An International Arbitration Court in London is expected to rule on Tullow Oil’s $400 million tax charged by the Ghana Revenue Authority (GRA) by the end of this year.
Tullow Oil disclosed this in its Trading Update, released on November 29, 2024, to investors.
The court is going ahead with the ruling after hearing arguments from both sides on the issues.
According to Tullow Oil, “a hearing in respect of this dispute took place in October 2023 with the outcome now expected by the close of this year”.
Speaking to investors at a programme in London earlier this year, Group Chief Executive of Tullow Oil PLC Rahul Dhir said the outcome of the ruling, could impact the company’s operations and financials.
“Management has applied judgment in assessing the likely outcome of the claims and has estimated the financial impact based on external tax and legal advice and prior experience of such claims”, he said.
Background
In October 2021, Tullow Ghana Limited (TGL) filed a Request for Arbitration with the International Chamber of Commerce (ICC) disputing the $320.3 million branch profits remittance tax (BPRT) assessment issued as part of the direct tax audit for the financial year 2014 to 2016.
In February 2023, Tullow Ghana Limited (TGL) filed requests for arbitration with the International Chamber of Commerce in London. This was in respect of two disputed tax assessments received from the Ghana Revenue Authority (GRA).
The assessments relate to the disallowance of loan interest deductions for the fiscal years 2010 – 2020 and proceeds received by Tullow Oil plc during the financial years 2016 to 2019 under the Group’s corporate Business Interruption Insurance policy.
Tullow had also previously filed a request for arbitration in respect of a separate assessment for Branch Profits Remittance Tax of $320 million in 2021.
According to Tullow Oil, The Ghana Revenue Authority (GRA) is seeking to apply branch profits remittance tax BPRT under a law which the Group considers is not applicable to TGL, since it falls outside the tax regime provided for in the Petroleum Agreements and relevant double tax treaties.
The arbitration hearing took place in October 2023 and a decision is expected in the current financial year. TGL is not required to pay any amount of BPRT until the dispute is formally resolved.
Engaging Government
Despite expecting a ruling on this tax charge issue, Tullow Oil has indicated it is willing to engage the government to resolve the issue. The company in its 2023 Annual report noted that “We believe that resolution through international arbitration will bring certainty, which is in the best interest of all stakeholders”.
“In the meantime, we continue to engage with the Government of Ghana, including the Ghana Revenue Authority to resolve these disputes on a mutually acceptable basis” Tullow Oil PLC revealed this in its 2023 Annual Statement.
Ghana Revenue Authority on Tullow Tax Charge
The GRA has maintained that it stands by the work done on Tullow Oil. The authority told JOYBUSINESS it would work to ensure that the taxes are paid.
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