On 18 June 2014, the Minister for Communications, Energy and Natural Resources advised that he has sought agreement from the Government for the fiscal terms for petroleum exploration and production in Ireland to be revised upwards to provide for an increased financial return to the State. The new fiscal terms would apply to discoveries made under future exploration licences and licensing options. There would be no retroactive changes to the fiscal terms applying to existing exploration authorisations.
Under the proposed revised fiscal terms, a form of production profit tax would continue to apply but the form of this tax would be revised and the rates would be higher than the Profit Resource Rent Tax (“PRRT”) currently in place. The corporation tax rate applying to petroleum production would remain at 25%. The current PRRT rate varies from 0% to 15% depending on the profit ratio of the field, with the total tax take from a field rising to a maximum of 40%. The most significant proposal would see the introduction of a minimum production profit tax of 5%, which would effectively function as a royalty from a field that is selling production, and a maximum overall rate of 55% in the case of new licences.
The announcement follows the receipt by the Minister of expert advice on the fitness for purpose of Ireland’s petroleum fiscal terms. Wood MacKenzie was engaged to provide the advice. The Minister’s announcement, and the Wood MacKenzie report, can be found on the Department of Communications, Energy and Natural Resources website: