Doing Business in Azerbaijan 2009 - Azerbaijan Export ...

84 DOING BUSINESS IN AZERBAIJAN
*To date, more than 30 PSA
were concluded between
Azerbaijan and translational
oil corporations. The
shareholders in the largest
PSA (Azeri, Chirag, Guneshli)
are: BP, Unocal, Inpex, Statoil,
ExxonMobil, TPAO, Devon,
Itochu, Delta Hess and
SOCAR. The oil reserves in
this field alone are 630 mln
metric tons.
of Azerbaijan and foreign oil companies. Owing to the absence of
any national legislation that covers the oil and gas industry and
specifically addresses the need for sector growth, such PSAs have
been enacted into the legislative system of the Republic of
Azerbaijan as laws of the country.
Each PSA does not only constitute a part of the Azerbaijani legal
system: it also takes precedence over “general” Azerbaijani legislation
in the event of any inconsistency between the PSA and any
other Azerbaijani law of general application. To date more than 30
PSAs* have been signed and adopted as laws of the Republic of
Azerbaijan.
One of the areas of particular interest to foreign oil production and
service companies is the tax regime introduced by the PSAs. Given
the significance that the Government attaches to the development
of the energy sector in Azerbaijan, substantial tax concessions have
been granted to the oil companies involved in the development of
the energy sector of Azerbaijan under production sharing agreements.
The principal objective of oil and gas taxation is to maintain
a balance between obtaining a fair share of revenues from oil- and
gas-related activities carried out in the country and retaining the
attractiveness of the oil fields in Azerbaijan and the Azerbaijani
sector of the Caspian Sea to foreign investors. Each PSA contains a
specific article dealing with the taxation of oil and gas production.
In accordance with PSAs (which are uniform with regard to taxation),
oil companies pay only one tax: namely, a Profit Tax on the
taxable profit derived from sales of oil and from certain other
sources specified in the PSAs, at a fixed rate for a calendar year.
The Profit Tax rate varies, depending on the PSA, from 25% to 32%.
Oil companies that are parties to a PSA Contract will not be liable
to any existing or future taxes (except for the Profit Tax) of any kind