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NRF to collect production bonuses and profits from Oil Company

Jan 05, 2020 News

The Natural Resource Fund (NRF) legislation, an Act which was established to manage the natural resource wealth of Guyana for the present and future benefit of the people will collect several forms of bonuses and profits that will be acquired from the oil company.
The fund is for the sustainable development of the country, and for connected matters.
Previously, Guyana with ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), and its two international partners, Hess Corporation and China’s CNOOC/NEXEN, allowed for all of its foreign subcontractors to enjoy a range of tax exemptions.
These subcontractors are exempt from Value Added Tax (VAT) and import duties on all equipment and supplies.
Recently Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia, revealed that it is predicted that the significant number of concessions granted to the oil sector will be reduced “very soon” to make way for the introduction of a system of tax credits.
He was at the time addressing concerns about the authority’s Tax Exemption Unit, which was stretched thin even before the new pressures that came with monitoring oil concessions.
The NRF has now accelerated all bonuses that relates to the production operations or the award of a petroleum license would be deposited into the fund.
Any capital gains charged on companies or individuals undertaking production operations would also be placed into the fund. However, the provision does not apply to the ExxonMobil’s Stabroek Block Contract which allows the Oil Company and its affiliated partners to be exempted from the tax.
Due to the stabilisation clause under the rigid economic equilibrium clause, future changes in law would apply to the investor, while the host State would secure the investor for its compliance with the new legislation; however, the Exxon’s Stabroek Block contract will be protected from the provision when it is implemented by the authorities in the future.
Excess money from the mining and forestry sectors will go towards the NRF, the law does not make this an absolute necessity as it states that the Ministry may deposit same into an account at the US Federal Reserve Bank.
The VAT collected on inputs or outputs on production operations, customs duties collected on inputs into production operations, applicable statutory fees collected by the regulatory agencies and withholding tax on payments made to contractors by the companies or individuals undertaking production operations will not be considered as part of the petroleum revenue and will not be included in the fund.

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