Presentation: The fiscal regime in Albania for upstream oil and gas operations Anisa Jasini, Tax Services Manager, Ernst & Young, Albania

1. Presentation: The fiscal regime in Albania for
upstream oil and gas operations
Anisa Jasini, Tax Services Manager,
Ernst & Young, Albania

2. The fiscal regime in Albania for
upstream oil & gas operations
17 March 2015

3. Page 3
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

4. Page 4
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

5. Page 5
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%
ProfitPetroleum

6. Page 6
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► Outdated legislation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

7. Page 7
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

8. Page 8
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

9. Page 9
Outdated legislation
► Special law on petroleum profit tax is outdated and has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

10. Page 10
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

11. Page 11
►Questions?
The fiscal regime in Albania for upstream oil & gas operations

12. Thank you!