Back Matter

Back Matter

Editor(s):
Michael Keen, and Victor Thuronyi
Published Date:
September 2016
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Index

Note: Page numbers in italic indicate a figure, while page numbers in bold indicate a table on the corresponding page.

abusive transfer pricing 80

access fee elements: capital structure 196–8; cost of debt 199; debt tax adjustment 199; equity tax adjustment 198–9; gross income to taxable income 201–2; overview 194–6; tax revenue impact 202, 203, 203; variable fee elements 200–1

active business income 14

additional profits tax (APT) 165, 183–5

administrative procedures 103–6

advance pricing agreements (APA) 7, 69–70, 86

African cross-border pipeline projects 219, 221

anti-base-erosion rules 116–17

area-based ring-fencing 83

arm’s length principle (ALP): application of 56–65, 64; cross-border natural resource projects 192–203, 200, 203, 203; introduction 13–14, 23–5; OECD guidelines 56–60, 192–3, 211; transfer pricing 53–6

Asian cross-border pipeline projects 222

asset beta 198

Australia cross-border pipeline projects 222

Australia-Indonesia maritime boundary 285–6, 286

Australian TARP rules 146

average effective tax rates (AETRs) 272, 283, 340–5

Baku/Tbilisi/Ceyhan pipeline (BTC) 218, 232

base erosion and profit shifting (BEPS): border withholding 117–27; discussion draft on commodity transfer pricing 86; extensive treatment risks 128–9; international taxation and 111, 113, 133–4; introduction 3, 6, 8–9, 11; overview 30–4; revenue loss from 22; summary of outcomes 35–6; tax coordination 337

Bayu-Undan production 295–6, 299

benchmark prices 88, 91, 105

bilateral investment treaty 144

bilateral tax treaties (BTTs) 25–8, 26, 111, 252

border withholding 117–27, 124

break clauses 93

Canada 171, 312–14

Canadian TCP rules 146

Capital Asset Pricing Model (CAPM) 197

capital export neutrality 14

capital gains/losses 139, 146–50

capital gains tax (CGT) 164, 165, 168–9, 174, 183, 185

capital structure in access fee elements 196–8

cash waterfall 145

Central African Economic and Monetary Community (CEMAC) 339

Central Asian cross-border pipeline projects 219–20

Certain Maritime Areas of the Timor Sea (CMATS) 287, 297

Chad/Cameroon oil pipeline project 218, 219, 228

China cost and freight (CFR) prices 61

Code of Conduct for business taxation 348–9

commodity sales, special rules 86–90, 88

commodity valuation 90–9

common consolidated corporate tax base (CCCTB) 34, 54, 348–9

common-law countries 174

Common Market for Eastern and Southern Africa (COMESA) 351

company taxes and royalties levies 308–15, 314, 314

comparable uncontrolled price (CUP) 57, 85, 91, 94, 193

conduit entity 113

conflicting interests 210

Contracting State 170, 177

controlled foreign corporation (CFC) 15, 36

controlled taxation 52

Convention of Mutual Administrative Assistance in Tax Matters (OECD) 7, 25, 27, 117

cooperative development 243

corporate income tax (CIT): coordination difficulties 346; direct tax coordination 349–50; introduction 16–18, 25; taxable gains under 127; tax competition 335–42, 340

cost of debt 199

cost of equity in access fee elements 196–8

cost of service (COS) 236–7

cost-overrun “cushion” 195

cost-plus method 57, 193, 194

Costs, Insurance, Freight (CIF) 83

Costs & Freight (CF) 83

Council of Europe 25

country-by-country reporting (CbCR) 31, 35

country risk premium (CRP) 197

cross-border natural resource projects: access fee elements 194–9, 200; arm’s length principle 192–203, 200, 203, 203; conclusion 210–11; conflicting interests 210; cost-plus method 193, 194; derived or negotiated tax liability 203–5; formulary system 205–7; introduction 190–2, 191; royalties and transit fees 207–9; third-party interests 209–10; see also taxes and cross-border resource investment

cross-border pipeline projects: cases of 220–2; categories and objectives 216–22; conclusions 237–8; on continental shelf/high seas 223; co-operation 3, 4; corporate structure 226–7; determination of 231–7; examples of 219–20; export pipelines from landlocked countries 216–17; frameworks of 223–8; freedom of transit principle 222–3; guiding principles 228–9; host government agreement 225, 225–6; implementation of tax principles 229–31; importance of 216; intergovernmental agreement 224–5; international law and 222–8, 243; introduction 5, 215; other agreements 227–8; pricing rules 24; tax issues 228–31; tax treaties and 115; transit fees 207–9, 231–5; transit pipelines 217–18; transportation agreements 227; withholding taxes 139

