Uganda Sees 25-45% In Capital Gains Tax On Eni-Heritage Deal

The Ugandan government is expected to levy between 25% and 45% capital gains tax on the proposed takeover of Heritage Oil PLC (HOIL.LN) interests in the country by Italian Oil major Eni SpA (E), the head of corporate affairs at the state-run Uganda Revenue Authority said Wednesday.

Peter Kaujju said that because the deal would involve the takeover of Heritage assets in the country, URA would levy the mandatory 25-45% capital gains tax on the $1.5 billion deal in accordance with the Ugandan tax laws.

"We are not yet sure whether the takeover will succeed and we have yet to be notified officially but we shall be applying the taxes once it goes through," he told Dow Jones Newswires.

If the deal is sealed, this will be Uganda's first tax revenues from the oil sector, since commercial reserves were confirmed along the country's western border in 2006.

According to sources, the government is expected to selectively apply the tax to favor the entry of Eni in the oil sector as it seeks to join the league of oil producers in the next three years.

Heritage is expected to officially inform Tullow Oil PLC (TLW.LN), its co-owner in the two Ugandan blocks, before the end of December. The deal will need the approval of both Uganda and Tullow Oil.

However, Brian Glover, Tullow Oil Ugandan country manager says that the company has already informed the government that it will "seriously" consider taking over Heritage's interest once it receives formal communication. That would scupper the anticipated deal with Eni.

-By Nicholas Bariyo, contributing to Dow Jones Newswires; +256 75-262 4615; bariyonic@yahoo.co.uk

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