On 28 February 2013 the Ministry of Finance published a draft act on a special hydrocarbon tax. The draft sets out the rules of taxation of revenue from the extraction of petroleum and natural gas (hydrocarbons). Above all, the hydrocarbon tax will be paid on the extraction of shale gas.
The new tax is similar to income tax, where the basis for taxation is the difference between revenue and costs, defined by the draft act as qualified expenditures. It is important to note that the new tax does not replace income tax. This means that entities involved in the extraction of hydrocarbons will be subject to both taxes. Income tax will, however, constitute a qualified expenditure which will reduce the basis for taxation with the hydrocarbon tax.
The following are the most important aspects of the hydrocarbon tax:
- revenue is defined using the cash method (the accrual basis will be applied to receivables not settled within 3 months of delivery);
- if remuneration for the sale of hydrocarbons is below 90% of the average market price in the given month, the revenue shall be appropriately increased to the value resulting from the application of 90% of the average price;
- qualified expenditures are recognised using the cash method;
- there is a wide range of expenditures which are not qualified expenditures, e.g. expenses for purchasing intangible assets, insurance premiums, interest for financing, as well as other expenditures that do not constitute tax-deductible costs;
- no time or quantitative limits for utilisation of tax losses;
- the tax rate is 12.5% if the ratio of aggregate income (i.e. from the commencement of the business activity) to aggregate qualified expenditures is higher than 1 but lower than 2, or 25% if this ratio is higher than 2.
The act also introduces amendments to the act on corporate income tax (including shortening of the depreciation period for boreholes to 60 months) as well as other acts.
The proposed act is currently at the interdepartmental negotiation stage, which means that its content may change before the legislative stage. The new law is supposed to enter into force on 1 January 2015.