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Sound Energy PLC on Wednesday reported that the local taxation committee has upheld the previous ‘assertions’ of the Moroccan tax authority.
Shares in the Morocco-focused upstream gas company were down 14% at 1.24 pence each in London on Wednesday afternoon.
The local taxation committee has confirmed that ‘purported’ intra group transactions between Sound Energy and its wholly owned affiliate Sound Energy Morocco SARL AU have taxable base values. The tax claims date back to a tax audit undertaken by the Moroccan tax administration during 2021 relating to fiscal years 2016 and 2017.
The company estimates that taxes on those base amounts would amount to $19.7 million, reduced from the $22.5 million estimate made in June 2021 due ‘solely’ to exchange rate fluctuations.
Sound Energy has 60 days to respond to either accept or challenge the findings of the local tax committee in the Moroccan courts.
Executive Chair Graham Lyon said: ‘The tax authority continues to frustrate the company's progress in Morocco, detracting its efforts away from satisfying the Moroccan need to provide gas to its power stations. One of the attractive features of Morocco from an industry perspective is its investment promoting fiscal code as laid out with the hydrocarbon code. This includes a 10-year exemption from corporation tax for upstream producers, as well as clearly defined import duty and VAT exemptions.
‘With Sound Energy deep into its micro-LNG project development and on the cusp of sanctioning a large pipeline development these distractions are jeopardizing their successful undertaking,’ he continued.
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