Deloitte Study: An overview on royalties and similar taxes. Oil and gas upstream sector across Europe

The effective royalties and similar taxes rate in Romania to increased to 17.4%, in 2016 while the European average rate decreased to 8.8%, according to a Deloitte study An overview on royalties and similar taxes. Oil and gas upstream sector across Europe. Starting with 2017, due to the the construction tax cut, the effective tax rate decreased to 13.9% in Romania.

"Now in its fourth edition, the Deloitte study regarding the royalties and similar taxes presents the evolution of the effective tax rates in Europe in 2016 and each country's tax regime for this sector. For Romania, we have also included 2017 data, when the effective tax rate decreased, after successive increases in the previous years. The decrease was mainly due to the special construction tax cut on January 1, 2017. The study is a minute documentation useful for the public interested in an overview of the specific taxation in the oil and gas industry," said Vlad Boeriu, Partner Deloitte Romania.

Key findings of the study:

• In Romania, the effective royalties and similar taxes rate decreased to 13.9% in 2017 from 17.4% in 2016 and 16.9% in 2015
• In 2016, the average effective royalties and similar taxes rate in the European states (including Groeningen field, Netherlands which has a special fiscal regime) dropped to 8.8% from 10% in 2015 and 11.7% in 2014. Also in 2016, the average effective royalty and other similar taxes rate (excluding the Groeningen field) decreased to 6.9% from 7.5% in 2015 and 9.1% in 2014
• The average effective royalties and similar taxes rate decreased in 2016 compared to 2015 in 9 European countries: UK, Norway, Denmark, Hungary, Ireland, Germany, Spain, Italy and Albania.
• The average effective royalties and similar taxes rate increased in 2016 in six European countries: Romania, Austria, Holland, Greece, Lithuania and Poland. In Serbia, it remained unchanged.

In Romania, the effective tax rate is computed as an average between the observable royalties and other similar taxes, namely: the 60% tax applied to additional revenues resulted from the deregulation of natural gas prices, special construction tax, the 0.5% tax applied to revenues resulted from the crude oil exploitation. The effective tax rate for the upstream gas activity is higher than the one for the upstream oil activity. The difference is mainly driven by the supplementary tax on gas.

The study represents an update of the previous editions , taking into account the limitations imposed by the different tax regimes applicable in each country and the existing tax rates  in various European countries based on the  available public information.

The computation of the effective tax rate for each country took into account the value of the royalties and specific upstream taxes paid by the main players from production and sale of oil and natural gas. Effective royalties and other similar taxes may differ from nominal rates, as a result of national priorities, market realities, and oil and gas prices in recent years. For further details please access the study here.