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removal of tax breaks at specific projects, moving some of those fields to the EPT regime instead. Analysts at BCS Global Markets (BCS GM) said the changes “appear to go beyond a revenue-raising exercise to a significant streamlining of Russia’s excessively complex oil tax regime.” The bills seek to remove targeted tax breaks at high-viscosity and highly-depleted oilfields. They also call for various changes to the EPT regime, including limiting the carryover of historic losses and a setting a new upper limit on costs that can be deducted from the tax base. Lukoil’s Korchagin field in the Caspian Sea will also lose its export duty exemption, as will a number of Eastern Siberian deposits belonging to Surgutneftegaz and Rosneft. However, projects affected by the reforms can be moved to the improved EPT regime. Gas producers will be unaffected by the reforms.
Russian government passed the mineral extraction tax (MET) for oil companies on September 30. ​Duma passes both of MinFin’s tax bills in 3rd and final reading. The bill was apparently unchanged from that passed in the 2nd reading. Interfax reported. Analysis: Tatneft hardest hit, Rosneft least impaired. Unless there were changes that did not make it into the Interfax story, tax breaks for high-viscosity oil and depleted oil fields were eliminated, the Excess Profits Tax (NDD) was tweaked up, specific breaks for Rosneft’s Vankor and Priobskoye fields either expanded or introduced, and two modest (c$150mn/yr for 3 years) breaks were extended to Tatneft and Gazprom Neft. At first glance, Tatneft appears to be the hardest hit by the new law, despite the late relief extended for its high-viscosity oil (HVO) production, followed by Lukoil. The relative ‘winner’ (although still likely a net-net loser of revenue) was Rosneft, which appears to be the only company to have been caught unsurprised by the MinFin’s initiative, as it had two major tax concessions written into the original bill. The quick passage of the Ministry of Finance’s two tax bills with minimal changes is somewhat negative for the industry but, at this point, expected, and should be largely in stock prices by now.
Russia’s Duma approves a new mineral extraction tax (MET) bill in first reading on September 22​. State Duma approves bill to hike the MET in first reading. Interfax reported. The state Duma approved the introduction of a 3.5 rent coefficient (K-rent) to the current MET for metals and fertilizers from January 2021 in the bill’s first reading. The rental coefficient would apply to most types of solid minerals, including potash salts, apatite-nepheline, apatite and phosphorite ores (current rate: 4%), ferrous and rare metal ores (now: 4.8%), nepheline, bauxite, natural salt and pure sodium chloride (5.5%), conditioned ores of non-ferrous metals (8%), and multicomponent complex ore containing copper, nickel and platinum (current rate: Rb730/t). Nevertheless, the Ministry of Finance may consider changing the hiked MET tax for new projects in the M&M sector by the spring session if there is sufficient justification that it is needed, but for no earlier than 2022, according to Deputy Finance Minister Alexei Sazanov. The chance the law will be adopted is rising. By initial assessment, the names likely to be worst hit by the law’s adoption
85 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com