If the taxable person has other taxable income, in addition to the income derived from petroleum operations, such income is taxed in accordance with the codes of the IRPS and IRPC.
Production Sharing Mechanisms
Oil production share operates in accordance with the dispositions regarding the recovery of costs and the right to profit, defined in September 2014 and these are applicable to oil so that the State and the concessionaire are entitled, in undivided participatory shares, to the oil available for sale by the concessionaire within a given period, unless otherwise the decided by the Government on the share of the State , by notification addressed to the concessionaire, 12 months in advance.
For the purposes of calculating the value of the R Factor, basic criterion of production sharing, the petroleum available and the petroleum cost shall be calculated taking into account the whole area of the concession contract.
The amount of Petroleum Cost to which the concessionaire has the right in a certain year is established on the basis of the value of the Petroleum Produced during that same year.
Calculation of Petroleum Cost and Petroleum Profit of the concessionaire is carried out for each calender year on a cumulative basis.
When amounts and real costs are not unknown, provisional estimates based on the working programmes and operational budgets of approved investment shall be used.
While the value of oil attributable to given year is not determined, the calculation shall be based on the value of that Oil during the previous year and, in the absence of that value, on the value jointly agreed between the Ministries that oversee the Finance and Petroleum sectors and the concessionaire, regardless of the adjustments to be carried out the following year on the basis of actual values of oil quantities, prices and expenses relating to such year.
References
Decree-Law nr. 32/2015, of 31th December
Law nr. 27/2014, of 23th September.