Presentation 8

1,990 views

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,990
On SlideShare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
116
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide
  • Changes to Legislation wrt this area – FYA has been removed and AA is granted from the year expenditure was incurred (1 st year).
  • Presentation 8

    1. 1. Petroleum Project Economics Econ210D Presentation 8 Petroleum Taxation Week 8
    2. 2. Learning Objectives <ul><li>Calculation of Taxes for petroleum operations governed by E&P licenses, namely: </li></ul><ul><li>PPL </li></ul><ul><li>UL </li></ul><ul><li>PI </li></ul><ul><li>SPT </li></ul>Petroleum Taxation Week 8
    3. 3. Petroleum Taxes Act (1974) <ul><li>The Petroleum Taxes Act is administered by the Minister of Finance through the Board of Inland Revenue </li></ul><ul><li>The act consists of a two-tier system consisting of: </li></ul><ul><li>Production based taxes (royalties) </li></ul><ul><li>Profit based taxes (corporation taxes) </li></ul><ul><li>Incentives and allowances to encourage investment, particularly in exploration projects and enhanced oil recovery schemes </li></ul>Petroleum Taxation Week 8
    4. 4. Production Based Taxes <ul><li>These taxes also called royalties are based on the value of oil produced (gross income) </li></ul><ul><li>Production Levy </li></ul><ul><li>Supplemental Petroleum Tax </li></ul><ul><li>Green Fund Levy </li></ul>Petroleum Taxation Week 8
    5. 5. Profit Based taxes <ul><li>These are taxes are based on the taxable profits . Taxable profit is the difference between revenue and tax deductible allowances. The tax allowances include: operating costs and capital allowances. The two profit based taxes in T&T are: </li></ul><ul><li>Petroleum Profits Tax </li></ul><ul><li>Unemployment Levy </li></ul>Petroleum Taxation Week 8
    6. 6. Petroleum Taxes Act <ul><li>The petroleum taxation system was revised in 1992 to enhance its competitiveness by providing additional relief to new investors, and the introduction of an S.P.T. rate structure sensitive to oil price variation. </li></ul><ul><li>Any other recent revisions? </li></ul>Petroleum Taxation Week 8
    7. 7. Production Levy <ul><li>A Production Levy (P.L) of up to 3% of gross income from the production and sale of crude oil. </li></ul><ul><li>The levy provides the subsidy for petroleum products sold on the domestic market such as gasoline and dieseline. </li></ul>Petroleum Taxation Week 8
    8. 8. Supplemental Petroleum Tax <ul><li>A Supplemental Petroleum Tax (S.P.T.) is computed on gross revenue from the production based on an oil price sensitive rate structure. </li></ul>Petroleum Taxation Week 8
    9. 9. Supplemental Petroleum Tax (S.P.T.) Petroleum Taxation Week 8 Crude Oil Price SPT Rate   Crude Oil Price SPT Rate   Crude Oil Price SPT Rate $ 13.01 0%   $ 21.00 16%   $ 29.00 32% $ 13.50 1%   $ 21.50 17%   $ 29.50 33% $ 14.00 2%   $ 22.00 18%   $ 30.00 34% $ 14.50 3%   $ 22.50 19%   $ 30.50 35% $ 15.00 4%   $ 23.00 20%   $ 31.00 36% $ 15.50 5%   $ 23.50 21%   $ 31.50 37% $ 16.00 6%   $ 24.00 22%   $ 32.00 38% $ 16.50 7%   $ 24.50 23%   $ 32.50 39% $ 17.00 8%   $ 25.00 24%   $ 33.00 40% $ 17.50 9%   $ 25.50 25%   $ 33.50 41% $ 18.00 10%   $ 26.00 26%   $ 34.00 42% $ 18.50 11%   $ 26.50 27%   $ 34.50 43% $ 19.00 12%   $ 27.00 28%   $ 35.00 44% $ 19.50 13%   $ 27.50 29%   $ 35.50 45% $ 20.00 14%   $ 28.00 30% $ 20.50 15%   $ 28.50 31%
    10. 10. Supplemental Petroleum Tax (S.P.T.) <ul><li>Companies are eligible for a &quot;productivity allowance“ equivalent to a 20% reduction in S.P.T. rate, on all production in excess of 90% of the preceding year's average. </li></ul><ul><li>A &quot;small field&quot; allowance equivalent to a 20% reduction in the S.P.T. rate is also granted for fields in which the production rate is less than 200 barrels a day for each well. </li></ul>Petroleum Taxation Week 8
    11. 11. <ul><li>Green fund levy (G.F.L.) at a rate 0.1 % of Gross income from the production and sale of crude oil. </li></ul><ul><li>Computed on the Gross income for the financial year (i.e. Jan to Dec) </li></ul>Green Fund Levy Petroleum Taxation Week 8
