(Adds detail, analyst, graphic)
By Manuel Mucari
MAPUTO Aug 29 Sales by foreign companies of
assets in Mozambique will be taxed at a fixed rate of 32 percent
from next year, a tax official said, as the government tries to
extract more benefits from its huge gas discoveries.
Civil society groups and the opposition have criticised big
tax breaks that were granted to foreign firms as the southern
African nation struggled to attract investment in the years
following a bloody civil war which ended in 1992.
Mozambique is now a key prospect for the export of liquefied
natural gas because of the size of recent discoveries, its
location en route to Asia and its appeal to buyers trying to
diversify away from big suppliers Qatar and Australia.
Up to now, the sale of local assets belonging to foreign
companies in Mozambique had been taxed on a progressively
declining basis, depending on the length of time they were held.
This is why Cove Energy paid a rate of only 12.8 percent
when it sold out to Thailand's PTT Exploration and Production
Mozambique's parliament passed an amendment to the tax
regime last year, stipulating that sales of assets held by
non-resident firms would be taxed at 32 percent without
consideration for the period they were held.
But the new law was put on hold, pending a review by the
president of the southeast African state.
"The constitutional issues that delayed the passing of the
tax law have been overcome and the president has promulgated the
law," Rosario Fernandes, head of the tax authority, told Reuters
late on Wednesday.
"Come Jan. 1, capital gains in all mega-projects, including
oil and gas, will be taxed according to the new legislation."
The fixed-rate tax will affect any future gas field deals in
Mozambique's attractive Rovuma basin and could spur companies
with agreements on the table to try get them wrapped up by the
end of the year.
Italian oil and gas company Eni agreed this month
to pay the former Portuguese colony $400 million in taxes on its
$4.2 billion sale of a gas field stake to China's CNPC.
Eni also pledged to build a power plant, which Fernandes
said is worth another $130 million.
If the new tax rule had been applied, Eni's tax bill on the
deal would have been as high as $1.35 billion, analysts said.
They said Mozambique was receptive to approving the Eni deal
under the existing, more flexible tax rule given Eni's financial
strength and ability to get capital-intensive LNG plants off the
ground. The government also has a close relationship with China,
which has invested a lot in infrastructure in Mozambique.
India's Oil and Natural Gas Corp (ONGC) said this
week it had agreed to buy 10 percent of a gas block from
Anadarko Petroleum Corp for $2.64 billion.
"Anadarko is relatively well-placed to negotiate an approval
before year-end 2013, thereby securing a lower tax bill," Mark
Rosenberg, an analyst at Eurasia Group, said in a note.
"Like Eni, Anadarko is critical to developing the Mozambican
gas industry: it is the lead operator of the Area 1 block and is
jointly leading construction of a large LNG plant at Palma with
Eni," Rosenberg added. "Still, a pre-2014 approval is far from
Approval on other outstanding deals may also slip into 2014.
In June, ONGC and state-run Oil India Ltd agreed
to buy a 10 percent stake in a gas field from Videocon Group
for $2.48 billion, while Norway's Statoil is
selling 25 percent of its licence to Japan's INPEX.
Mozambique has become an attractive gas investment
destination, with current estimates for its reserves at 150
trillion cubic feet - enough to supply Germany, Britain, France
and Italy for 15 years - but sporadic raids by former rebels
this year have raised fears the country could slip back into
In neighbouring Tanzania, which also boasts attractive gas
discoveries, albeit of smaller size, capital gains are taxed at
a rate of 10 and 20 percent for residents and foreign
(Additional reporting by Fumbuka Ng'wanakilala in Dar es
Salaam; writing by Agnieszka Flak; editing by Pascal Fletcher
and Tom Pfeiffer)