Practical Tax Issues Arising in the Course of Russian Arctic Shelf Projects
Article by Andrei Panin Andrey Panin, Partner, Tax & Legal, Deloitte CIS, was published on the website of the Russian independent information-analytical network edition PRO-ARCTIC, dedicated to responsible and the rational development of resources in the Russian Arctic.
The global community calls the 21st century the "Arctic Century." Economic, military, political and scientific interest in the Arctic is growing as Arctic ice is shrinking. Unlike the Antarctic, the Arctic zone has no special legal regime set by a special international convention. Currently, the Arctic nations (Russia, the United States, Canada, Denmark and Norway) have not signed any document regulating activity in the region, limiting themselves to a number of international declarations.
On 30 September 2013, Russian President Vladimir Putin signed law No. 268-FZ, encouraging hydrocarbon production on the Russian continental shelf. This law came into effect on 1 January 2014. Essentially, the law created a special tax regime for continental shelf hydrocarbon production projects. The law introduced a number of terms and definitions to Russian legislation that provide the basis for the legal regulation and taxation of offshore natural resource production, and a number of specific rules for the assessment of taxes on offshore operations (profit tax, VAT, MET, etc.). At the same time, the law left a number of issues unresolved, including some legal and taxation issues for Russian and foreign contractors and subcontractors participating in Russian offshore projects, a number of features in the accounting for income and expenses by participants in offshore operations and questions on transfer pricing.
Read also on the PRO-ARCTIC_legislation (in Russian)