16th Jul 2014 15:15
LONDON (Alliance News) - Tullow Oil PLC said Wednesday it plans to challenge an assessment from the Tax Appeal Tribunal in Uganda relating to capital gains tax, although it hopes that further direct negotiation with the Ugandan government can resolve the matter.
Tullow said the tribunal has ruled against it on the express tax emption contained in the production sharing agreement for its Exploration Area 2.
The tribunal has calculated Tullow's capital gains tax liability to be USD407 million, of which Tullow has already paid USD142 million. Tullow believes the amount it has already paid exceeds its liabilities relating to its EA1 and EA3A exploration areas. It may wish to challenge specific points in the ruling relating to these two areas, it said.
However, a specific exemption was included in the EA2 PSA area, and Tullow said it was "extremely disappointed" the Tribunal had ruled that the then Minister of Energy did not have the legal authority to grant the exemption.
Tullow said it believes the tribunal has "erred in law" and intends to challenge its assessment on this exemption through the Ugandan courts and international arbitration. It considers, based on external legal advice, that an international arbitration tribunal would award in its favour.
"Tullow is very concerned by this ruling which ignores a contractual term signed by a government minister in Uganda. Tullow is Uganda's largest foreign investor and a major taxpayer," Chief Executive Aidan Heavey said in a statement.
"Over the last 10 years, Tullow has spent USD2.8 billion in Uganda and discovered 1.7 billion barrels of oil. This money was spent by Tullow on the understanding that our contracts with the government, which contained important incentives to invest that were vital at a time when no oil had been discovered in Uganda, would be honoured," Heavey added.
Shares in Tullow were trading down 1.7% at 776.97 pence late Wednesday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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