C541

[SB

[282]

A BILL

[EXECUT

FOR
AN ACT TO AMEND THE PETROLEUM PROFITS TAX ACT, 2004
AND FOR OTHER MATTERS CONNECTED THEREWITH

Commencement,

B E IT E NACTED by the National Assembly of the Federal Republic of

Nigeria as follows
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1. The Petroleum Profits Tax Act 2004 in this Act referred to as "the
principal Act") is amended as set out in this Act.
2. Section 2 of the principal Act is amended

Amendment
0f 2004 Cap.
21 15.
Amendment
of Section 2.

(a) by inserting after the definition of" crude oil" the definition of "
development area" as follows
"development area" means the area in respect of which an oil mining

Amendment of
Section 8,

lease has been granted;

(b) by inserting immediately before the semi-colon in the definition of
"petroleum operations" the following
"but does not include upstream gas operations";
(c) by inserting after the definition of "tax", the definition of "upstream
gas operation" as follows
"Upstream gas operations" means the wining or obtaining of natural
gas in Nigeria by or on behalf of a company on its own account for
commercial purposes and shall include any activity or operation related to
natural gas that occurs up to the point at which downstream gas as defined in
the Downstream Gas Act, 2006) begins".
3. Section 8 of the principal Act is amended by inserting immediately
after the words "petroleum operations" the following words" or in upstream gas
operations".

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4. Section 9 of the principal Act is amended as follows

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(i) by inserting before subsection (2) of section 9 the following new

subsection 1 (A) as follows

Amendment of
Section 9.

C542 2006 No.

Petroleum Profits Tax {Amendment)

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"(1) (A) subject to any express provisions of this Act in relation to any

accounting period, the profits of that period in respect of upstream gas

operations in a development area shall be taken to be the aggregate of

(a) the proceeds of sale of all gas sold in that period;

(b) all income of that period incidental to and arising from such

upstream gas operations";

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(ii) by inserting immediately after subsection 5 of section 9 a new subsection (6)as

follows-

"(6) Deductions and adjustments relating to petroleum operations may be

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Amendment
of Section 10.

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adjustments relating to upstream gas operations conducted in a development area

may be made in respect only of the profits of such operations". 5. Section 10 of the
principal Act is amended by inserting immediately
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after the words" petroleum operations" in paragraph (f), subsection (1) of

"(1) (f) or, in the case of upstream gas operations, that the prior approval

section
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Amendment
of Section 21.

10 as follows

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of Minister was obtained".

6. Section 21 of the principal Act is amended by inserting immediately
after sub-section (1) the following new subsections

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" (1) (A) the rate of tax for any accounting period; applicable to operations

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within a development area in respect of the upstream gas operations shall be

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determined in the following manner:

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when R < 1.4 Rate of tax shall be 20 %

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when 1.4 < R < 2.5 Rate of tax shall be 20% +((R-1.4)/(2.5-1.4"*
55%

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when R > 2.5 Rate of tax shall be 75 %

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where R= Cumulative Revenue- Cumulative Tax Paid

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Provided that, in the case of operations in a production sharing contract area

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or a deep offshore contract area, the rate of tax shall range from 15% to

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65%.

2006 No. C543

Petroleum Profits Tax {Amendment)

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(1) (B) For the purposes of this section:

"Cumulative Revenue" means all revenue received or accrued in respect of gas

operations from the commencement of business to the end of the proceeding

accounting period;

"Cumulative Tax Paid" means all tax liability together with the following
6 indirect taxes levied by competent indirect taxation authorities (NDDC levy and
7 education tax) levied from the commencement of business

8 to the end of the preceding accounting period;

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(1) (C) the assessable tax for any accounting period in respect of upstream gas

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1 operations within a development area shall be an amount equal to the product of rate of

1 tax and the chargeable profits of that period in respect of the said operations".
12 7. Section 45 (1) of the principal Act is amended by inserting immediately

Amendment

13 before the full-stop, the words "except that in respect of upstream gas operations,

of Section 45,

14 tax shall be payable annually".

General

8. Except for sections 2, 8, 9, 12 and 19 and paragraph 5 and 6 of the 17 amendment.

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Second Schedule to the Principal Act, replace the words "petroleum operations" 18
with the words "petroleum operations or upstream gas operations" wherever
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they appear in the principal Act.

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9. The Second Schedule to the principal Act is amended by inserting

immediately after sub-paragraph (1) of paragraph (6), a new sub-paragraph as

Amendment
of the 2nd
Schedule.

follows
"(1) (A) subject to the provisions of this Schedule, where a company owning any
asset has incurred in respect thereof qualifying expenditure wholly, exclusively and
necessarily for the purposes of upstream gas operations carried on by it, there shall be
due to that company as from the accounting period in which the
company commences production as certified by the Minister(" commencement of
production") an allowance (hereinafter called "an annual allowance") at the

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10. Table II to the Second Schedule to the principal Act is amended by

Amendment
of table II to
the second
schedule.

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appropriate rate per centum specified in table II A of this Schedule".
10. Table II to the Second Schedule to the principal Act is
inserting immediately after table II a new table II A as follows

C5M 2006 No.

Petroleum Profits Tax (Amendment)

TABLE II A
For Upstream Gas Operations
"Annual Allowance

Rate Percentum

First year (From commencement of production) ..

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Second year

..

..

..

..

25

Third year ..

..

..

..

..

25

..

..

..

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Amendment
of the Third
schedule to the
principal Act.

Fourth Year
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11. Third schedule to the principal Act is amended by inserting

immediately
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Amendment
of the Fourth
schedule to the
principal Act.
Short Title.

..

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after paragraph (3) a new paragraph (4) as follows

"(4) in respect of upstream gas operations for any accounting period, the
tax due for each such year shall be payable annually".
12. Fourth schedule to the principal Act is amended by deleting it from

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the principal Act.

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13. This Act may be cited as Petroleum Profits Tax (Amendment) Bill,
2006