Mineral Extraction taxation Abdikalikova Gulzhainar ID: 20092630 Shokhrukh Mamasharipov ID: 20102346 Oteulov Beibit ID: 20110329
outline • Introduction – Definition • Main body – – • Classification Mineral Extraction Taxation in Kazakhstan Mineral Extraction Taxation in Results in comparison: pros and cons Conclusion
Definition • The rates of mineral extraction tax for crude oil, including gas condensate are fixed according to the scale depending on annual oil volumes • MET is a new tax that would effectively replace royalty provided in the tax law to date.
• MET would be generally payable on the volume of extracted • mineral resources. Tax base calculation procedures and tax rates • are different for the following groups of mineral resources: (i) • crude oil, gas condensate, natural gas; (ii) “raw minerals” (e. g. , • metals); (iii) commonly occurring mineral resources(e. g. , sand, • clay), groundwater and therapeutic muds.
• The tax is not due on natural gas pumped back into the subsurface. Also, the New Tax Code would exempt the volume of flared natural gas from MET. • Below is a general overview of METrelated draft provisions with regard to crude oil, gas condensate, natural gas and raw minerals.
MET base • The actual extraction volume • “World” prices • Exceptions
Exceptions • 1) The value of extracted crude oil and gas condensate not exported outside Kazakhstan would be determined as follows: a) The actual sales volume and actual sales price per unit of production. b) If crude oil/gas condensate is transferred for processing to an oil refinery located in Kazakhstan • 2) The value of extracted natural gas not exported outside Kazakhstan would be determined as follows: a) the actual extraction volume and weighted-average sales b) the actual volume used for own production needs and the per unit extraction cost. Example: If the natural gas is extracted along with crude oil (“associated gas”), its production cost is determined based on production cost of crude oil in the proportion of 1 thousand cubic meters of natural gas per 0. 857 tons of crude oil.
MET rate • • • The New Tax Code provides for a scale of MET rates on crude oil and gas condensate depending on the volume of annual production (with gradual increase of tax rates each year). The rates would range from 5% to 18% for 2009, from 6% to 19% for 2010 and from 7% to 20% since 1 January 2011. These ratesshall be reduced in half with respect to extracted crude oil and gas condensate (i)sold on the domestic market, (ii) transferred for processing to a local refinery (without transferring the ownership right) or (iii) used for the subsurface user’s own production needs.
MET in Russia • Taxpayers organisations and individual entrepreneurs recognised as users of subsoil • Subject to tax Extracted commercial minerals • Tax base Thetax base is the result of self assessment tax. It is established as the value of extracted minerals or as a multiple of the quantity of extracted minerals and a certain solid tax rate subject to a coefficient
MET in Russia • Taxable period Calendar month • Tax rate Determined for each type of exacted mineral • Tax payment Not later then the 25 th day of the month following the expired tax period • Tax return shall be filed not later than the last day of the month following the expired tax period.
MET on ‘difficult’ oil-fields • Taxing financial earnings will supposedly stimulate the development of new and “difficult” oil-fields. In addition to the effective 0% MET tax rate for onshore hydrocarbon exploration above the Arctic Circle the government is aiming to develop new tax incentives for exploring all raw materials on the shelf and in the domestic waters.
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Conclusion • Soviet era. • regulatory environment, raising industry practices • Kazakh market • exploration companies and the numerous gaps
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