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Angola Will Start Taxing Oil Explorers for Imports of Materials

Oil explorers in Angola, Africa’s second-largest crude producer, will be required to start paying duties on imported materials under a new law.

The southern African nation will charge 0.1 percent of the value of goods imported for oil and gas exploration and production, which had previously been exempt of duty, according to the National Press Administration, the government gazette.

Gilberto Luther, associate director of the government’s tax reform project, declined to comment in an e-mail. Nicholas Neto, head of the policy and procedures department at Angola’s National Customs Service, didn’t immediately respond to e-mailed questions.

Angola is overhauling tax collection and customs administration to protect some domestic industries such as beverage production, while merging state agencies to cut costs and meet standards set by the World Customs Organization. The changes are meant to help the government boost income and diversify the economy, which relies on oil exports for about 40 percent of output and 80 percent of state revenue.

The new tax code, enacted Nov. 22 in a decree by President Jose Eduardo dos Santos, refers to a list of goods for which oil companies will pay duty. The product list is contained in a separate law passed Nov. 12 that hasn’t been published yet.

Tax Discussions

Sonangol EP, the state petroleum company, Angola’s Ministry of Petroleum and other oil industry officials discussed the tax code changes as they were being drawn up, Neto said in an interview in May. Discussions were also held about whether to trim the current 90 days that oil companies are allowed to complete a customs declaration, Neto said.

Angola, a member of the Organization of Petroleum Exporting Countries, pumped 1.7 million barrels a day in November almost entirely from offshore fields operated by companies such as Total SA (FP), Exxon Mobil Corp. (XOM) and BP Plc. (BP/) The country, second to Nigeria in oil output in Africa, is rebuilding its $114 billion economy after a 27-year civil war that ended in 2002.

A consumption tax of as much as 10 percent of spending by oil companies for services and supplies, such as drilling rig rentals, took effect in October. Companies said they are unsure how they will recover the costs because the law is vague.

The government plans to cut corporate taxes to 30 percent from 35 percent. To help offset that reduction, the administration is increasing the withholding tax on public service contracts to 6.5 percent from 5.25 percent in most industries and from 3.5 percent in public construction. In mining, corporate taxes were cut a year ago to 25 percent from 35 percent.

To contact the reporter on this story: Colin McClelland in Johannesburg at cmcclelland1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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