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Angola set to exempt oil companies from services tax, E&Y says

COLIN MCCLELLAND

LONDON (Bloomberg) -- Petroleum explorers including Total and BP in Angola, will probably be exempt from a consumption tax, the head of Ernst & Young’s local unit said.

The proposed 5% levy on services and supplies to oil companies and 10% on drill rig leases and other equipment rentals won’t be imposed after opposition from the Petroleum Ministry and companies led the Finance Ministry to revise the law, Luis Marques said in an interview in the capital, Luanda.

“What will happen in the draft law is that oil companies will be exempt,” said Marques, who advises foreign investors in Angola on changes to the tax and legal regime.

A call to the Finance Ministry wasn’t returned, and Jose Miguel, a Petroleum Ministry spokesman, said he couldn’t comment. Angola, recovering from a 27-year war that ended in 2002, is attempting to update its tax laws to boost revenue. Companies that also include Exxon Mobil and Chevron spend an estimated $20 bn a year on exploration and production in the country, and oil taxes contribute about 80% of revenue.

Gilberto Luther, head of the government’s tax-reform project, didn’t reply to a phone call and email. Spokesmen for Exxon and Chevron in Houston declined to comment. BP and Total didn’t respond to emails.

The implementation of a separate law requiring annual audits of “large” taxpayers in the oil, diamond, financial and telecommunications sectors will be delayed until June 2015 because a list of 486 companies subject to the measure wasn’t prepared in time for this tax year, Marques said in the interview on April 24.

The legislation, approved in October, doesn’t state criteria for being on the list, aside from requiring those earning more than $71.5 mn a year in revenue to file reports on the fees they charge outside the country, known as transfer pricing, he said. The list omits industrial and trading companies, some with annual revenue of more than $300 mn, he said.

Ernst & Young Angola is targeting revenue of $5.6 mn for the year ending June 30 and doubling that within three years as it plans to start posting a profit, Marques said. The unit is focusing on helping companies with tax changes as it shifts emphasis to permanent local clients from supporting projects originating outside Angola. Staff tripled to 75 in the past two years, he said.

Lack of skills remains one of the country’s greatest challenges, he said. E&Y will sponsor 20 students a year at the Catholic University of Angola and in their graduate studies in Portugal, he said.

Angola is African’s biggest crude producer after Nigeria.

05/02/2014

 

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