Romania to introduce new taxes on onshore and offshore exploration

Bucharest - Palace of the Parliament
Source: DollarPhotoClub

The Government of Romania will develop a new method of taxation on hydrocarbon extraction. The new tax proposals, however, will have no influence on current contracts – the country’s Prime Minister, Victor Ponta said.

The tax rate on the profits from oil and gas excavation is currently between 3 and 13.5 per cent, depending on the amount extracted. It does not, however, reflect the difference in costs between onshore and offshore extraction of oil and gas. The new tax law is to be passed in November this year, after the presidential elections.

The Romanian Government has had extensive talks with the International Monetary Fund to revamp its royalty system while taking care not to make investment prohibitively expensive, Finance Minister Ioana Petrescu said in April.

“On a European and global level, one cannot have the same royalty tax for offshore and onshore because there are huge differences in investment and profit,” Ponta told reporters.

“We are working on a differentiated system that will keep offshore exploitations profitable,” he said, adding “the law and international practice are very clear, one cannot enforce a new law for old agreements or … we would lose resulting lawsuits.”

The head of the National Bureau of Mineral Resources, Gheorghe Dutu reported that some of the current concessions and licenses would expire in the next 5-7 years.

Mr Dutu said that the new tax law will introduce different levels of taxation on onshore, offshore and deep offshore extraction, while making sure that the levies are low enough to attract investors.

“One option is to overtax the profit for strong fields, but we are still working on the system,” Mr Dutu said.

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