debt capital 142

debt-equity test 8, 128; debt-to-equity ratio 101–2

debt-recovery rules 178

debt tax adjustment 199

debt-to-tariff ratio 237

deductible payments 65–6

‘deemed disposal’ mechanism 9

deferrals 19, 21

derived tax liability 203–5

direct transfers of interest: application of tax treaties 170–2; characterisation as income or capital 168–9; deduction recapture 166; depreciation regime 168; gain on 167–72; impact on host country 167; international tax and treaty strategy 126–7, 160; jurisdiction to tax gain 169–70; overview 166–72; rollover relief 172

discounted cash flow (DCF) 237

discount rates 321–2, 322

disguised interest 103

dispute resolution 35, 69–71

dividend withholding tax rates 123

Dodd-Frank Act 31

domestic tax law and tax treaties 150–3

domestic transfer pricing 24

double taxation agreements (DTAs) 6–7, 14, 119–23, 1201, 122

downstream operations with special taxes 82–3

earn-in agreement 141, 182

earnings before interest and taxes (EBIT) 201, 202

economic rent 307–8

Elang Kakatua-Kakatua North (EKKN) 295–6

Energy Charter Treaty (ECT) 222–3

EPCM (engineering, procurement, and construction management) contractor 135, 137

equity market risk premium (EMRP): 197–8

equity tax adjustment 198–9

European Commission (EC) 32, 54, 205

European Council 348

European Union (EU) 335

Europe cross-border pipeline projects 221

excise tax 352

Exclusive Economic Zone (EEZ) 244, 246, 264

exemption method 14

exploration company 162

export credit financing 119

export pipelines from landlocked countries 216–17

extractive industries (EIs) see international taxation; tax competition and coordination; taxes and cross-border resource investment; tax treaties; transfer pricing

Extractive Industry Transparency Initiative (EITI) 31

extractive investments and tax treaties: capital gains and 146–50; conclusion 156–7; domestic tax law and 150–3; financing of investment 139–46, 145; introduction 133–6; life cycle of 136, 136–9; role of 153–6

farm-in agreements 161–2

farm outs 127, 161–2, 182–3

fee charges for management 59

finance costs 99–103

finance requirement test 102

financing of investment 139–46, 145

fiscal architecture of maritime disputes 266–9

fixed assets 206

FOB port prices 61–2

foreign direct investment (FDI) 26, 146, 344

foreign oil-related income (FORI) 17

foreign tax credit 14

formula apportionment (FA) 33

formulary system in cross-border natural resource projects 205–7

France 119, 122–3

freedom of transit principle 222–3

Free on Board (FOB) 83, 91, 94

Frigg gas field 251, 252

gas valuation 92–4

General Agreement on Tariffs and Trade (GATT) 222

general valuation rule 88, 89

Ghana 163

Global Forum on Transfer Pricing (OECD) 59

G20 Development Working Group 31

G20-OECD BEPS project 30, 32, 111, 129

harmful tax practices 35

hedging 83

host government agreement (HGA) 225, 225–6, 229–30

hybrid mismatch 36

immoveable property 8–9, 127, 174–5, 175, 177

indirect tax coordination 350–2

indirect transfers of interest: impact of tax treaties 177–8; international tax and treaty strategy 127; jurisdictional rule 174–7, 175, 176; new shares, issuance 179; overview 172–9, 173; taxation of gains 160, 162–3, 174; tax collection 178–9; taxing of 173

infrastructure investment 156–7

intangible assets 20, 206

intellectual property (IP) 13, 100, 118

interest deductions 36, 102

intergovernmental agreement (IGA) 224–5, 229, 251

internal rate of return (IRR) mechanism 281

international accounting standards 103

International Court of Justice 247

international law 222–8, 233–4

international monetary fund (IMF) 111, 333

international oil companies (IOC) 265

international pipelines 216

international taxation: arm’s length principle 13–14, 23–5; conclusion 34; introduction 4, 11–12; issues and context 1–4, 2; overview 12–18, 1516; principles and concepts 12–16; problem areas 23–9; resource-rich countries 6–9; tax avoidance/tax planning 18–22, 22; tax treaties 24–8,26; tools of trade 19; transfers of interest 28–30, 29

international taxation, and tax treaties: help for 129–30; introduction 111–12; risk areas 128–9; tax treaties, extent and nature 112–17; withholding taxes 117–27

international unitisation agreements (IUA) 242–5, 250, 266, 285, 287, 298

intra-company debt shifting 20–1

Joint Development Authority (JDA) 248, 3012

joint development zones (JDZ): basis for 243–5; conclusion 259; framework approach 258–9; introduction 5, 242–3; Nigeria-Sao Tome case study 246–9; Norwegian-UK Agreements 252, 253, 254–7; overview 245–6, 246; pragmatic use of 254–9; unitization 249–53

