ENERGY

Saudi Arabia lowers tax on Aramco from 85% to 50%

The Saudi Press Agency said the royal order to impose income tax on producers of oil and hydrocarbons. (Shutterstock)

The Saudi Press Agency said the royal order to impose income tax on producers of oil and hydrocarbons (oil and gas) in the Saudi kingdom has been issued.

The tax will be as follows:

50% to be imposed on producers whose total invested capital in the kingdom exceeds 375 billion SAR ($100 billion).

65% to be imposed on producers whose total invested capital in the kingdom exceeds 300 billion SAR ($80 billion) and reaches the maximum of 375 billion SAR ($100 billion).

75% to be imposed on producers whose total invested capital in the kingdom exceeds 225 billion SAR ($60 billion) and reaches the maximum of 300 billion SAR ($80 billion)

85% to be imposed on producers whose total invested capital in the kingdom does not exceed 225 billion SAR ($60 billion)

Al-Rajhi Capital’s head of research Mazen al-Sadeeri told Al Arabiya that “the decision comes as a start to find a tax system for the first time in Saudi Arabia – starting from the most important sector, oil and gas.”

Al-Sadeeri said that he is expecting this decision to have an impact on investment regulation in the energy sectors, especially the state’s intention to sell shares of oil company Aramco.

A cut in the tax paid by Aramco to the government will not hurt state finances and is in the strategic interests of the kingdom, Saudi Arabia’s Finance Minister Mohammed al-Jadaan said on Monday.

“Any tax revenue reductions applicable to hydrocarbon producers operating in the kingdom are replaced by stable dividend payments by government-owned companies, and other sources of revenue including profits resulting from investments,” he said in a statement.

A royal decree retroactive to Jan. 1 set an income tax rate of 50 percent for Saudi Aramco. Previously, the company had paid 85 percent, according to Saudi officials.

The cut in income tax to 50 percent from 85 percent brings the company in line with international benchmarks, chief executive Amin Nasser said in a statement on Monday

The tax cut appeared designed to facilitate a planned initial public offer of shares by Aramco next year, which is expected to be the world’s largest equity offer.

Aramco currently pays a 20 percent royalty and 85 percent tax to the government, Saudi officials have said.

(With Reuters)

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Last Update: Monday, 27 March 2017 KSA 15:51 - GMT 12:51
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