Tunisia oil and gas report - Freshfields

either in kind or in cash to the GrantingAuthority in accordance with the terms ofthe Specific Agreement. The method ofcalculating the royalty payable is based onthe ‘R’ ratio (see Petroleum Income Taxbelow). The royalty rate is divided intoseven tiers for oil and nine tiers for gas,which range from 2 per cent to 15 per centdepending on the R value determined.• Petroleum Income Tax (Article 101.3 ofthe Tunisian Hydrocarbons Code) – tax ispayable on net income from oil and gasproduced based on the ratio of accruednet earnings to accrued totalexpenditures for each exploitationconcession (the R ratio). Net income fromoil is taxed at a rate of 50–75 per cent.Net income from gas is taxed at a rate of50–65 per cent. A 50 per cent tax rateapplies to both oil and gas if ETAP hastaken a stake of 40 per cent or more inthe relevant concession.• Petroleum Annual Tax (Article 101.1.2 ofthe Tunisian Hydrocarbons Code) – this isa fixed annual tax for every hectare ofland included in an exploitation concessionequal to the hourly minimum wage of anordinary worker (ie $1/hectare). This tax isequal to five times the hourly minimumwage of an ordinary worker per hectarefor inactive or non-exploited concessions.This tax is payable annually (30 June)during the entire term of a concession.• Fixed tax (Article 101.1.1TunisianHydrocarbons Code) – this tax is equal tothe hourly minimum wage of an ordinaryworker for every full elementaryperimeter (an area of 4km2) to which anexploration permit, prospecting permit orexploitation concession has been granted.This tax amounts to approximately$195 per perimeter and does not apply toprospecting authorisations. This tax is aone-off payment that must be paidwhenever a new permit/concession isgranted, an existing permit/concession isrenewed or the area for prospecting/exploring/exploiting is extended.In addition, under the PSA Regime:• a fixed percentage of production (cost oil)is allocated to the contractor for therecovery of costs incurred under the PSA(including, where relevant, costs incurredunder a prospecting permit). Thepercentage is specified in the PSA and is50 per cent for oil and 55 per cent for gas;• the remaining production (profit oil) isshared between ETAP and the contractoraccording to the terms of the PSA and theSpecific Agreement based on the R ratio:—— for oil, the split varies from 65–85 percent for ETAP and 35–15 per cent forthe contractor;—— for gas, this split varies from 55–75per cent for ETAP against 45–25 percent for the contractor; and• ETAP (as owner of the petroleum assets) isheld liable for the payment of theregistration fee, royalty, petroleumannual tax and the fixed tax. Thecontractor is liable for the PetroleumIncome Tax, but this is deemed to havebeen paid when the contractor deliversETAP its profit oil share. The contractorremains otherwise subject to the generaltax regime applicable to entitiesoperating in Tunisia.Local content requirementsThe Tunisian Hydrocarbons Code has localcontent requirements specifically set out inArticle 62.2. Under the Code, the permitholder or contractor must hire, as a matterof priority, Tunisian employees, as long asthis is compatible with the properaccomplishment of its activities.The permit holder or contractor must alsotrain the Tunisian personnel in allspecialisms as required by his activities, inaccordance with a training plan that issubject to Granting Authority approval.4 Freshfields Bruckhaus Deringer llpTunisiaMarch 2013