Saudi Arabia approved 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, Arab news reported on March 28, 2017.
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.
Saudi Aramco will see its income tax rate fall from 85 % to 50 %, 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 January 1.
Saudi Arabia aims to sell as much as 5 % 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 % 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.
«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», Energy Minister and Aramco Chairman Khalid Al-Falih said in a statement.
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