    12. 12. Taxable Profit <ul><li>Taxable profits = </li></ul><ul><li>Revenue </li></ul><ul><li>Less </li></ul><ul><li>Operating Expenses </li></ul><ul><li>Capital allowances </li></ul>Petroleum Taxation Week 8
    13. 13. Capital Allowances <ul><li>This is a tax allowable deduction based on the amount of capital expenditure. Capital expenditure can be categorized into: </li></ul><ul><li>Tangible capital expenditure </li></ul><ul><li>Intangible capital expenditure </li></ul>Petroleum Taxation Week 8
    14. 14. Capital Allowances <ul><li>Capital allowances for taxation purposes in T&T are based on the following: </li></ul><ul><li>Tangible capital expenditure – 20% in the initial year followed by 20% straight line depreciation in subsequent years. </li></ul><ul><li>Intangible capital expenditure - 10% in the initial year followed by 20% declining balance depreciation in subsequent years. </li></ul>Petroleum Taxation Week 8
    15. 15. <ul><li>PART I – INDUSTRIAL BUILDINGS </li></ul><ul><li>Initial Allowance 10 % </li></ul><ul><li>Annual Allowance 5 % (Straight Line) </li></ul><ul><li>PART II – PLANT & MACHINERY – E & P </li></ul><ul><li>Initial Allowance 20 % Year 1 </li></ul><ul><li>Annual Allowance 20 % Year 1-5 </li></ul><ul><li>PART III (INTANGIBLES) </li></ul><ul><li> Initial Allowance 10 % Year 1 </li></ul><ul><li>Annual Allowance 20 % </li></ul><ul><li>- Exploration (Year 1) </li></ul><ul><li>- Development (Year 2 or from commencement of commercial </li></ul><ul><li> production) </li></ul>Capital Allowance Petroleum Taxation Week 8
    16. 16. Petroleum Profits Tax P.P.T. <ul><li>This is based on taxable profits earned by businesses in the course of petroleum operations falling under the Petroleum Taxes Act. </li></ul><ul><li>The PPT rate is 50%. </li></ul>Petroleum Taxation Week 8
    17. 17. Unemployment Levy <ul><li>An Unemployment Levy of 5% is also charged on taxable profits less further eligible deductions. </li></ul><ul><li>These include production levy and Supplementary Petroleum Tax payments as well as a heavy oil allowance on projects designed to recover crude of 18 degrees API specific gravity or lower. </li></ul><ul><li>Rate 5 % of gross income from the production and sale of crude oil. </li></ul>Petroleum Taxation Week 8
    18. 18. Question 1 <ul><li>A company has the following production profile over life of field. </li></ul>Petroleum Taxation Week 8 Year Production Price 2010 1800,000 $50.00 2011 1700,000 $60.00 2012 1600,000 $75.00 2013 1500,000 $80.00 2014 1400,000 $100.00 2015 1300,000 $100.00 2016 1200,000 $100.00
    19. 19. E&P license - Taxation <ul><li>The contractor is liable to make all payments relating to royalties and petroleum profit taxes to the government as outlined in the petroleum taxes act. </li></ul>Petroleum Taxation Week 8
    20. 20. Question 1 <ul><li>Operating expenses are estimated at $5m per annum during the production phase and $2m during exploration and development. </li></ul><ul><li>Capital expenditure are: </li></ul><ul><li>Intangibles $10m </li></ul><ul><li>Tangibles $10m </li></ul><ul><li>Calculate the following: </li></ul><ul><li>Annual Gross income over life of field </li></ul><ul><li>Annual Capital allowances </li></ul><ul><li>All royalty taxes on an annual basis </li></ul><ul><li>All profit based taxes on an annual basis </li></ul>Petroleum Taxation Week 8
    21. 21. Question 2 <ul><li>An oil company plan to develop an oil field in a country with a concessionary system. The prognosis shows gross revenue of 200 million USD and a total cost of 90 million. The royalty is 20 % and all capital and operational cost are deductible against revenue. The taxable income is taxed on two levels: 10 % provincial taxes and 40 % federal taxes. Provincial taxes are deductible against federal taxes. </li></ul><ul><li>Calculate the following: </li></ul><ul><li>Net revenue </li></ul><ul><li>Taxable income </li></ul><ul><li>Effective tax rate </li></ul><ul><li>Total profit </li></ul><ul><li>Contractor take and government take </li></ul><ul><li>Profit margin </li></ul><ul><li>Remember the right sequence: first royalty, then deductions and last taxes </li></ul>Petroleum Taxation Week 8
    22. 22. Petroleum Taxation Week 8

    ×