28 Aug 2009 12:55

Uzbekistan tightens tax rules for foreign gas partners

TASHKENT. Aug 28 (Interfax) - Uzbekistan looks set to tighten tax rules for the foreign partners of gas production sharing agreements (PSAs).

The Uzbek Senate August 28 passed amendments to the Tax Code, which will oblige foreign partners in new PSAs to pay excise of 25% of customs duty on gas. The lower house of parliament passed the amendments in June.

Only local firms currently have to pay the 25% excise tax.

The new rules will grant foreign partners in existing PSAs a ten-year grace period on the excise tax payments, from the date the PSA was signed.

The Senate also approved a new procedure that unifies the levy of royalties on natural gas, oil and gas condensate produce under PSAs.

Once the new legislation has been enacted, foreign investors participating in PSAs will pay profit tax, land tax, subsurface resource use tax, a tax on the use of water resources and a unified social tax on the same basis as residents of Uzbekistan unless the terms of a PSA stipulate different rates for these taxes.

Three PSAs are in progress in Uzbekistan. Russia's Lukoil has been developing the Kandym group of gas fields in the Bukhara region and exploring in the Ustyurt region under agreements worth more than $2 billion since 2004. The company in 2008 started to develop fields in the Ustyurt and Southern Hissar regions under PSAs worth approximately $700 million.

A consortium of Uzbekistan's Uzbekneftegaz, Lukoil Overseas, Petronas, KNOC and CNPC is developing fields in the Uzbek sector of the Aral Sea under PSAs with an initial value of $100 million.

Uzbekistan owns at least 50% of the three PSAs at the initial stage.

Malaysia's Petronas plans this year to launch two PSA projects worth a total of $1.1 billion in southern Uzbekistan.