9 Jun 2022 15:23

State Duma adopts bill on MET tax deductions for oil and ore extraction projects in first reading

MOSCOW. June 9 (Interfax) - The Russian State Duma, in the first reading, has adopted a bill that introduces an increased mineral extraction tax (MET) deduction for Rosneft's Samotlor field; a MET deduction for Evraz on the infrastructure of the Kachkanarsky GOK mining and processing plant; as well as a deduction for extracting multicomponent complex ore containing molybdenum and copper at subsoil plots in the Republic of Khakassia.

The Russian government submitted amendments No. 136059-8 to the Tax Code to the State Duma on June 3.

Rosneft could receive an increased MET deduction for production at the Samotlor field from April 1, 2022, to December 31, 2022, if oil prices exceed the baseline price of $44.20 per barrel during the tax period.

Rosneft already has a deduction for production at the field that was introduced from January 1, 2018, to December 31, 2027, at 35 billion rubles per year. The adopted bill stipulates that the amount of the tax deduction for tax periods from April 1, 2022, to December 31, 2022, inclusive, increase by the tax deduction ratio calculated in millions of rubles.

The explanatory note to the bill indicates that the amendment is necessary in order to maintain the level of oil production at flooded fields.

The bill also introduces a deduction for extracting iron ore, except for oxidized ferruginous quartzite, in subsoil areas within the Kachkanarsky and Nizhneturinsky urban districts of the Sverdlovsk Region, where Evraz's Kachkanarsky GOK mines ore. The tax deduction is valid from January 1, 2023, to December 31, 2026, at more than 10 billion rubles.

In order to receive a tax deduction, a company must invest in the costs to acquire, construct, manufacture, and deliver fixed assets, including mining and mining-related processing facilities. The company must not have purchased the equipment earlier than January 1, 2022, in this case, and the company cannot deduct more than 33% of the expenses for the equipment, as well as for the acquisition, construction, manufacturing, and delivery of fixed assets. The amount of expenses is multiplied by a ratio of 0.33.

The adopted bill also stipulates a MET tax deduction from August 1, 2022, to December 31, 2040, inclusive, for extracting multicomponent complex ore containing molybdenum and copper at subsoil plots located wholly or partially in the Republic of Khakassia. The tax deduction must be for total expenses for purchasing mining equipment and machinery.