Government on Monday revealed it had settled a tax dispute with oil firms, clearing the way for Tullow Oil to revive plans to sell a stake in its assets and allow the firms to move to a final decision on development.
The government has been locked in a tax dispute with the oil firms, including Total and CNOOC, over the taxes assessed on Tullow’s plans to sell part of its stakes in the oil fields.
Tax disputes have been around: Capital Gains Tax on the Tullow Oil farm down, the treatment of $617 million exploration costs that Tullow Oil incurred, and the stipulation within the Income Tax Act that places a cap on allowable deductions for Corporate Income Tax purposes.
Hanns Kyazze, a communications specialist at the ministry of energy and mineral development, said the government had offered the companies a deal to end the dispute- Reuters reported
In meeting held at State House on October 31 chaired by President Museveni, government tabled to the oil companies a raft of offers, most of which were to facilitate the conclusion of the sale of Tullow Oil’s stake in Uganda to France’s Total E&P and China’s Cnooc.
‘‘Government agreed to the oil pipeline company being incorporated in the United Kingdom, plus to international arbitration. However, it has insisted that the laws of Uganda will govern the Host Government Agreement for the pipeline. Government also agreed to waive withholding tax on the dividends that the oil companies might wish to repatriate back to their home countries. ‘’ the Observer reported
‘ ‘When it came to the issue of local content, the oil companies say there are a number of skills and equipment that Uganda lacks, which are needed for the construction of the pipeline.The companies requested that some special contracts and recruitment of staff should not be advertised in the media. During the meeting, the government was not too clear on this request, but said some sort of advertisement needs to be agreed to.’’
“They (firms) have now accepted that proposal and are moving on to ensure that package of proposed terms is operationalised,” Kyazze said
Commencement of commercial production has been repeatedly delayed by a disputes over taxes, including the latest one, and disagreements over field development strategy.
With the tax dispute settled, the government expected the firms to reach a final investment decision, sign a $3.5bn Final Investment Decision for the crude oil pipeline early next year