Sound Energy, the transition energy company, provides an update further to its announcements of 1 June 2021 and 7 September 2022 with respect to its wholly owned dormant affiliate Sound Energy Morocco SARL AU ("SEMS") and the Moroccan Tax Authority's decisions regarding purported historical taxable events relating to SEMS.
The Local Taxation Committee has upheld the previously notified assertions of the Moroccan Tax Authority in respect of Moroccan taxes purported to be due pursuant to a tax audit undertaken on SEMS by the Moroccan Tax Administration during 2021 and related to fiscal years 2016 and 2017.
The Local Taxation Committee has, in upholding the Moroccan Tax Authority's prior decisions, confirmed that certain purported historical intra Group transactions between SEMS and SEME have taxable base values as per the original tax administration claim as previously informed.
The Local Taxation Committee has not presented a full calculation of the amounts it purports to be due on the taxable base amounts it has now upheld. However, Sound Energy estimates taxes on those taxable base amounts, as previously announced on 7 September 2022, would amount to approximately US$ 19.7 million (reduced from the Company's 1 June 2021 assessed amount of US$ 22.5 million due solely to exchange rate fluctuations).
The Company has 60 days to respond to either accept or challenge the findings of the Local Tax Committee in the Moroccan courts.
The latest decision by the Local Tax Committee in relation to SEMS is in addition to the Moroccan Tax Authorities claims against SEME, the status of which was most recently notified by the Company on 13 July 2022.
Commenting, Graham Lyon (Executive Chairman) 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.