Doing business in

Democratic Republic of Congo

2012 Africa Oil and Gas Tax
Workshop: Sub-Saharan Africa
Paris, France
2324 February 2012

Contents

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

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

The Democratic Republic of Congo (DRC) is

located in central Africa

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan 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DRC Ordinance No.81-013 of 2 April 1981 is obsolete.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.

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

Recent and expected legislative changes

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:

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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
Doing business in Democratic Republic Congo
2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

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)

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

Taxation

Tax 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

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

Taxation

Tax 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 Domanial
Receipts (DRGAS) and Directorate of Customs and Excise (DGDA)

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

Subcontractor regime specifics

Subcontractors are exempt from all taxes that are not

payable by the title holders and their affiliates.

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

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:

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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.

Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

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

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

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.

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Doing business in Democratic Republic Congo

2012 African Oil and Gas Tax Workshop: Sub-Saharan Africa

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