joint development zones (JDZ), fiscal schemes: conclusions 299–300; evaluation of 281–5, 282, 284; introduction 264–5; Malaysia–Thailand joint development zone 269–75, 270, 271, 274, 275; maritime boundaries in the Timor Sea 285–99, 286, 28992, 293, 294, 296, 297; Nigeria-São Tomé e Príncipe joint development zone 275–6; São Tomé e Príncipe (STP), hydrocarbon activities 276–81, 2778, 279, 280, 281; utilization beyond 268; see also maritime disputes

joint petroleum development authority (JPDA) 253

joint tax liabilities 183–4

joint ventures (JVs) 99, 140

jurisdictional rule 174–7, 175, 176, 181

Kenya, border withholding example 123–5, 124

large-scale extraction operations 80

Latin American cross-border pipeline projects 219, 221

League of Nations 3, 25, 134

licence and surface fees 137

limitation of benefits (LOB) provision 27–8, 119, 130

liquefied natural gas (LNG) 92–3, 216, 233, 298

London Interbank Offered Rate (LIBOR) 199

London Metal Exchange (LME) 81, 94

long-term bond rate (LTBR) 311

Loran-Manatee Field 250

low-tax jurisdictions 23, 55, 128

Malaysia-Thailand joint development zone 269–75, 270, 271, 274, 275

management service charges 100

marginal effective and royalty tax rates (METRRs): comparative analysis 311–15, 314, 314; overview 307, 308–11

maritime boundaries in the Timor Sea 285–99, 286, 28992, 293, 294, 296, 297

maritime disputes: fiscal architecture of 266–9; Malaysia-Thailand joint development zone 269–75, 270, 271, 274, 275; Nigeria-São Tomé e Príncipe joint development zone 275–6; São Tomé e Príncipe (STP), hydrocarbon activities 276–81, 2778, 279, 280, 281

Middle East cross-border pipeline projects 221

mine gate market value 97

mineral rights 6, 8–9, 113, 117, 126

mineral valuation 94–6

mining or petroleum concession 60–1

Model Tax Convention (OECD) 53

Mongolia 163

monopoly power and economics 209

Mozambique 162–3

multinational enterprises (MNEs): arm’s length pricing 23–4; balance sheets 135; effective rate of tax, reducing 62; global tax rate 63; introduction 1–2, 11; mutual agreement procedures 87; profit-split methods 58; subsidies of 140; tax avoidance/tax planning 20–1, 34; transfer pricing 43, 51

Murchison Agreement (1979) 252

mutual agreement procedure (MAP) 152–3

Namibia, treaty shopping 119–23, 1201, 122

national oil companies (NOCs) 245–6, 267–8

National Petroleum Agency (ANP) 280

netback costs 97–8

Netherlands–UK Agreements (1965) 252

net present value (NPV) 194–5

net smelter return (NSR) 95–6

new shares, issuance 179

Nigeria 91, 99

Nigerian National Petroleum Corporation (NNPC) 276

Nigeria-São Tomé case study 246–9

Nigeria-São Tomé e Principe Joint Development Zone 275–6

Nigeria-São Tomé e Príncipe Treaty 250

North American cross-border pipeline projects 219, 221

North Sea Treaties 253

Norway 312, 315

Norway, joint development zones 250–3

Norway-Russia Agreement 257

Norwegian-UK Agreements (1965) 252, 253, 254–7

Official Maritime Claims Law 246

offshore holding companies 63

oil valuation 90–2

Organisation for Economic Co-operation and Development (OECD): arm’s length principle 56–60, 192–3, 211; BEPS recommendations 128–9; corporate tax competition 338–9; discussion draft on commodity transfer pricing 86; Double Tax Convention 230–1; “functionally separate entity” approach 230; Global Forum on Transfer Pricing 59; Model treaties 66–8, 115–16, 134; Transfer Pricing Guidelines 43, 53, 56, 201, 316; transfer pricing risk identified by 85

output decision in revenue-based royalty 328

over-riding royalty 9, 162, 180–1

paid-on-behalf arrangements 16, 24

partial transfer of interest 162

payroll taxes 55

permanent establishment (PE) 12, 35, 171

petroleum infrastructure 268–9

petroleum resource rent tax (PRRT) 183–4, 287, 311

petroleum rights transfer of interest 161–6

Platts iron ore index (IODEX) price 61

Practical Manual on Transfer Pricing (UN) 56–60

principal purpose test (PPT) 27

production sharing agreement (PSA) 16, 92, 99, 269

production sharing contracts (PSCs): fiscal regime issues 287–8; issues with 296, 296–9, 297; joint development zones 269–70, 280; Sunrise contracts 288–95, 28992, 293, 294; transfers of interest 165–6, 184–5

