Federal Law No. 366-FZ as of November 24, 2014, introduced the so called “big tax maneuver” in the oil industry which stipulated:
Gradual growth in Mineral Extraction Tax (MET) on crude oil and gas condensate
MET base tax rate was set for 2015 at RUB 766 per ton (instead of old target RUB 530 per ton), and for 2016 and 2017 at RUB 857 and RUB 919 per ton, respectively. An approach to MET tax benefits calculation was changed as well. The tax benefit (Dm) is determined based on a rate of RUB 530 per ton for 2015 (RUB 559 per ton after January 01, 2016) and a series of adjustment factors. It is then subtracted from the overall tax rate determined as the base MET rate multiplied by pricing coefficient. Therefore, the zero MET rate during oil production for individual regions (the so called tax holidays) and for crude oil with viscosity over 200MPa*c (but below 10000MPa*c) was replaced with a discounted rate. However, the zero MET rate will remain for the oil produced from hydrocarbon deposits classified as Bazhenovsk, Abalak, Hadum, and Domanik layers.
MET on gas condensate is calculated taking into account the adjustment factor.
Reduction of the maximum export customs duty rates for crude oil and oil products
In 2015, K coefficient in the formula defining the maximum total export customs duty rate for crude oil is set at 42%, if average Urals oil price (oil) in the global markets exceeds USD 182.5 per ton {Rate (total) = К × (oil - 182.5) + 29.2} . This is below the previous target coefficient value (57 %). K value in 2016 remains at the 2015 level (42 %), while it will be reduced to 30 % starting from 2017.
Furthermore, the formula defining the maximum discounted customs duty rate for crude oil with special physico-chemical characteristics was changed. The new formula provides for the following determination of the discounted export duty rate: Rate (reduced) (above zero) = (oil – 182.5) × К - 56.57 - oil × 0.14. Maximum export customs duty rates were also set by law for certain oil refining products (percentage of the export duty rate for crude oil).
Reduction of the excise rates on oil products versus previous target excise rates stipulated by law
| Types of excisable goods | New excise rates for 2015 (RUB per ton) |
Previous target excise rates for 2015 (RUB per ton) |
|---|---|---|
| Gasoline | ||
| non compliant with Classes 3, 4, and 5 | 7,300 | 13,332 |
| Class 3 | 7,300 | 12,879 |
| Class 4 | 7,300 | 10,858 |
| Class 5 | 5,530 | 7,750 |
| Diesel fuel | ||
| non compliant with Classes 3, 4, and 5 | 3,450 | 7,735 |
| Class 3 | 3,450 | 7,735 |
| Class 4 | 3,450 | 5,970 |
| Class 5 | 3,450 | 5,244 |
| Straight run gasoline | 11,300 | 13,502 |
| Motor oils | 6,500 | 9,086 |
| Heating gas oil | 3,000 | 7,735 |
| Jet fuel | 2,300 | - |
| Benzene, paraxylene and ortoxylene | 2,300 | - |
Introduction of a “negative excise” for certain oil products
2015 coefficients
applicable to the accrued amount of excise and determining an increased excise deduction:
- 1.37 for straight run gasoline;
- 2.88 for benzene, ortoxylene, and paraxylene; and
- 2 for jet fuel.
Increased deductions (the so called negative excise) were applied by law to straight run gasoline, benzene, ortoxylene, paraxylene, jet fuel.
Furthermore, the Russian Tax Code was complemented by the provisions of the Federal Law No.376-FZ as of November 24, 2014, governing the income tax imposed on foreign companies controlled by Russian entities and foreign entities income. These amendments particularly outline the conditions for determining a controlled foreign company; criteria for taxation procedure and a basis for tax exemption for a controlled foreign company; liability for non-payment (incomplete payment) by a controlling person of the tax accrued on the controlled foreign company’s income. The Tax Code was also amended with the definitions of fiscal residence of legal entities and beneficiary owner of income.
