Doing Business in DRC

Doing business in Democratic Republic of Congo2012 Africa Oil and Gas Tax Workshop: Sub-Saharan AfricaParis, France

23–24 February 2012

Page 2 Doing business in Democratic Republic Congo2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

► Legal issues► Recent and expected legislative changes ► Taxation► Subcontractor regime specifics► HR issues ► Accounting issues

Contents


The Democratic Republic of Congo (DRC) is located in central Africa


Legal issues

► DRC Ordinance No.81-013 of 2 April 1981 is obsolete.► In practice investors rely on provisions of oil conventions and

respective production sharing contracts (PSC).► A hydrocarbons code is under development.


► Draft hydrocarbons code► A draft hydrocarbons code is currently under consideration by the

Congolese Parliament and covers the following topics:► Framework of PSC, general regime, risks► State participation in PSC► Introduction of the concept of profit oil► Application of exceptional tax on expatriates’ salaries (IER) during a

production phase► Petroleum taxes:

► Additional bonuses► Thresholds for proportional royalty fee

► Employment and training of nationals► Subcontracting priority to award subcontractors to companies

incorporated in DRC► Environmental responsibility to repair damage from industrial activities

and gas flaring

Recent and expected legislative changes


Recent and expected legislative changes

► Value added tax (VAT) replaces the turnover tax (ICA) as of 1 January 2012

► DRC is in the process of joining the Organization for the Harmonization of Corporate Law in Africa (OHADA)


TaxationTax planning structure

► Three different tax regimes applicable to oil companies: ► For onshore contracts (e.g., with Muanda International Oil Company

(MIOC), ODS International (ODS), and Teikoku Oil), statistical tax, royalties, income taxes on dividends are collected

► For offshore contracts (e.g., with Soreplico, and Japoco Inocal), statistical tax and taxes on the margin distribution, on participation, and on profits are collected

► In a PSC, taxes on profit oil, royalties, annual surface fees and bonuses are collected


TaxationTax administration issues

► Tax audit by the Ministry of Mines, Petroleum and Hydrocarbons► Various tax administrations have jurisdiction: Directorate of General

Taxes (DGI), Directorate of Administrative, Legal and DomanialReceipts (DRGAS) and Directorate of Customs and Excise (DGDA)


Subcontractor regime specifics

► Subcontractors are exempt from all taxes that are not payable by the title holders and their affiliates.


HR issues

► Employment of nationals/foreigners:► The number of expatriates in a company cannot exceed 2% of total

workers by job category.► The draft hydrocarbon code recommends giving preference to equally

qualified Congolese manpower.► Training of nationals:

► A training budget should be provided, and a vocational training program and a system for staff promotion should be implemented for all phases of hydrocarbon operations.


HR issues

► Immigration labor rules for foreign personnel:► A local contract, work permits, an initial visa and multiple entry/exit visas

are required for any expatriate who works in the DRC.► A specific category work visa (good for six months, renewable once) and

a work permit are required for foreign company personnel.► Work permits are increasingly difficult to obtain due to inefficiency and

administrative delays


Accounting issues

► Petroleum costs:► Under the draft hydrocarbon code:

► Conditions of recovery► Ring fencing clearly limited to the permit zone

► Bookkeeping:► Bookkeeping of the branch/subsidiary must be performed in the DRC in

French.► Petroleum companies and oil subcontractors must use Congolese

accounting.

Ernst & YoungAssurance | Tax | Transactions | Advisory

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction andadvisory services. Worldwide, our 152,000 people are united by ourshared values and an unwavering commitment to quality. We make adifference by helping our people, our clients and our widercommunities achieve their potential.

Ernst & Young refers to the global organization of member firms ofErnst & Young Global Limited, each of which is a separate legal entity.Ernst & Young Global Limited, a UK company limited by guarantee,does not provide services to clients. For more information, please visitwww.ey.com.

How Ernst & Young’s Global Oil & Gas Center can help yourbusiness

The oil and gas industry is constantly changing. Increasingly uncertainenergy policies, geopolitical complexities, cost management andclimate change all present significant challenges. Ernst & Young’sGlobal Oil & Gas Center supports a global practice of more than 9,000oil and gas professionals with technical experience in providingassurance, tax, transaction and advisory services across theupstream, midstream, downstream and oil field service sub-sectors.The Center works to anticipate market trends, execute the mobility ofour global resources and articulate points of view on relevant keyindustry issues. With our deep industry focus, we can help yourorganization drive down costs and compete more effectively toachieve its potential.

© 2012 EYGM Limited.All Rights Reserved.

EYG no: DW0140

This publication contains information in summary form and is thereforeintended for general guidance only. It is not intended to be a substitutefor detailed research or the exercise of professional judgment. NeitherEYGM Limited nor any other member of the global Ernst & Youngorganization can accept any responsibility for loss occasioned to anyperson acting or refraining from action as a result of any material inthis publication. On any specific matter, reference should be made tothe appropriate advisor.

http://www.ey.com

Documents

Doing Business in DRC