ANNUAL REPORT 2005 - Lukoil

FINANCIAL ACCOUNTS
A corporate holder of interests in DSs or ordinary shares that is resident in the United Kingdom will generally be subject
to UK corporation tax on the dividend paid on the DSs or ordinary shares. A corporate holder of interests in DSs or
ordinary shares that is not resident in the United Kingdom will generally not be subject to UK corporation tax on any
dividend paid on the DSs or ordinary shares unless the DSs or ordinary shares are attributable to a trade carried on by
the holder in the United Kingdom through a branch or agency.
Taxation of Disposals
The disposal by a UK holder of interests in DSs or ordinary shares may give rise to a chargeable gain or allowable loss
for the purposes of UK taxation of chargeable gains. An individual holder of interests in DSs or ordinary shares who is
resident or ordinarily resident and domiciled in the United Kingdom will generally be liable for UK capital gains tax on
chargeable gains made on the disposal of an interest in DSs or ordinary shares. An individual holder of interests in DSs
or ordinary shares who is resident or ordinarily resident, but not domiciled, in the United Kingdom will be liable for UK
capital gains tax to the extent that the proceeds received on the disposal of an interest in DSs or ordinary shares (or part
thereof) are remitted or deemed to be remitted to the United Kingdom; losses arising on such disposals cannot be remitted
to the UK. Dealings in the DSs or ordinary shares on the London Stock Exchange may give rise to remitted gains that
would, therefore, give rise to a UK capital gains tax liability. It should be noted that special rules may apply where an
individual has acquired his or her shares in connection with their employment such that any gain or part thereof is
subject to income tax rather than capital gains tax.
In qualifying circumstances (including a qualifying time period), relief may be available to UK resident individual holders,
to reduce the amount of a gain on a disposal of the ordinary shares or DSs, under "taper relief" rules for assets acquired
after March 1998 (indexation may be available if the assets were acquired prior to this time).
Where a UK holder of interests in DSs or ordinary shares has acquired the interests or ordinary shares on a number of
occasions there are specific matching rules which determine, for tax purposes, which interests or ordinary shares are
being disposed of first.
A corporate holder of interests in DSs or ordinary shares that is resident in the United Kingdom will generally be subject
to UK corporation tax on any chargeable gain arising from a disposal of DSs or ordinary shares. A corporate holder of interests
in DSs or ordinary shares that is not resident in the United Kingdom will be subject to UK corporation tax on any
chargeable gain arising from their disposal where the DSs or ordinary shares in question are attributable to a trade
carried on by the holder in the United Kingdom through a branch or agency. An indexation allowance based on the Retail
Price Index may be available to reduce the gain.
In qualifying circumstances (including a qualifying time period), an exemption may be available to UK resident corporate
holders, on a disposal of ordinary shares or DSs, such that any gain/loss will not be taxable/relievable.
Effect of withholding taxes
As discussed in "Taxation - Russian tax considerations - Taxation of Dividends" and "-Taxation of Capital Gains" above,
dividend payments in respect of ordinary shares will be, and certain capital gains may be, subject to Russian withholding
taxes. A UK resident investor should generally be entitled to a credit for Russian tax (if any) properly withheld from such
payments against such investor's liability to income tax or corporation tax on such amounts, subject to UK tax rules for
calculation of such a credit.
Stamp duty
Payment of UK stamp duty will not normally be required in connection with a transfer of interests in DSs or ordinary
shares, provided that the instrument of transfer is executed outside the UK and the transfer does not otherwise relate
to "some matter or thing done or to be done in the UK". No UK stamp duty reserve tax will be payable in respect of an
agreement to transfer interests in DSs or ordinary shares provided that they are not registered in a register kept in the
UK by or on behalf of the body corporate by which they are issued.
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