They got caught using loopholes.

Allafrica.com
Maputo — The Italian energy company ENI has agreed to pay 400 million US dollars in capital gains tax to the Mozambican authorities.

The tax agreement was announced on Tuesday when the ENI Chief Executive Officer, Paulo Scaroni, met Mozambican President Armando Guebuza in Changara district in the western province of Tete.

ENI heads the consortium exploring for hydrocarbons in Area Four of the Rovuma Basin, off the coast of the northern province of Cabo Delgado, where vast deposits of natural gas, amounting to some 80 trillion cubic feet, have been discovered.

ENI signed an agreement on 13 March with the China National Petroleum Corporation (CNPC), under which CNPC was to pay 4.21 billion US dollars for 28.57 per cent of the ENI stake in Area Four. Since ENI held 70 per cent of the rights to Area Four, this equated to 20 per cent of the total stake.

When, in 2012, the London-registered company Cove Energy sold its 8.5 per cent stake in the gas field in offshore Area One to the Thai state oil company PTT, the Mozambican government imposed capital gains tax at a rate of 12.8 per cent.

But it was reported in March that ENI was exploiting an apparent tax loophole, and intended to pay no capital gains tax at all.

The trick was that CNPC was not buying its stake in Rovuma Basin Area Four directly from ENI. Instead it acquired a 28.57 per cent holding in the subsidiary ENI East Africa, whose sole asset is the block in the Rovuma Basin.

The Paris-based magazine "Africa Energy Intelligence" claimed that this transaction "will enable ENI to skirt around paying tax while putting the full 4.2 billion dollars on its books".
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