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Table 4. Energy Related Taxes in Russia and Azerbaijan
AZERBAIJAN
RUSSIA
CONTRIBUTIONS
FOR THE
REPLACEMENT OF
THE MINERAL
BASE
Not applicable. Azerbaijan has no such
contributions
Mineral Replacement Tax was abolished from January 1,
2002 due to the introduction of the Mineral Extraction Tax
(Chapter 26 of part II of the Russian Tax Code)
ROYALTY
Types of Licence
Only the state entities and joint stock
companies where a controlling interest is
owned by the state can extract oil and gas
in Azerbaijan. No licence is required to
be obtained by such entities. In respect of
the extraction of other mineral resources,
no licence is required.
1- Right to explare and appraise deposits.
2- Right to prospect deposits.
3- Right to produce commercial minerals.
Tax Payers
All companies and individuals engaged
in the extraction of mineral resources in
Azerbaijan.
Royalty was abolished due to the introduction of the
Mineral Extraction Tax
Object of Taxation
Mineral resources extracted in
Azerbaijan.
Royalty was abolished due to the introduction of the
Mineral Extraction Tax
Tax Base
Product’s wholesale price.
Royalty was abolished due to the introduction of the
Mineral Extraction Tax
Tax Rate
Oil -26%; gas-20%; other minerals-3%
to 10%
Royalty was abolished due to the introduction of the
Mineral Extraction Tax
MINERAL
EXTRACTION TAX
None.
Tax Payers: Enterprises and private entrepreneurs which
are users of subsurface resources.
Object of Taxation: Commercial minerals extracted from
the sub-surface and recovered from mining waste (losses).
Tax Base: The value of extracted commercial minerals,
determined separately for each type of extracted
commercial minerals.
Tax Rate: Effective2009: 0% normative losses of
commercial minerals, natural fuel gas from oil deposits,
associated petroleum gas from oil deposits; 16,5%– oil and
17.5% of value of extracted gas condensate. Transitional
rules from 2004 up to December 31, 2006: 419 RUR per
tonne with the application of a correction index which is
I=(P-9)*R/261,where P is the average market price of
Urals blend crude oil; R is the average quarterly RUR/
USD exchange rate established by the Central Bank. From
2004: 147 roubles per 1000 cubic meters of extracted
natural gas, 0 RUR for associated gas.
EXCISE DUTY ON
OIL
Not applicable. Azerbaijan has no excise
levy on crude oil.
Not applicable. Russia has no excise levy on crude oil.
Excise duty on oil and gas condensate was abolised from
January 1, 2002 due to the introduction of chapter 26 of
part II of the Russian Tax Code.
EXCISE DUTY ON
NATURAL GAS
Not applicable. Azerbaijan has no excise
levy on naturel gas or gas condensate.
Abolished effective 2004.
EXCISE LEVY ON AUTOMOBILE FUEL
Tax Payer
Persons producing and importing fuels
Enterprises which sell and/or transfer excisable fuel.
Object Of Taxation
Supply, transfer to customers, import and
export of products. Oil distillates (light,
medium, heavy), oil and other products
produced from hydrocarbon distillation.
Other products produced from crude oil
and bituminous minerals.
Petrol or diesel fuel sold (transferred).
Tax Base
Weight of oil products.
Volume of fuel sold (transferred).
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Tax Rate
150 - 400 Azeri manats per tonne.
For petrol of up to 80 octane-RUR 2,657 per tonne; for
petrol of more than 80 octane-RUR 3,629 per tonne; for
diesel fuel-RUR 1,080 per tonne, oil for diesel and
carburretor engines -2 951 RUR per 1 tonne; straight-run
perol - 2 657 RUR per tonne.
VAT
18%
(on goods sold and services rendered
within Azerbaijan, including imported
goods).
18%-basic rate; 0%- export of goods; 10% -sale of certain
food products, children’s goods, certain periodic
publications and related services, specific medical goods
both of domestic and foreign origin; 9,09% and
15,25%(tax-inclusive rates)-rates for VAT withholding
from income of foreign taxpayers.
SALES TAX
None
Abolised effective 2004
PROPERTY TAX
1%
(average annual residual value)
2.2%
maximum rate which may be set by the regional
government.
TURNOVER TAXES
(Road Users Tax,
Housing Tax,
Emergency Fund
Contribution)
None
None
EXPORT DUTY
None
Various, for crude oil and crude oil products – currently
USD 160.8 per tonne (March 2006), For Gas 30 % of
customs value, 0 for LNG
IMPORT DUTY
0 – 15 % of the customs value of
imported goods.
Various.
TAX ON THE SALE
OF FUEL AND
LUBRICANTS
None
None
Source: ITIC , The Taxation Systems, Investment Regulation and Economic Development in Select Countries of Eurasia, ITIC
Special Report, March 2005, p.20-23. and ITIC, Some Fiscal Parameters of the Investment Climate in Select Countries
of Eurasia, ITIC Special Report, May 2006, p.14-19.
The importance of the oil sector in the
economies of Russia and Azerbaijan has been
growing in recent years. Actual tax revenues from
the oil sector in these countries, however, have
been low compared with major export importers.
Low tax revenues mainly resulted from
infrastructure constraints on oil exports, upheaval
in the countries corporate sectors, weak tax
administration, and inappropriate tax structures
which emphasized production-based levies and
export duties.
1
In Russia the current regime applied to oil has
three major components: Mineral extraction tax,
Export Duty and Profit Tax. In addition, there are
tax costs associated with delays to value-added tax
(VAT) refunds for exporters, and additional taxes,
for example the assets tax and import duty.
However, the three listed levies are the key
elements of government take in the upstream
petroleum sector.
2
1
Vahram Stephanyam, “Reforming Tax Systems: Expe-
rience of The Baltics, Russia and Other Countries of
Former Soviet Union”, IMF Working Paper, WP/03/173,
September 2003, p.13.
2
Daniel & Fernando (2004), p. 11-12.
In Azerbaijan energy-oil related tax system
have three major taxes: Excise Levy on
Automobile Fuel, VAT and Import Duty. There
are no Mineral Extraction Tax, Excise Duty on Oil
and Natural Gas, Turnover Taxes and Export
Duty. Table 4 clarifies the rules and practices of
energy-oil related taxes in detailed.
An excessive tax burden on oil and gas
production has curtailed new investment in the
energy sector. In particular, the oil and gas tax
regime has relied primarily on revenue-based and
production taxes, such as excises, royalties, and
export duties. Two reform efforts to rationalise oil
and gas taxation are under way. One effort is to
provide for a more profit-based tax regime
through production-sharing agreements. The other
effort is to amend the existing tax legislation to
replace the production-based excise tax with a
surtax on profits.
3
In Russian case, there are some
distortions introduced by the system:
4
3
OECD (2001), p.23.
4
Daniel & Fernando (2004), p.12.
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