Oil and mining companies are not required to pay Capital Gains Tax in Guyana. This benefit is secured in the various existing mining agreements and Production Sharing Agreements (PSA).
The International Monetary Fund (IMF) noted that this is the case in Guyana while most other countries ensure that tax on capital gains are paid by all companies. Also, IMF noted that the provisions of these contracts go against what is stipulated in Guyana’s Capital Gains Tax Act (CGTA)
The IMF made these observations in a technical assistance report it submitted to Government last year. The report titled, “A Reform Agenda for Petroleum Taxation and Revenue Management,” covered a detailed review of Guyana’s preparation for first oil. It also includes an assessment of the PSA Guyana has with US oil giant, ExxonMobil.
Capital gains refer to the money secured from the sale of the assets of a business. The profit realized from such a transaction is usually taxed.
IMF said, in Guyana, the Capital Gains Tax Act (CGTA) levies a tax of 20 percent on gains realized from any change of ownership of “movable or immovable property, rights of any kind, whether absolute, conditional, or contingent and effect of any kind, situate or having their seat in Guyana or elsewhere”.
The Fund noted that while the CGTA does not explicitly refer to the sale of petroleum and mineral interests, these appear to be covered by “rights of any kind”.
However, the IMF mission said that its understanding is that most mining agreements and PSAs exempt contractors from capital gains tax. Going forward as the sector continues to mature this policy should be carefully reviewed. It is also necessary to establish if there are limitations from existing double tax treaties on the right to tax gains on assets in Guyana.”
Almost all taxes are being waived for oil companies operating in Guyana.
Government pre-approved uncapped importation for ExxonMobil. The oil giant can import unlimited numbers of items totalling more than 250.
These items include All Terrain Vehicles (ATVs), Trailers, computers, other vehicles, bulldozers, cement, gravel, hammer wrenches, lights, drums, water tanks and waste bins. The items that are considered pre-approved are outlined in Annex D of the 2016 PSA.
Annex D is to be applied in harmony with Article 21 of the contract.
Article 21 states that ExxonMobil and all its affiliates engaged in Petroleum Operations shall be permitted to import, free of duty, VAT or all or any other duties, taxes, levies or imposts, all equipment and supplies required for Petroleum Operations including but not limited to drill ships, platforms, vessels, geophysical tools, communications equipment, explosives, radioactive sources, vehicles, oilfield supplies, lubricants, consumable items (other than foodstuffs or alcoholic beverages or fuel), as well as all items listed on Annex D.
Further, the contract states that each expatriate employee of ExxonMobil or its affiliates who have been assigned to work in Guyana will be given duty free as well.
The contract also states that each expatriate employee of the Contractor (including any Affiliated Company) and of Sub-Contractors shall have the right to export from Guyana, free of all duties and taxes, and at any time, all of the items imported.
IMF had also noted that the PSA that ExxonMobil has with Guyana provides for “broad tax exemptions for subcontractors.”
Some of these foreign subcontractors operating in Guyana are Bristow Group Inc. Nobel Oil Group and SBM Offshore.
IMF noted that Article 21 says that subcontractors engaged in petroleum operations are exempt from Value Added Tax (VAT) and import duties on imports of equipment and supplies required for petroleum operations.
Interestingly this provision is only for the benefit of foreign contractors.
The only tax that foreign sub contractors employed by ExxonMobil will have to pay is excise tax. The companies only have to pay that tax on fuel imports at a rate of 10 percent. However, locals have to pay 50 percent excise tax on fuel. https://www.export.gov/article?id=Guyana-Import-Tariffs
IMF said that Guyana foregoes revenue with such “generous” provisions.
The Fund said, “In addition to the forgone revenue, this (the exemptions) introduces administrative complexities and risks of tax evasion. Finally, interest and dividend payments from affiliated companies’ or non-resident sub-contractors’ branch in Guyana to its foreign or head office or to affiliated companies are exempt from withholding taxes.”
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