The impact of the oil price crash and COVID19

Despite the improving conditions around COV19 the financial impacts in oil, gas and chemicals is still being felt.  We expect a further decrease in oil demand globally in April before a slow recovery through the rest of 2020.  China will likely recover faster however as oil and gas are global commodities it will not be immune to these global dynamics.

To manage through this price crisis and pandemic all business units must do their part to preserve cash, reduce cost and continue to operational performance.  A few things we would highlight are below with a greater focus on what you should do today:

Short term cash flow and cost reductions (90 days)

• Government grants and incentives – trillions of dollars of stimulus packages have been released in China and around the world.  Benefits range from business interruption claims, loans, employee wage payments, cancellation/deferral of taxes, and other tax credits. See link below for more info.
• Tax instalments – revised economic forecasts will allow for reduced or deferred tax instalment payments.
• Contract reviews- due to unforeseen circumstances force majeure clauses may apply which may change the contractual nature of many agreements
• Employee costs – the lack of mobility, trapped employees and allowances and related employee and employer tax costs.

Medium Term (3-6 months)

• Transfer pricing adjustments to deal with lower earnings expectations.
• Refunds of ITC's and settling tax disputes to collect cash and manage outflows.
• Planning for losses (how to minimize, how to utilize within a country or region and offset other taxable entities)
• PE and tax residency – increased risks of PE issues and tax residency due to difficulty on holding offshore board meetings.

Long term (6 months plus)

• Supply chain changes; combining with BEPS changes
• Delivery centers, tax operations transformation, and outsourcing models to reduce operating costs
• Technology & innovation
• M&A opportunities

For more information visit our websites or contact your local Deloitte professional.  Two key links are:

Deloitte Tax Atlas COVID-19 Tax and Fiscal Measures Microsite

Access a high-level summary of tax and fiscal COVID-19 measures that have been announced by governments. The page shows reliefs and deferrals for direct, indirect and other taxes along with changes in tax administration practice designed to ease compliance for tax payers. You can view by country and tax type in the interactive map and create country comparisons. To request access, please complete the short online access request form found here.

Deloitte Oil, Gas & Chemicals

Deloitte's Center of Excellence and our webpage is updated regularly with solutions and points of view related to the oil, gas and Chemicals industry.

For more information visit our websites, contact your known local Deloitte professional or book a 15-min online audio/video session with our SME for general discussion of the relevant OGC tax topics and your service needs. Please kindly scan the QR code as below and tell us your request, we will provide more detailed information based on your needs.