6 Feb 2023 17:33

Russian gov't commission approves MET tax deduction of 79.2 bln rubles for Yamal projects - source

MOSCOW. Feb 6 (Interfax) - Russia's government legislative commission on Monday approved a tax deduction of 1.1 billion rubles per month (79.2 billion rubles for the entire period) for Gazprom Neft from April 1, 2023 to March 31, 2029 with refund from April 1, 2029 to March 31, 2035, a source familiar with the preparation of the bill told Interfax.

The relevant draft bill was prepared by the Finance Ministry at the instruction of Prime Minister Mikhail Mishustin, the source said. The Presidential State-Legal Directorate had no conceptual legal comments on the document. The bill has been agreed with the Energy Ministry, the Economic Development Ministry and the Natural Resources Ministry, they said.

According to the text of the draft bill, MET tax deductions can be claimed by taxpayers participating in the implementation of projects for construction of transport infrastructure within development of hydrocarbon deposits in subsoil areas located fully or partially to the west of 68 degrees east longitude within the Yamal region of the Yamalo-Nenets Autonomous District, with initial recoverable reserves of combustible natural gas in each amounting to or more than 1500 billion cubic metres as of January 1, 2020.

"The bill is aimed at granting Gazprom Neft a tax credit to finance the construction of infrastructure for the transportation of liquid hydrocarbons produced on the Yamal Peninsula - the Bovanenkovskoye and Kharasaveyskoye gas and oil condensate fields," the source explained.

The tax credit will be refunded by the company in the period from April 1, 2029 to March 31, 2035, inclusive, in an amount equal to the amount of the tax deduction received, indexed by 9%.

The tax deduction will have to be refunded by the company in the period from April 1, 2029 up to and including March 31, 2035, in an amount equal to the amount of the tax deduction received, indexed at a rate of 9%.

At the same time, according to the source, the bill establishes restrictions on the application of the tax deduction, and it will not be granted at oil prices below or equal to the cut-off price, proposed at $45.04 per barrel in 2023 (with subsequent annual indexation of 2% from 2024). No deduction will be given if the price of oil in the tax period is above the cut-off price plus $27.55.