profit allocation 13–14

profit-based methods 58, 96, 307

property taxes 55, 334, 338

rent-based royalty 329–30, 331–2

Resale Price Method (RPM) 57

residence country taxation 13, 14–15

resource rent tax (RRT) 80, 207–8, 335

resource-rich countries 6–9, 151, 155, 165

revenue-based royalty 328–9

revenue to cost ratio (R/C ratio) 271–2

ring-fencing rules 82–3, 100–1

risk-free rate 197

risk service contract (RSC) system 269, 280

risk transfer 19

rollover relief 172

royalty 207–9, 210

sales price determination 60–2

sales taxes 55, 306, 308, 311, 315, 335, 351

São Tomé e Príncipe (STP), hydrocarbon activities 276–81, 2778, 279, 280, 281

special mining taxes 96–9

special participation (SP) fee 311, 312

special remuneratory benefit (SRB) 274, 283

stability agreements 113–14

Statfjord Agreement (1979) 252

Sweden 119

take-or-pay obligations 93

tariffs 350–1

tax avoidance/tax planning 18–22, 22, 34

tax collection 178–9

tax competition and coordination: concluding remarks 353; difficulties with 346–8, 347; direct tax coordination 348–50; experience in 348–52; indirect tax coordination 350–2; introduction 6, 333–5, 334; lessons from 335–9; overview 339–43,340, 3413; questions of need 343–6

tax deductions 19, 138

tax-efficient financing structures 317–20, 321

tax information exchange agreement (TIEA) 71

taxes and cross-border resource investment: company taxes and royalties levies 308–15, 314, 314; conclusions 322–3; discount rates 321–2, 322; economic rent 307–8; introduction 306–7; multinational cross-border fiscal issues 315–22, 321, 322; rent-based royalty 329–30, 3312; revenue-based royalty 328–29; tax-efficient financing structures 317–20, 321; time-to-build model 326–8; transfer pricing 316–17

tax havens 100

tax information exchange agreements (TIEAs) 7, 25, 28, 112

tax-royalty arrangement 164

tax sparing 18

tax treaties: extent and nature 112–17; impact of 177–8; introduction 4–5; Mongolia 2; overview 24–8, 26; see also extractive investments and tax treaties; international taxation

technical assistance (TA) 7

territorial taxation 14, 143

thin capitalization 101; limitations 8

third-party access (TPA) 236

third-party interests 145, 209–10

Timor Sea, joint development zones 253

Timor Sea Treaty (TST) 266, 268, 285–7

total hydrocarbon value (THV) 271

transactional net margin method (TNMM) 57

Transboundary Hydrocarbons Agreement 257

transfer pricing: abuse 19, 20; arm’s length principle 53–65, 64; concerns with 24; defined 43–50, 46, 47, 48, 49; determining sales price 60–2; dispute resolution 69–71; documentation summary 35; enforcement of 72; examples 45–50, 46, 47, 49, 63–4, 64; government strategy response to 65–72; host country tax minimization 63–5, 64; introduction 4, 7–8, 42–3; legal regime objectives 68–9; legislation and regulations 66–8; objectives 50–3; summary 35; taxes and cross-border resource investment 316–17

transfer pricing, special EI issues: administrative procedures 103–6; commodity valuation 90–9; conclusion 106–7; finance costs 99–103; gas valuation 92–4; general rules 84–6; introduction 79; large-scale extraction operations 80; methods of 84–90; mineral valuation 94–6; oil valuation 90–2; risks 80–3; special mining taxes 96–9; special rules for commodity sales 86–90, 88; special taxes, prevalence of 82–3

Transfer Pricing Guidelines (OECD) 43, 53, 56

transfers of interest 28–30, 29, 125–7; application of APT 183–4; conclusion 185; economic effects 164; examples of 161–3; introduction 160–1; mining and petroleum rights 161–6; under overriding royalty/farm-out agreement 179–83; production sharing contracts 184–5

transit fees 207–9, 231–5

transit pipelines 216

transnational pipelines 216

transportation agreements 227

transport cost adjustments 93

treatment and refining costs (TC/RCs) 95

treaty shopping: limitation of benefits provision 119; Namibia 119–23, 1201, 122; overview 19, 21, 27; summary of 35

United Kingdom 312–13

United Kingdom, joint development zones 250–3

United Nations (UN) 56–60, 66, 71, 115–16

United Nations Convention on the Law of the Sea (UNCLOS) 223, 246, 247, 264

unitization in joint development zones 249–53

U.S. FIRPTA rules 146

value-added tax (VAT) 138, 156, 229, 350–2

value chain 134

value-shifting arrangements 179

variable fee elements 200–1

weighted average cost of capital (WACC) 195–9, 202, 204, 236–7

West African Economic and Monetary Union (WAEMU) 335, 349–50

withholding tax (WHT) 25–7, 65–6, 81, 117–27, 139

World Bank Group 31, 142

World Trade Organization (WTO) Agreement 222

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