Managing tax in the LNG and FLNG industry: Lessons from the front lines

Managing tax in the LNG and FLNG industry

Across the globe, liquefied natural gas (LNG) and floating LNG (FLNG) opportunities are rapidly emerging as fast, cost-effective means of unlocking new gas resources.

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From a tax viewpoint, new technologies and new ways of doing business always bring new tax issues – and LNG and FLNG projects are no exception. 

Investors and operators are challenged to comply with complex income and resource tax regimes and manage indirect taxes and custom obligations across supply chains, while ensuring they don’t miss out on exemptions, incentives and recoveries. And the unprecedented features of massive, mobile FLNG projects create a raft of additional tax challenges.

What are the top tax issues being encountered by LNG and FLNG producers and investors? In this report, KPMG energy and natural resources tax professionals from member firms in South Africa, Nigeria, Japan, Canada and Australia share leading practices, lessons learned and key actions for effective tax management. 

Based on their experience advising clients on the front lines in their markets, some key actions for investors and proponents to consider include:

  • Confirming tax incentives and requirements related to your LNG activities in all relevant jurisdictions
  • Optimizing access to research and development incentives in all of your locations 
  • Ensuring the business reasons for your tax positions are well supported and documented 
  • Verifying and documenting your transfer pricing policies
  • Establishing a globally-integrated plan for managing indirect taxes and maximizing recoveries across your global supply chain 
  • Understanding the project’s local impact and meeting obligations to contribute to the local economy.

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