Rosneft is trying to withdraw its subsidiaries from excess profit tax

As it became known to Kommersant, Rosneft is trying to withdraw its non-core subsidiaries from the effect of the bill on excess profit tax, which is being coordinated in the State Duma. We are talking about petrochemical and IT companies that are part of Rosneft, but are not included in its consolidated taxpayer group. The Energy Committee of the State Duma has already prepared relevant comments on the bill. The Ministry of Finance promised not to impose a tax on excess profits for oil companies, since they had already raised taxes in 2022.

The State Duma Energy Committee has prepared an opinion on the project on excess profits tax (Kommersant has a copy). In it, the committee proposed to exempt from tax non-core subsidiaries of oil companies with state participation, which “ensure the payment of income in the form of dividends to the budget.” We are talking, in particular, about subsidiaries in the field of IT, petrochemistry and the supply of petroleum products, which were not included in the consolidated taxpayer group (CGT). The CGT institute, which ceased to operate this year, was created in 2012 to optimize the income tax within the holding due to the fact that some companies of the group could reduce their profits at the expense of the losses of others. Almost all major companies use this regime; since 2016, a moratorium has been imposed on the expansion of CTG.

The excess profit tax involves a one-time payment for companies whose average profit in 2021–2022 exceeded RUB 1 billion. The tax will be levied at a rate of 10% of the tax base, defined as the difference between the average profit in 2021-2022 and the same figure in 2018-2019. On June 26, the project was supported by the budget committee of the State Duma. The Ministry of Finance decided not to impose this tax on oil producers and refineries, as it had already raised taxes for them in 2022.

In the Russian Federation there are two largest oil companies with state participation – Rosneft and Gazprom Neft. According to Kommersant’s interlocutors, it was Rosneft that initiated the discussion about exempting subsidiaries from excess profit tax. Its CTG included about 60 companies, but there is no complete list of participants in the public domain. The oil company owns three large petrochemical productions, two of which, probably, could not get into the CGT. We are talking about the Novokuibyshev Petrochemical Company (profit in 2018 and 2019 – 410 million rubles and 1.2 billion rubles, respectively), which Rosneft acquired in March 2015, and Ufaorgsintez, which is part of Bashneft (profit in 2018 and 2019 – 2.5 billion and 3.2 billion rubles, respectively).

Rosneft bought a controlling stake in Bashneft at the end of 2016. These companies did not disclose financial results for 2021-2022, however, they probably improved their performance against the background of rising oil prices and the weakening of the ruble. Of the large IT companies of Rosneft, Sibintek belongs (profit is 2 billion rubles and 1 billion rubles in 2018–2019) and RN-BashNIPIneft, which is part of Bashneft until 2018 (profit is 276 million and 372 million rubles in 2018–2019). Rosneft and the Ministry of Finance did not respond to Kommersant’s request.

The State Duma Energy Committee also asks to exempt Transneft and Rosseti from excess profit tax, since their revenue is generated almost exclusively from tariffs, and stevedoring organizations created by coal companies. According to one of Kommersant’s sources familiar with the project, the practice of exceptions may lead to the fact that the tax burden will be redistributed among other payers of this tax.

Sergey Semyonov, managing partner of the law firm Taxology, clarifies that the companies could not be included in the CGT due to the lack of the required share of ownership or were acquired after the existing configuration of the CGT. Such companies, for example, according to him, can carry out activities in the field of IT, transport, logistics and trade.

In accordance with the project, organizations that produced hydrocarbons in 2022 are exempt from tax, Mikhail Orlov from Kept notes. With this approach, the state has no reason to exempt subsidiaries of oil companies from tax if they themselves are not engaged in oil production, he believes. In his opinion, “it should be recognized as a very liberal approach to the complete exemption of former members of the CGT from tax, if among them were oil-producing organizations.” At the same time, further expansion of the number of “beneficiaries” may not only change the concept of this emergency tax, but may also require adjustments in rates in order to reach the planned collection volume, the expert concludes.

Dmitry Kozlov