The draft federal law On Amending Chapter 26 of Part II of the Tax Code of the Russian Federation regarding tax incentives for the production of hard-to-recover (or difficult) oil reserves was drafted by the Ministry of Finance in accordance with Government Directive No. 700-r dated May 3, 2012 and the Government Instruction of December 20, 2012.

The draft law calls for the introduction of differentiated MET (Mineral Extraction Tax) rates depending on reservoir permeability, degree of field depletion and size of net pay.

The degree of field depletion, reservoir permeability and the size of net pay are to be calculated by the taxpayer on the basis of the government register of the balance of oil reserves approved in the year preceding the tax period’s year.

To ensure reliable reporting of the amount of oil produced, the draft law calls for direct separate metering of oil output per well and for the approval of Government regulations on calculating the amount of different types of natural resources for the purpose of accounting, including taxation.

The draft law was considered and approved at a Government meeting on June 17, 2013.