3 Feb 2023 16:48

Gazprom and its subsidiaries could be exempted from elevated 34% profit tax for LNG exporters - source

MOSCOW. Feb 3 (Interfax) - The Finance Ministry has developed amendments to the Tax Code which will exempt Gazprom and its subsidiaries from the increased profit tax of 34% introduced from January 1, 2023 for all LNG exporters, a source familiar with the document told Interfax.

This concerns the amendments prepared for the second reading of the bill (N260062-8) which will take place next week in the State Duma, the source said.

The source recalled that on January 1, 2023, for a period of three years, the profit tax rate was increased from 20% to 34% for those LNG exporters which have already exported gas and have a license for the exclusive right to export gas. According to the Law on Gas Exports, the exclusive right to export LNG shall be granted to the owner of an integrated gas supply system or its subsidiaries, in the authorized capital of which an organization owning the unified gas supply system has a 100% stake [meaning Gazprom]; a number of state companies operating on the shelf with more than 50% of Russian equity capital; private companies (and their subsidiaries with capital over 50%) which as of January 1, 2013 were issued a license providing for construction of gas processing plants. The right to export LNG was granted to private companies as of November 1, 2013.

The amendments developed by the Finance Ministry suggest clarification of the category of companies subject to the increased rate: these are the companies specified in Clause 2, Part 1, Article 3 of the Federal Law on Gas Exports, namely subsurface users at subsurface sites of federal significance, the subsurface license to which as of January 1, 2013 provide for construction of an LNG plant or delivery of extracted natural gas in a gaseous state for liquefaction to a liquefied natural gas plant which produces natural gas in a liquefied state from natural gas in a gaseous state extracted in the above subsoil areas of federal significance or in other subsoil areas of federal significance whose subsoil use licenses were issued to the above subsoil area users after January 1, 2013

According to the text of the bill, the elevated rate will not apply to other companies which have the right to export LNG, with this norm to be applied to legal relations arising starting on January 1, 2023.

Among private companies, Novatek has large LNG projects (Yamal LNG, Arctic LNG). Gazprom has the Sakhalin-2 PSA project.

The bill is scheduled for a second reading at next week's plenary session of the State Duma.