Local advantages in Equatorial GuineaApril 2, 2018
Alexis Moutome, tax and legal services partner at EY Equatorial Guinea, talks to TOGY about compliance with local content regulations, access to financing for smaller companies, the “single desk” regime and tax amnesty. EY has had a presence in Equatorial Guinea since 2001, providing audit, accounting, tax and legal services to oil and gas companies, among others.
• On industry recovery: “Times are very, very difficult and most of the companies that are still here are just trying to maintain their current basic activities. Most of them have suffered a lot and many companies closed their doors for a long time. For the moment, we can’t see a recovery because when companies close their doors, sometimes it takes more time to bring back the materials or people.”
• On local work issues: “Local companies are suffering, as they don’t have too much work because majors are giving most of the work to foreign subcontractors. Majors should give local companies a chance to do jobs, as is stated in the national local content regulations.”
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How are companies in Equatorial Guinea weathering the low oil price environment?
Times are very, very difficult and most of the companies that are still here are just trying to maintain their current basic activities. Most of them have suffered a lot and many companies closed their doors for a long time. For the moment, we can’t see a recovery because when companies close their doors, sometimes it takes more time to bring back the materials or people.
For the majors that are operating here, only one was doing something quite good last year. Based on discussions we have had with some operators, I think we will see some improvement by the end of 2018.
What improvements does the government’s new “single desk” regime bring to companies operating in the country?
Now we only have to go to one place to do everything with regards to setting up new companies. The “single desk” will help in the sense that you can find local and foreign companies in the same place, and if a foreign company needs a merger or to be in compliance with local regulations, they know where to find suitable information to get into compliance.
This “single desk” has been enacted by decree and now the government is trying to put everything in place. They are building the structure and they will probably be in operation by the end of 2018.
What can be done to provide support for local companies seeking work?
Local companies are suffering, as they don’t have too much work. Majors are giving most of the work to foreign subcontractors. Majors should give local companies a chance to do jobs as is stated in national local content regulations.
In my opinion, the law is clear and the Ministry of Mines and Hydrocarbons should start doing inspections to ensure that companies are getting into compliance. Only inspection can provide a chance for these companies to put in place what is stated in the national regulation.
They should be internally organised with regards to how they are going to proceed and when they are going to start the inspection. To my knowledge, they have not started yet. I think it should have an internal deadline put it in place.
Are local banks providing financing to local contractors?
Generally speaking, I think that banks can assist companies. Those companies just need to provide a financial statement and an overview of how they are going to manage the projects over one, two or three years. They will give that to the banks, the banks will review it, and then decide how to assist them. It will also depend on the contracts. Based on that, they can discuss options.
How adequate is Equatorial Guinea’s taxation system?
Compared to surrounding countries, we are okay in EG. The corporate income tax rates are average here, compared to Gabon or Cameroon, which are higher. The main challenge we are facing concerns tax inspection. We still have this problem with the Ministry of Finance, the Economy and Planning and the Secretary of State in charge of audits.
According to EY, both departments should work together, because compared to other countries, EG is the only country where you can have one audit from each ministry or administration. For a taxpayer, it’s time- and energy-consuming. Based on the discussions I have had with both, they are working on that. Hopefully they will solve that very soon.
Once this is solved, companies will probably feel a little bit more secure because when you are coming to a country, you know you only have one tax auditor and once it is finalised, it is closed. You will feel more secure.
What are EY’s latest developments in the country?
We believe that the situation will normalise by the end of 2018. That is why we maintain our staff, so that when the work comes, we still have the staff.
The presidency of the republic made Law No. 9/2017, dated November 20, 2017, concerning tax amnesty. The law was published in early January 2018, and now they have to implement it. EY is here to help companies take advantage of this law, which says that if you have a tax situation that you have not declared, you can come to the tax administration and declare it and they will cancel some penalties.
If a company has this issue, they will have until the end of 2019 to solve the situation. Companies should take advantage of this. We want to let companies know there is a tax amnesty law that they should take advantage of.
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