President finally signs regulation on tax system for gross split scheme
Friday, December 29 2017 - 01:42 AM WIB
The Ministry of Energy and Mineral Resources said in a statement on Thursday that the signing of the regulation received positive response from upstream investors. Deputy Minister of Energy and Mineral Resources Arcandra Tahar told reporters on Thursday that the contents of the regulation are the same with draft proposed by the ministry and are in line with the expectations of the upstream industry players.
The new regulation promises a number of incentives for upstream oil and gas activities applying the new gross split production sharing contract. The government introduced earlier this year the new gross split scheme, under which expenses of the upstream oil and gas contractors are no longer reimbursed by the government in exchange for greater production split. The gross split scheme, to be applied in new oil and gas contracts, replaces the previous cost recovery scheme where expenses are reimbursed by the government. Upstream investors in the country have been waiting for the president to sign the gross split scheme tax regulation to ensure certainty of their investment under the new gross split scheme.
Among of the incentives provided under the new Government Regulation No 53 is the extension of the tax loss carry forward in upstream activities to 10 years. Under the current Law No 36/2008, the tax loss carry forward is limited to five years only. Another tax incentive is regarding indirect tax, which according to Arcandra, oil and gas contractors will not have to pay the tax until they obtain the first oil.
Chapter 6 of the new regulation also stipulates that operating expenses of the contractors during exploration and exploitation activities as well as in ?other categories? can be used as deducting factor in their income tax.
Aside from the above tax incentives, Arcandra said that oil and gas contractors applying the gross split scheme contract will be entitled to additional output split depending on the economics of their respective projects, which will be later stipulated under a new ministerial regulation to be soon issued by the Ministry of Energy and Mineral Resources.
Meanwhile, chapter 25 of the new gross split tax regulation explains various fiscal incentives to be given to oil and gas contractors during exploration and exploitation stages including exemption of duty and taxes in the import of goods and equipment for operational activities.
The ministry said in the statement that following the signing of the gross split tax regulation, a number of investors have finally submitted their bid documents to the ministry over 15 oil and gas blocks offered by the government via tender this year. The deadline for the submission of the bid document has now been set for December 31. The deadline has been delayed a couple of times as investors await the new gross split tax regulation.
Elsewhere, Archandra said that that PT Pertamina Hulu Energi ONWJ, which applied the gross split scheme in its new contract over the Offshore North West Java (ONWJ) block signed in January, will also be entitled to the various incentives offered under the new regulation.
Editing by Reiner Simanjuntak