Israel's finance ministry approves model for taxation of gas exports
Jerusalem (Platts)--26Nov2014/914 am EST/1414 GMT
Israel's finance ministry has approved a proposed model for gas export tax, Finance Minister Yair Lapid said on Tuesday.
The draft was prepared by a finance ministry team of experts headed by Finance Ministry director general Yael Andorn. Lapid said in a statement that the draft proposal was approved by the ministerial committee on legislation. The proposal will now be presented to the Knesset for final approval in the coming weeks.
The proposal calls for a netback model for determining the transfer price for taxation purposes on exports. The state would determine the expected profit for each export deal and then subtract the accepted return on investment on this kind of transaction. In addition, a mechanism would be established to guarantee that the gas price in export deals is not lower than the average price in the domestic market.
In March 2011, the Knesset passed a new tax law for the oil and gas sector, which was based on the recommendations of a finance ministry appointed committee. The committee, however, left open the issue of taxation on exports.
The law raised the government's share of tax from oil and gas production, for the local market, from less than 30% prior to the new law to 52-62%. In addition, the law includes a tax on profits -- ranging from 20% to a maximum of 50% -- accelerated depreciation and a lower level of taxation on oil and gas fields that begin production by 2014, retaining the 12.5% royalty tax and cancellation of the depletion allowance.
The issue of exports has become relevant after the signing in the past year of letters of intent for gas sales to customers in Egypt, Jordan and the Palestinian Authority. Last year, the Israeli government approved the export of up to 40% of the country's offshore gas resources.
--Neal Sandler, newsdesk@platts.com
--Edited by Geetha Narayanasamy, geetha.narayanasamy@platts.com
Similar stories appear in Natural Gas Alert See more information at http://www.platts.com/products/natural-gas-alert
The draft was prepared by a finance ministry team of experts headed by Finance Ministry director general Yael Andorn. Lapid said in a statement that the draft proposal was approved by the ministerial committee on legislation. The proposal will now be presented to the Knesset for final approval in the coming weeks.
The proposal calls for a netback model for determining the transfer price for taxation purposes on exports. The state would determine the expected profit for each export deal and then subtract the accepted return on investment on this kind of transaction. In addition, a mechanism would be established to guarantee that the gas price in export deals is not lower than the average price in the domestic market.
In March 2011, the Knesset passed a new tax law for the oil and gas sector, which was based on the recommendations of a finance ministry appointed committee. The committee, however, left open the issue of taxation on exports.
The law raised the government's share of tax from oil and gas production, for the local market, from less than 30% prior to the new law to 52-62%. In addition, the law includes a tax on profits -- ranging from 20% to a maximum of 50% -- accelerated depreciation and a lower level of taxation on oil and gas fields that begin production by 2014, retaining the 12.5% royalty tax and cancellation of the depletion allowance.
The issue of exports has become relevant after the signing in the past year of letters of intent for gas sales to customers in Egypt, Jordan and the Palestinian Authority. Last year, the Israeli government approved the export of up to 40% of the country's offshore gas resources.
--Neal Sandler, newsdesk@platts.com
--Edited by Geetha Narayanasamy, geetha.narayanasamy@platts.com
Similar stories appear in Natural Gas Alert See more information at http://www.platts.com/products/natural-gas-alert
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