New tax regime to boost Aramco IPO value

March 28, 2017

Jeddah, Mar 28: Saudi Arabia approved Monday a new tax regime for oil and natural gas producers in the Kingdom, which will boost Saudi Aramco’s valuation as it plans to sell shares in its initial public offering (IPO) next year.

Under the new regime, hydrocarbon companies in Saudi Arabia will be taxed depending on their capital, according to a royal decree issued Monday and posted on the website of the Saudi Press Agency (SPA).

Companies with capital of more than SR375 billion ($100 billion) will pay 50 percent income tax. Those with capital between SR300 billion and SR375 billion will pay 65 percent tax.

Companies with capital between SR225 billion and SR300 billion will pay 75 percent, and those with capital below SR225 billion 85 percent.

Saudi Aramco will see its income tax rate fall from 85 percent to 50 percent, CEO Amin Nasser said Monday, adding that the new rates will put the company in line with international benchmarks. The new rate is effective retroactively from Jan. 1.

Saudi Arabia aims to sell as much as 5 percent of the company late next year in an IPO. With the drop in its tax rates, future investors who are interested in buying Saudi Aramco shares will see more cash flow.

This will be positive news for the company’s valuation, which the government estimates to be at least $2 trillion.

“The 50 percent tax rate will be very lucrative to investors who should be gearing up for its privatization,” said John Sfakianakis, director of economic research at the Gulf Research Center Foundation in Riyadh.

“This is one of many steps that will begin a process of investor-friendly initiatives that will help in wetting appetites,” he added.

“The royal decree falls in line with an earlier promise that Saudi Arabia will reduce the overall tax rate paid by its national oil company to make its 2018 IPO — potentially one of the largest in history — more appealing to investors.”

But the fall in tax rates does not mean the government will lose income. “Any reduction in tax revenues arising from this Royal Order is replaced by stable dividend payments and other sources of revenue from hydrocarbon producers to the government,” Energy Minister and Aramco Chairman Khalid Al-Falih said in a statement.

“It is very important to make it clear that the hydrocarbon resources of Saudi Arabia remain sovereign.”

Saudi Aramco welcomed the introduction of the new tax regime as another positive step in diversifying the Kingdom’s economy.

“We thank… King Salman… for the Royal Order,” said Nasser. “The new tax rate will bring Saudi Aramco in line with international benchmarks.”

Nasser said the company will continue to make a critical contribution to the diversification and growth of the Saudi economy in line with Vision 2030.

Comments

Add new comment

Coastaldigest.com reserves the right to delete or block any comments.
Coastaldigset.com is not responsible for its readers’ comments.
Comments that are abusive, incendiary or irrelevant are strictly prohibited.
Please use a genuine email ID and provide your name to avoid reject.

Yemeni armed forces shoot down US MQ-9 drone, strike British oil tanker in retaliation

News Network

April 27,2024

The spokesman for the Yemeni Armed Forces has said it has carried out new operations against American and British targets in retaliation for their aggression on the country.

Brigadier General Yahya Saree said on Friday that Yemen’s naval forces struck a British oil tanker in the Red Sea with missiles.

Saree also said the military also shot down an American MQ-9 drone in Sa’ada province.

He added that the new operations were also a show of solidarity with Palestinians in the Gaza Strip, amid the Israeli genocide there.

“The Yemeni Armed Forces salute all the people of Yemen for their faithful response to the call of the fighter leader Sayyed Abdulmalik Badr El-Din Al-Houthi, may Allah protect him, in their unprecedented large-scale interaction in support of our oppressed brothers in the Gaza Strip, affirming support for the Armed Forces in their military operations against the ‘Israeli’ enemy and against the American-British aggression supporting it in the Red and Arabian Seas and the Indian Ocean,” Saree said.

He stressed that the Yemeni armed forces will continue operations in the Red and Arabian Seas as well as the Indian Ocean until the Western-backed Israeli genocide comes to a halt.

Since the start of the brutal campaign in Gaza, the regime has killed more than 34,300 Palestinians and injured over 77,000 others. It has cut off fuel, electricity, food and water to the more than two million Palestinians living there.

The Yemeni Armed Forces have been targeting Israeli vessels or those “associated” with the occupying regime in the Red Sea and the Arabian Sea since October 7, 2023.

The regime ignited its bloody war machine in the besieged Palestinian territory on that October day in response to Operation Al-Aqsa Storm conducted by the resistance movement Hamas.

The maritime attacks have forced some of the world’s biggest shipping and oil companies to suspend transit through one of the world’s most important maritime trade routes.

Tankers are instead adding thousands of miles to international shipping routes by sailing around the continent of Africa rather than going through the Suez Canal.

The pro-Palestine maritime campaign has also prompted airstrikes by the US and its allies on Yemen – in violation of the Yemeni sovereignty and international law.

In consequence, Yemen’s armed forces have declared US and British vessels as legitimate targets.

Comments