Presentation: The fiscal regime in Albania for upstream oil and gas operations

Anisa Jasini, Tax Services Manager,

Ernst & Young, Albania

The fiscal regime in Albania for upstream oil & gas operations

17 March 2015

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Agenda

► Highlights of the Albanian fiscal regime for oil & gas sector

► Issues, pitfalls and loopholes in its implementation

► Ideas for a more efficient and predictable regime

The fiscal regime in Albania for upstream oil & gas operations

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Highlights

Special fiscal regime for the taxation of oil & gas profits

► PSC model for the sharing of petroleum

► Special profit tax at 50% on petroleum profits

► Royalty at 10% on petroleum sales

► VAT exemption during exploration

► Custom duty exemption

The fiscal regime in Albania for upstream oil & gas operations

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Albanian PSC Fiscal Regime

The fiscal regime in Albania for upstream oil & gas operations

Contractor’s

Profit

Petroleum

GOVERNMENT CONTRACTOR

Royalty 10%

Cost

Recovery

Petroleum

Profit Tax 50%

Petroleum after tax

Government Share Government Share

Petroleum production

Cost

Recovery

Petroleum

Royalty 10%

Pro

fit

Pe

trole

um

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Issues, pitfalls and loopholes in the implementation of the regime

► Fiscal stability issues

► VAT exemption procedure pitfalls

► Outdated legislation

The fiscal regime in Albania for upstream oil & gas operations

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Fiscal stability

► PSC’s stability clause provides for economic equilibrium

► PSCs are not approved by the Parliament and changes to

the fiscal legislation affect the Contractors:

► Royalty tax introduced in 2008

► VAT exemption during development phase removed in 2014

► Exemption from payroll tax for expatriates removed in 2014

► Exemption from excise removed in 2014

The fiscal regime in Albania for upstream oil & gas operations

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VAT exemption procedure

► VAT exemption rules have changed several times

► New requirements narrowed the eligibility for VAT

exemption

► Misaligned procedures between AKBN and tax authorities

The fiscal regime in Albania for upstream oil & gas operations

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Outdated legislation

► Special law on petroleum profit tax is outdated and has

been curtailed over the years

► Lack of implementing administrative guidelines

The fiscal regime in Albania for upstream oil & gas operations

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Ideas for a more efficient and predictable regime

► New legislation on the taxation of petroleum profits, to be:

► Prepared in consultation with stakeholders

► Aligned with international best practices

► Addressing actual and potential issues

► Detailed administrative guidelines

► Clear and simple procedures for VAT exemption during

exploration should be introduced

The fiscal regime in Albania for upstream oil & gas operations

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►Questions?

The fiscal regime in Albania for upstream oil & gas operations

Thank you!