Petroleum Taxation
University of Oslo
March 2013
Jan B. Jansen/Joachim M. Bjerke
Advokatfirmaet BA-HR DA
1
INTRODUCTION
1.1
The Petroleum Tax Act 1975 (PTA)
1.2
1.3
•
Establishes the Norwegian continental shelf as a tax district (28%), PTA section 1
•
Establishes the additional Special Tax (50%) on E&P activities, PTA section 5
•
Based on net profits, but with several unique features
Justification for a special tax
•
State ownership of resources, ref. Petroleum Act 1996 section 1-1
•
Resource rent; enables extraordinary profits, should accrue to the public
•
Investor concerns
Some numbers
State Taxes in BNOK:
2008
2009
2010
2011
Income and wealth tax
298
307
324
329
Petroleum Tax (78%)
247
145
175
227
VAT
191
185
198
209
Payroll tax (employer)
122
128
130
139
1.4
Statoil 2011 Taxes Norway offshore
BNOK 114
TOTAL E&P Norge 2011
BNOK 24
Some terms
General income, General Tax Act (GTA) 1999
Special Tax income (50%)
Uplift (7.5% in four years)
2.
ASSESSMENT BODIES
2.1
Oil Taxation Office (OTO), centralized tax office
Prepares assessment to be decided by the Oil Taxation Board
Prepares appeals to be decided by the Appeals Board
2.2
Oil Tax Board (OTB)
Renders the assessment of E&P tax payers
5 members appointed by the State (Ministry of Finance)
2.3
Appeals Board for Oil Taxation
Renders rulings in appeal cases
Appointed by the State (Ministry of Finance)
2.4
Civil Courts
3.
SOURCES OF LAW
Acts
•
PTA 1975 with regulations
•
GTA (through reference in PTA Section 8)
2 (10)
Preparatory documents
Court precedence, in particular Supreme Court
Administrative practice, OTB and Appeals Board
Limited literature
4.
SCOPE
4.1
The NCS as a separate tax district, PTA section 1
4.1.1
Functional scope, PTA section 1
4.1.2
•
Exploration
•
Exploitation/production
•
Related activities and work
•
Pipeline transportation
•
Processing facilities, PTA section 1 second paragraph
Geographical scope, PTA section 1 litra a to d
•
Internal Norwegian waters and Norwegian Sea Territories (a)
•
Norwegian Continental Shelf (a)
•
Adjacent seas and cross boarder fields (b)
•
Outside Norway and NCS; pipeline transportation/landing of petroleum (c)
•
In Norway: pipeline transportation and receiving/export facilities (d)
•
Specific regulations for the scope of tax liability on transportation and treatment
systems on-shore, PTA section 1, third paragraph
4.2
The Special Tax Regime; PTA Section 5
•
Extraction, processing and pipeline transportation
3 (10)
4.3
Double tax treaties
4.4
Allocation issues
General rules in the GTA applies: The entity entitled to the benefit or liable for the cost
Income and costs which are earned or accrued for tax purposes cannot be transferred to a
different entity for tax purposes
5.
TAXABLE INCOME
5.1
Derived by activity and work referred to in section 1 (exploration, exploitation,
pipeline transportation and processing), PTA section 2
•
Any benefit “derived by”
-
Connected benefits
•
Sale of produced petroleum, crude, NGL, dry gas
•
Processing
•
Pipeline transportation
•
Ad hoc income?
•
Integrated activities
5.2
Norm Prices, PTA section 4
5.2.1
Background
5.2.2
PTA Section 4
Stipulated Norm Price:
•
What petroleum could have been traded at in a free market between independent
parties
•
Replaces actual sales prices
Binding effect: Taxable income and timing of taxation
Norm prices are stipulated at the Norm Price Point
4 (10)
Which items are included?
In general; satisfactory system with few appeals
So far, only used for crude oil but considered to apply to other areas as well
5.3
Dry gas and condensate
Actual sales price, pre/post the Gas Negotiations Committee
Increased internal sales, GTA § 13-1
Advance pricing approval, PTA section 6, fifth paragraph
Reporting of all sales of natural gas, PTA section 6, sixth paragraph
•
Secret comparables; bench marks for related transactions
A major challenge to determine arm's length prices for gas sales
5.4
Special Tax basis, PTA section 5
Income from extraction, processing and pipeline transportation
Uplift, see below
Losses from other areas may not be deducted in the basis for the Special Tax
6.
