Uganda Energy Min Says Heritage Oil Must Pay Capital Gains Tax

19th Jun 2010 08:01

KAMPALA, Uganda (Dow Jones)--London-listed Heritage Oil PLC (HOIL.LN) must pay capital gains taxes on its proposed sale of Ugandan assets, Uganda's energy and minerals minister said late Friday. According to Hilary Onek, the oil assets belong to the Ugandan people and as such, Heritage is obliged to pay the taxes if it needs the government to sanction the up-to-$1.5 billion sale of its stakes in blocks 1 and 3A to U.K.-based Tullow Oil PLC (TLW.LN). "Our position as government still stands, there is no need of going for arbitration in London, Heritage should just pay the tax," he said. Talks between government and Heritage have dragged on since February over the capital gains tax on the sale of its assets in the Lake Albert basin. Whereas the government insists that Heritage must pay at least $360 million in capital gains taxes on the sale, Heritage announced Thursday that it would seek arbitration to resolve a tax dispute. "Heritage has proposed that the outstanding tax dispute be submitted to binding arbitration in London and has offered to deposit $108 million with the Ugandan Revenue Authority on its receipt of the cash consideration of $1.35 billion on closing, which would be refunded to Heritage if it is ultimately determined that no tax is payable," Heritage said in a statement. A Heritage spokesman could not comment on the minister's remarks immediately. The purchase of Heritage interests will allow Tullow to hold a 100% stake in three blocks where close to one billion barrels of oil have been discovered. Tullow has already presented its partnership terms with China's Cnooc Ltd. (CEO) and France-based Total SA (TOT) to the Ugandan government for the development of the fields. Ugandan President Yoweri Museveni said during the annual national address earlier this month that Uganda would not allow the sale without the capital gains tax. People familiar with the situation say that the standoff could delay the development of oil fields, slated to commence later this year. -By Nicholas Bariyo, contributing to Dow Jones Newswires; 256-75-2624615 [email protected] (END) Dow Jones Newswires June 19, 2010 03:01 ET (07:01 GMT)