Extractives Industry

Question 1

Licensee?

Answer 1

person granted a mining right

Question 2

Contractor

Answer 2

person with whom government has concluded a petroleum agreement

Question 3

subcontractor

Answer 3

supplies services to licensee and contractor

Question 4

Licensee corporation tax rate

Answer 4

?

Question 5

contractor tax rate

Answer 5

30% resident
37.5% non resident with PEs

Question 6

upon ceasing of operations, how long can unutilized losses be carried forward?

Answer 6

3 years

Question 7

What is prospecting expenditure?

Answer 7

incurred in operations authorised under a prospecting right

Question 8

Exploration Expenditure?

Answer 8

incurred by a contractor in explorattion operations

Question 9

Extraction expenditure

Answer 9

capex incurred by licensee when undertaking operations under extraction right

Question 10

Development expenditure?

Answer 10

capex incurred by contractor while undertaking operations under a development plan

Question 11

tax treatment of prospecting/exploration expenditure?

Answer 11

allowable deduction in the year incurred

Question 12

Tax treatment of development/extraction expenditure?

Answer 12

20% claimed in year its incurred and subsequent years (till 100%)

Question 13

treatment of social infrastructure expenditure?

Answer 13

tax deductible subject to approval by CS

Question 14

Treatment of machinery for prospecting/exploration?

Answer 14

WTA at 100%

Question 15

WTA rate of petroleum pipelines

Answer 15

12.5%

Question 16

treatment of contributions to rehabilitation/decommissioning funds

Answer 16

allowed if approved

Question 17

treatment of amount returned to the licensee/contractor or surplus?

Answer 17

taxable in the year it was returned

Question 18

treatment of amount accumulated/withdrawn for rehab/decommissioning expenditure?

Answer 18

tax exempt

Question 19

Tax treatment of Petroleum sharing agreement?

Answer 19

portion govt receives includes the taxes

Question 20

taxes excluded from petroleum sharing agreements?

Answer 20

tax on gain on disposal of interest in the agreement
withholding tax

Question 21

Farm out agreement?

Answer 21

agreement entered into by a licensee/contractor with a 3rd party for the transfer of interest in a mining/petroleum agreement

Question 22

withholding tax to subcontractor paid by licensee?

Answer 22

20% on gross. Is final tax

Question 23

withholding tax on payment by contractor to subcontractor?

Answer 23

5.625% on gross. Is a final tax

Question 24

tax point on WHT on fees to subcontractors?

Answer 24

when fee is paid or time contractor credits service fee of subcontractor account whichever comes first

Question 25

corporate tax rate of non resident subcontractors?

Answer 25

37.5%

Question 26

corporate tax rate of resident subcontractors?

Answer 26

30%

Question 27

thin cap ratio for licensees and contractors?

Answer 27

2:1

Question 28

treatment of hedging income?

Answer 28

as a specified source of income

Question 29

gain on disposal of interest where interest derives more than 50% from immovable property?

Answer 29

100% of gain is taxable

Question 30

where value derived is between 20-50%

Answer 30

A*B/C
A- amount of gain
B -value of interest from immovable property
C - total value of interest

Question 31

tax rate for the gains in disposal on interest?

Answer 31

30% resident
37.5% non resident

Question 32

withholding tax rates on royalties?

Answer 32

5% resident
20% non residents