ANNUAL REPORT 2005 - Lukoil

The measures that we use for tax planning and management strategies have been based on our understanding of tax
legislation existing at the time of implementation of these measures. We are subject to tax authority audits on an ongoing
basis, as is normal in the Russian environment, and, at times, the authorities have attempted to impose significant additional
taxes on us. We believe that we have adequately met and provided for tax liabilities based on our interpretation of
existing tax legislation. However, the relevant authorities may have differing interpretations and the effects could be
significant. In 2005 the Group recognized an expense of $163 million in relation to the results of tax audits of the Group
companies for periods prior to the 2004 financial year.
The following tables represent average enacted rates for taxes specific to the oil industry in Russia for the respective
periods.
2005*
Change
from 2004
2004*
Change
from 2003
2003*
Export tariffs on crude oil $/tonne 130.62 134.2% 55.77 83.5% 30.40
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Export tariffs on refined products
Light distillates (gasoline), middle
distillates (jet fuel), diesel
fuel and gasoils $/tonne 92.26 143.2% 37.93 38.6% 27.36
Liquid fuels (fuel oil) $/tonne 52.73 43.9% 36.64 33.9% 27.36
Excise on refined products
High-octane gasoline RUR/tonne 3,629.00 8.0% 3,360.00 12.0% 3,000.00
Low-octane gasoline RUR/tonne 2,657.00 8.0% 2,460.00 12.3% 2,190.00
Diesel fuel RUR/tonne 1,080.00 8.0% 1,000.00 12.4% 890.00
Motor oils RUR/tonne 2,951.00 8.0% 2,732.00 12.0% 2,440.00
Mineral extraction tax RUR/tonne 1,876.26 78.2% 1,052.76 31.4% 801.44
* Average values.
Tax rates set in rubles and translated at the average exchange rates for respective periods are as follows:
2005*
Change from
2004
2004*
Change from
2003
2003*
(in USD dollars per tonne)
Excise on refined products
High-octane gasoline 128.29 10.0% 116.59 19.3% 97.76
Low-octane gasoline 93.93 10.0% 85.36 19.6% 71.36
Diesel fuel 38.18 10.0% 34.70 19.7% 29.00
Motor oils 104.33 10.0% 94.80 19.2% 79.51
Mineral extraction tax 66.33 81.7% 36.51 39.8% 26.12
* Average values.
During 2005 our tax burden rose significantly compared to the previous year. Average crude oil export tariffs increased by
134.2% compared to 2004. Approximately 89% of the increase related to growth of crude oil prices, and the remaining
45% resulted from changes in the duty rate calculations effective June 2004 (see below). Export tariffs on gasoline, jet
fuel, diesel fuel and gasoils increased by 143.2%. Excise on refined products in Russia increased by approximately 10.0%.
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