Petroleum Africa
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Monday, September 29, 2014
The Kenya Finance Bill 2014 was passed by the Kenyan parliament and given the greenlight by the country’s president, Uhuru Kenyatta. The bill is expected to be publicized shortly and the majority of the legislation included in it, applicable to the oil and gas industry, will be effective on January 1.
A wide range of issues are covered under this bill aimed at the economic development of the East African country. In terms of its impact upon the oil and gas sector reports have the bill being a mixed bag.
Africa Oil, one of the foreign operators in the country, said that “On a positive note the legislation abolishes the previous withholding tax regime and allows farm out transactions to be completed in a tax effective manner. Such transactions are heavily relied upon by the oil and gas industry in order to attract companies with the appropriate technical and financial capabilities to projects over the course of their life cycle, thereby mitigating technical and financial risk. Africa Oil has completed numerous farm out transactions to date and will continue to consider farm outs as we continue our extensive exploration and appraisal program in East Africa.”
The finance bill also reintroduces the capital gains tax, which has been suspended since 1985. While the rate of capital gains tax has been established at 5% for most capital transactions, oil and gas as well as mining will be taxed at a higher rate, 30% or 37.5% depending on the company’s country of residency for tax purposes.
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