DEDUCTIONS, DEPRECIATIONS
6.1
General
Costs incurred to earn income which is deductible under the GTA
Special tax basis: Only costs which is connected with extraction activities
•
No deduction for provisions, discounts or costs on sales to affiliated companies, PTA
section 3 e
•
Exploration costs are deductible when incurred, PGA section 10
Distinction between costs which are deductible immediately and costs which must be
capitalized and depreciated
5 (10)
6.2
Investments, PTA section 3 b
Investments must be capitalized and depreciated, ref. above
Depreciation rules in GTA does not apply, PTA S 3 b first sentence
All costs related to acquisition of production facilities and pipelines
Depreciation 16 2/3% annually from investment (6 year straight line)
•
33 1/3% annually for large Scale LNG plants, Snøhvit, PTA section 3 b) last sentence
Example:
Investment
Depreciations
700
600
500
400
300
200
100
0
1
2
3
4
5
6
7
8
9
10
year
6.3
Special Tax basis, uplift
Net income subject to Special Tax is reduced with uplift, PTA section 5
Deduction 7.5% over 4 years, total of 30%
Cost price for assets covered by PTA section 3 b
6.4
Owning vs leasing of production installations, PTA section 3 i
Equal taxation owning or leasing of production facilities
Voluntarily – ref "may claim"
6 (10)
7.
FINANCIAL COSTS, PTA SECTION 3 D
7.1
Complexity
Allocation between onshore and offshore
Thin capitalization
Several changes to the rules
7.2
New rules 2007
Tax book value offshore
Deductions =
(Financial charges +/- currency) x 0,5 x
Average interest bearing debt
Average interest bearing debt
Financial income and other financial elements only taxable in the 28% tax regime
Non-deductible costs allocated onshore, but may be recharged offshore 28%
8.
TIMING
Realization principle GTA § 14-2
Decommissioning and removal PTA § 3 g
9.
TAX REFUNDS, PTA SECTION 3 C
9.1
Tax refunds of exploration costs, PTA section 3 c
Incentives to newcomers
Shall obtain the same tax benefit whether in tax position or not
Exploration costs, direct and indirect, but excluding financial charges
Annual refund of tax value, limited to net loss in year
7 (10)
9.2
Refund of loss carry forward upon cessation, PTA section 3 c
Incentive for newcomers
Refund of tax value of loss carry forward upon cessation, PTA section 3 c, fourth paragraph
10.
GAINS AND LOSSES ON REALISATION
10.1
Transfer of licenses
Approval by Ministry of Finance, PTA Section 10
Tax neutrality to the State
Section 10 Regulations
10.2
Other transactions
PTA S 3 f and S 5 for uplift
Capital gains/losses deferred over time
11.
DISPUTES AND COURT CASES
11.1
Transfer pricing, GTA section 13-1
Arm’s length principle, GTA Sec. 13-1
11.2
Other issues
Decommissioning
Scope of the special tax regime (trading)
8 (10)
Skattelisten for 2011
Org.nr.
