Capital Gain Tax on International Oil Companies in Iraq

[MrOptimistic]

Capital Gain Tax on IOCs in Iraq

Posted on 10 February 2014

 

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Many countries impose capital gain tax on individuals, companies and corporations when a profit realized from the sale of assets. National and state legislation often has a large array of fiscal obligations and regulations regarding capital gains, however, these fiscal obligations may vary from jurisdiction to jurisdiction.

In other words capital gain tax is a normal component of taxation systems on both national and international levels, and thus has a significant contribution to the state revenues and fiscal policies. Iraq is no different and should consider doing the same.

In Iraq the signed service contracts provide the IOCs with a possibility to assign (sell) wholly or partly their participating interests as specified by a common clause in the signed contract, “any Company shall have the right to assign any of its Participating Interest, shares, rights, privileges, duties or obligations under this Contract to an Affiliate.” Such right for assignment is subject to and governed by a set of provisions outlined in the signed contract.

Due to the long duration of the contracts (the Term) that extend beyond 20 years, and due to the usual practice of Merger and Acquisition (M&A) in the international petroleum business it is highly probable that IOCs might “farm in” and “farm out” by acquiring, selling or exchange participation interests in the related petroleum field.

The transfer of participation interests between IOCs involves financial transactions or transfer of “asset” ownership between the concerned parties: the buyer and the seller.  This assignment deal may (though highly likely) results in significant realized gain (profit) for the selling party compared to the actual cost (investment) it made as a consequence to its participation in the related upstream petroleum development project.

 This realized gain is known to be “capital gain” and in most countries it is taxable. The “Capital Gain Tax” is imposed on individuals, companies and corporations and in many countries it is imposed in addition to other direct taxes such as “Property/Wealth Tax” and “Income Tax” among others. The percentage of Capital Gain Tax differs according to the taxation systems and fiscal policies across the world.

http://www.iraq-businessnews.com/tag/west-qurna/

[thylocene]

I think that IRAQ are shooting themselves in the foot with this.  It is too early to impose a Capital Gains Tax.  It is just going to frighten companies away. 

[MrOptimistic]

I think that IRAQ are shooting themselves in the foot with this.  It is too early to impose a Capital Gains Tax.  It is just going to frighten companies away. 

I guess it depends on the percentage of the tax. All countries, as far as I'm aware, tax international oil companies. 

The tax will add more revenue to the Iraqi government and they wan't to make as much money from their oil as they can. The revenue should go toward reconstructing Iraq so that it benefits all of Iraq IMO.

[gymrat76541]

If Iraq really wants to see profits they should RV............................

[10 YEARS LATER]

This mob ain't the sharpest bunch of tacks in the box now are they. . . just hope it's smoke.

[sandfly]

THANKS

[unirod]

A real and complete tax law only serves to build the value a country and it's currency....IMO