The State Duma adopts a law to lift limitations on tax privileges for offshore projects
The State Duma has adopted an amendment, in the third reading, to the Tax Code to lift the deadline for the application of mineral tax privileges for offshore hydrocarbon projects, Interfax reports.
The government has submitted this amendment to the lower house of parliament within the framework of the second reading of amendments to the Tax Code and Article 1 of Federal Law No. 254-FZ On Amendments to Part Two of the Tax Code dated July 29, 2017.
"The government is proposing lifting the deadline to qualify for the privileged regime for new offshore hydrocarbon deposits. These measures were proposed in light of recent developments [technological sanctions that hinder the participation of major Western companies in offshore projects — Interfax]," Deputy Finance Minister Ilya Trunin said at a meeting of the State Duma Budgetary Committee.
According to Interfax, amendments to the Tax Code adopted in 2013 stipulate a special tax schedule for new offshore hydrocarbon projects in inland sea waters, the territorial sea and the continental shelf, as well as in the Caspian Sea. In particular, additional ad valorem mineral tax exemptions have been approved for some gas deposits with a statutory time limit for the application.
For example, a 1.3% tax rate has been approved for up to 120 months, but no later than March 31, 2037, for gas project areas that are 50% or more in the Black Sea at a depth of over 100 meters, in the northern part of the Sea of Okhotsk (55°N and further north), as well as in the southern part of the Barents Sea (south of 72°N). The mineral tax for other minerals extracted there is 10%.
A reduced tax rate of 1% percent has been approved for up to 180 months, but no later than March 31, 2042, for gas project areas that are 50% or more in the Kara Sea, the northern part of the Barents Sea (72°N and further north), as well as the eastern part of the Arctic (the Laptev Sea, the East Siberian Sea, the Chukchi Sea and the Bering Sea). The mineral tax for other projects in these areas is 5%. A tax rate reduction to 4.5% has been approved for companies that do not hold an LNG export license.
A 30% tax rate has been approved for up to 60 days after the start of commercial production, but no later than March 31, 2022, for deposits located in the Sea of Azov and for project areas that are 50% or more in the Baltic Sea. A 15% tax rate has been approved for up to 84 months, but no later than March 31, 2032, for deposit areas that are 50% or more in the Black Sea at a depth of up to and including 100 meters, the Russian part of the Caspian Sea bottom, the Pechora Sea and the White Sea, as well as the southern part of the Sea of Okhotsk (south of 55°N), including the Sakhalin shelf.
The approved amendments lift the time limit on the application of tax exemptions.