Company
Income NCS
Tax NCS
990 888 213
Statoil Petroleum AS
154 494 843 027
115 442 166 201
927 066 440
Total E&P Norge AS
32 267 288 949
24 028 337 384
924 956 917
ExxonMobil Production Norway Inc
22 281 749 620
17 379 764 704
914 048 990
ExxonMobil Exploration and Production Norway AS
21 671 913 441
16 257 618 631
918 110 127
ConocoPhillips Skandinavia AS
21 310 460 396
15 900 155 137
923 702 962
Marathon Oil Norge AS
16 605 814 230
12 722 954 434
919 160 675
Eni Norge AS
14 031 689 099
10 252 256 839
914 807 077
A/S Norske Shell
13 594 631 555
10 096 499 343
996 888 177
Solveig Gas Norway AS
2 909 650 726
2 145 350 606
986 209 409
Lundin Norway AS
2 878 356 166
2 063 509 749
931 713 671
DONG E&P Norge AS
2 888 370 084
1 966 790 347
953 133 210
Idemitsu Petroleum Norge AS
1 862 843 349
1 349 061 788
983 426 417
GDF SUEZ E&P Norge AS
4 575 083 928
1 281 023 500
929 559 428
Enterprise Oil Norge AS
1 395 604 854
1 075 758 705
926 620 207
RWE Dea Norge AS
1 397 231 804
755 812 816
996 739 910
Silex Gas Norway AS
675 692 297
602 496 218
995 152 142
Njord Gas Infrastructure AS
375 777 624
568 503 938
985 706 050
Talisman Energy Norge AS
745 687 593
348 003 248
997 229 088
Infragas Norge AS
308 171 863
291 680 749
981 355 210
BP Norge AS
979 608 762
274 290 453
989 726 242
Centrica Energi
367 734 803
264 310 288
918 352 074
Norsea Gas AS
328 809 715
249 798 984
930 322 784
Chevron Norge AS
296 323 722
220 599 824
995 915 995
Core Energy AS
244 415 124
173 789 690
989 399 071
Faroe Petroleum Norge AS
235 093 550
155 444 028
975 871 932
Norpipe Oil AS
91 517 397
59 649 317
987 008 644
Altinex Oil Norway AS
0
0
986 615 806
BG Norge AS
0
0
990 089 655
Centrica Resources (Norge) AS
0
0
996 460 088
Emergy Exploration AS
0
0
994 923 986
Stratum Energy AS
0
0
997 198 336
Talisman Petroleum Norge AS
0
0
977 026 792
Talisman Resources Norge AS
0
0
991 531 556
E&P Holding AS
0
-7 851 744
9 (10)
930 459 321
Hess Norge AS
0
-10 218 032
997 015 231
Petrolia Norway AS
0
-11 719 716
997 295 684
Explora Petroleum AS
0
-14 276 288
989 490 168
Bayerngas Norge AS
0
-18 397 542
891 083 092
4Sea Energy AS
0
-22 381 804
946 680 591
Norske AEDC A/S
0
-26 268 846
988 682 039
Bridge Energy Norge AS
0
-38 242 212
994 434 403
Agora Oil & Gas AS
0
-47 011 999
991 735 194
Lotos Exploration and Production Norge AS
0
-50 029 282
987 863 749
Dana Petroleum Norway AS
0
-77 308 364
991 252 606
Spring Energy Exploration AS
0
-78 657 430
990 554 382
Fortis Petroleum Norway AS
0
-83 272 973
988 120 545
Valiant Petroleum Norge AS
0
-106 225 017
989 795 767
Skagen44 AS
0
-111 444 249
988 217 867
Concedo ASA
0
-120 229 627
991 193 030
Edison International Norway Branch
0
-135 069 340
990 809 712
Skeie Energy AS
0
-153 961 921
987 581 883
Front Exploration AS
0
-172 431 248
910 229 958
Svenska Petroleum Exploration AS
0
-187 815 329
993 787 787
Repsol Exploration Norge AS
0
-225 595 898
991 317 155
PGNiG Norway AS
0
-226 394 221
989 050 052
Nexen Exploration Norge AS
0
-264 438 751
934 651 758
VNG Norge AS
0
-276 485 079
887 995 222
Premier Oil Norge AS
0
-321 712 351
985 740 909
E.ON E&P Norge AS
0
-364 723 493
989 362 100
Suncor Energy Norge AS
0
-366 596 573
991 870 830
Spring Energy Norway AS
0
-457 140 285
987 989 297
Norwegian Energy Company ASA
0
-515 585 382
891 797 702
North Energy ASA
0
-531 140 787
940 376 645
Rocksource ASA
0
-564 003 118
986 592 288
BG Norge Limited
0
-634 769 827
988 400 025
OMV (Norge) AS
0
-635 219 220
986 478 434
Maersk Oil Norway AS
0
-695 300 791
985 224 323
Wintershall Norge AS
0
-740 076 638
989 795 848
Det norske oljeselskap ASA
0
-1 443 140 355
10 (10)