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  The New Income Tax - Chapter 10 : NATURAL GAS INVESTMENT TAXArticle 44: A natural gas investment tax shall be imposed on every person engaged in natural gas investment, gas liquids and condensates within the Kingdom, its exclusive economic region or its continental shelf.
Article 45: (a) Natural gas investment activities shall mean exploration, production, collection, treatment, processing, fractionation of natural gas liquids, production and collection of gas condensates as well as transportation of natural gas, its liquids and gas condensates. (b) Transportation shall mean transporting natural gas from treatment plants to processing and fractionation plants or from any such plants to end user facilities, as well as transporting gas condensates and its liquids. That does not include local distribution networks and pipelines constructed by non-gas producers beyond the official sale points. (c) Gas condensates shall mean condensates in their natural form, which are hydrocarbons that exist in a single gaseous phase in reservoirs with original temperatures in the range between the critical and maximum temperatures, where it is possible for the substance to have two phases side by side and which are extracted from wells completed in gas condensate reservoirs and become liquid at standard conditions of temperature and pressure.
Article 46: Income from natural gas investment activities shall be the gross income derived from the sale, exchange or transfer of natural gas and its liquids, gas condensates, including sulfur and other products, as well as any other incidental or non-operational income derived from the taxpayer’s primary activity, regardless of its type or source, including income derived from the utilization of excess energy in a facility subject to natural gas investment tax.
Article 47: The natural gas investment tax base shall be the gross income referred to in Article Forty Six of this Law, minus the expenses deductible under this Law. The amounts of royalties and surface rentals shall be considered as deductible expenses.
Article 48: The natural gas investment tax rate for any taxable year shall be determined on the basis of the internal rate of return on the cumulative annual cash flows of the taxpayer derived from natural gas investment activities. The tax rate applicable to natural gas investment tax base of the taxpayer shall be in accordance with the following table:
Cumulative annual cash flows shall mean the aggregation of the annual cash flows of the taxpayer subject to the natural gas investment tax for each year starting from the first year of its tax declaration in which the taxpayer was subject to the natural gas investment tax until the year preceding the year in which the tax declaration is due for presentation. The internal rate of return shall mean the discount rate that causes the net present value of these cumulative annual cash flows (after being discounted to the start of the first year of such cash flows) to equal zero, and then rounded to the nearest tenth of a percent (0.1%). Article 49: The annual cash flows shall be calculated by adjusting the natural gas investment tax base as follows: (a) Adding back any operational losses carried forward from previous years. (b) Adding back non-cash items deducted for the purpose of determining the taxpayer’s base. (c) Adding back all financing fees and other bank service fees. (d) Subtracting capital cash expenditures except financing fees and other bank service fees. (e) Subtracting the natural gas investment tax and companies income tax actually paid.
Article 50: (a) Income tax stipulated under paragraph (b) of Article Seven of this Law shall be applied to the natural gas investment tax base of a taxpayer subject to natural gas investment tax. (b) The income tax amount paid by a taxpayer for natural gas investment tax base in accordance with paragraph (a) of this Article shall be deducted from the natural gas investment tax to be paid by the taxpayer.
Article 51: (a) For the purpose of calculating the natural gas investment tax, the taxpayer’s natural gas investment tax base for each gas exploration and production contract or agreement with the Government shall be deemed independent of the natural gas investment tax base or any other gas exploration and production contract or agreement. The taxpayer shall file separate tax declaration and audited closing accounts for each gas exploration and production contract or agreement. (b) A taxpayer’s natural gas investment tax base shall be deemed independent of the tax base for its other activities that are not related to its natural gas investment activity. The taxpayer shall file a tax declaration and audited closing accounts for its natural gas investment tax activity separate from its other activities.
Article 52: A taxpayer is subject to income tax stipulated under paragraph (b) of Article Seven of this Law on the following: (a) Its income from processing or fractionation of natural gas in a licensed independent plant. (b) Its income from transporting natural gas for a third party through a licensed independent pipeline.
Article 53: The provisions of this Chapter shall not apply to any company engaged in the production of petroleum or the production of both petroleum and natural gas, with respect to such company’s activities within its areas of operations or concession, as delineated upon the effectiveness of this Law. Article 54: The provisions of paragraph (c) of Article Seven of this Law shall not apply to the gas investment tax base for any taxpayer subject to the natural gas investment tax.
Article 55: Where no stipulation is provided for in this Chapter, the provisions of other Articles of this Law shall apply to the taxpayer subject to the natural gas investment tax.
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Brief Information on DZIT
