Read about the oil industry excess-profits tax draft law.
November 2017 marked the start of the approval process of the oil industry excess-profits tax draft law at the Russian State Duma. Before that, the initiative had been discussed for a number of years by the Ministries of Finance and Energy. The current tax scheme in the sector (royalty tax and export duties) does not directly account for the economy of oil field development projects, and the profitability issue is patched by point concessions which increase the administrative burden. The excess-profits tax aims at unifying the approach to supporting development projects, and replacing the extensive list of concessions with a clear fiscal scheme for both business and the authorities. The new tax is calculated based on the economy oil field development projects during the entire investment period, and the tax amount is defined by each field's profitability. Companies transferring over to the excess-profits tax will not be fully released from royalty tax and export duties, but will be offered more favourable conditions as well as a number of other benefits. KPMG professionals advise the business to take its time in 2018 to prepare for the transfer, which will require the elaboration of new internal tax methodologies as well as applicable ERP system updates.