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REVENUE MONITORING AND REPORTING Audit procedures and internal and external reporting of revenues

REVENUE MONITORING AND REPORTING Audit procedures and internal and external reporting of revenues. Luanda, 16 of May 2006 Luís Alves – Audit Manager. BACKGROUND . AWARD OF CONTRACT TO DELOITTE BY MEANS OF AN INTERNATIONAL BIDDING. AUDIT PERFORMED ON A YEARLY BASIS. SOME FIGURES:

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REVENUE MONITORING AND REPORTING Audit procedures and internal and external reporting of revenues

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  1. REVENUE MONITORING AND REPORTING Audit procedures and internal and external reporting of revenues Luanda, 16 of May 2006 Luís Alves – Audit Manager

  2. BACKGROUND • AWARD OF CONTRACT TO DELOITTE BY MEANS OF AN INTERNATIONAL BIDDING • AUDIT PERFORMED ON A YEARLY BASIS • SOME FIGURES: - AUDIT OF 100 TAX RETURNS APPROXIMATELY; - 27 BLOCKS: - 3 CONCESSIONED BLOCKS (ALL IN PRODUCTION PHASE)); - 24 PRODUCTION SHARED BLOCKS OF WHICH: - 8 WITH PRODUCTION; - 16 WITHOUT PRODUCTION

  3. STRATEGICAL OBJECTIVES TO ATTAIN • ASSISTANCE TO THE MINISTRY OF FINANCE OF ANGOLA • REINFORCEMENT OF TAXATION CAPABILITY OF THE OIL COMPANIES OPERATING IN ANGOLA • KNOW-HOW TRANSFER AND METHODOLOGIES TO MINFIN TECHNICAL STAFF

  4. NATURE OF THE WORK • AUDIT OF THE OIL COMPANIES ACCOUNTS • AUDIT OF THE OIL COMPANIES TAX RETURNS • TRAINING OF MINFIN TECHNICAL STAFF • STATISTICAL COMPILATION • RECOMENDATIONS

  5. Main goals • Verification of the crude oil sold valuation criteria followed by the Oil Companies and its adherence with applicable law 1. AUDIT OF THE ACCOUNTS • Confirmation that the books and accounting records are maintained adequately and verification that they are in accordance with the Law • Verification of the correct cost accounting in accordance with applicable law

  6. Verification of witholding tax obligations Main goals 2. REVISION OF THE TAX RETURNS SUBMITTED BY THE OIL COMPANIES • Verification of the correct filling of the tax returns considering the applicable tax regime • Verification of the correct calculus and payment of taxes to which the companies are subject to • Verification of the adopted criteria to valuate crude oil • Verification that the costs were accounted according to applicable legislation

  7. Main goals • Decisions at “Direcção Nacional de Impostos” level regarding additional tax settlements concerning withholding tax, personal income tax and capital income tax. 3. OUTPUT OF THE WORK Issue of reports allowing: • Decisions at Fixation Committee level of Petroleum Income Tax with relation to: • Possible corrections to taxable income; • Determination of accumulated recoverable costs available to carryforward; • Determination of costs not fiscally deductable in each year;

  8. Main goals • Implementation of efficient and modern tools (prevention and tax control) 4. TRAINING PLAN • Know-how transfer to MINFIN technical staff • Methodologies development (audit and tax revision)

  9. Accumulated approach and by Province Methodology 5. STATÍSTICAL COMPILATION OF REVENUES AND LOSSES ACCOUNTS PER COMPANY • Approach by Development and Concession areas

  10. Main goals • Analysis and recommendation of control mechanisms which could be implemented in order to maximize the tax efficiency 6. RECOMENDATIONS • Study and recommendation of actions, including changes in legislation

  11. 7. KEY ISSUES • Full revenue capture; • Eligibility of cost at contract level (approval National Concessionary); • Costs essential to oil operations; • Cut-off; • Adequate support documentation; • Bonuses calculation (uplift); • Mechanics of cost oil determination

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