OREANDA-NEWS. Investors and operators are challenged to comply with complex income and resource tax regimes and manage indirect taxes and custom obligations across supply chains, while ensuring they don’t miss out on exemptions, incentives and recoveries. And the unprecedented features of massive, mobile FLNG projects create a raft of additional tax challenges.

What are the top tax issues being encountered by LNG and FLNG producers and investors? In a new report titled “Managing tax in the LNG and FLNG industry: Lessons from the front lines”, KPMG energy and natural resources tax professionals from member firms in Australia, Canada, Japan, Nigeria and South Africa share leading practices, lessons learned and key actions for effective tax management.

“With upfront planning, investors can arrange their participation in LNG projects in ways that ensure that their tax position is well defined,” says Andr? Boekhoudt Partner, Global Head of Energy & Natural Resources Tax Energy & Natural Resources Tax, Meijburg & Co.

In the report, readers will find insights on some of the questions that should be top of mind; such as:


  • Have tax incentives and requirements related to LNG activities in all relevant jurisdictions been investigated and confirmed?
  • Is access to research and development incentives in all relevant locations being optimized through a globally integrated plan?
  • Have the tax effects of alternative ways of structuring LNG investments been explored?
  • Are the rationale and documentation of tax positions strong enough to withstand possible tax authority challenges?
  • Are transfer pricing policies sufficiently verified and documented?
  • Are there opportunities to achieve tax certainty through advance pricing arrangements with local governments?

Member firm quotes

“While uncertainty may dampen natural gas exploration and production activity in South Africa for the time being, the government’s priority on natural gas is expected to produce positive results for the LNG industry in the future.”

- Di Hurworth, Director, Global Energy & Natural Resources and Indirect Tax, KPMG in South Africa

“A new transfer pricing regime was introduced with effect for 2014 and later tax years. The first round of transfer pricing audits is in its early days, and how the tax authorities will apply the rules in practice remains to be seen.”

- Victor Onyenkpa, Partner & Head, Tax, Regulatory & People Services, KPMG in Nigeria

“In setting transfer prices for LNG and other resources, Japan’s tax authorities expect companies to follow market prices, which can present challenges in allocating profit to holding or trading companies in low-tax jurisdictions.”

- Kenichi Takashima, Partner, M&A/Global Solutions, KPMG in Japan

“In establishing its tax treatment for LNG, Canada has sought to ensure its overall tax treatment remains globally competitive.”

- Mary Hemmingsen, Partner and National Sector Leader, LNG and Power and Utilities, KPMG in Canada

“Because FLNG projects are completely offshore, they involve much less infrastructure and generate less onshore economic activity and local tax revenue.”

- Kate Law, Partner, Indirect Taxation – Energy and Natural Resources Leader, KPMG Australia

“Despite some misconceptions, personnel working on the FLNG vessel (in Australian waters) have similar personal income tax obligations to those working onshore.”

- Daniel Hodgson, International Executive Services Partner, KPMG Australia