Comments sent to Tax Justice Italia

The Group's activities, particularly those in the Exploration & Production segment, which generate the bulk of its income taxes, are structured to ensure that these taxes are paid in the countries of operation, particularly in those that hold oil and gas reserves, in accordance with the contractual and tax regime of each place. This assertion is in no way contradicted by the use of companies that reside in countries other than those in which operations take place, located mainly in the Netherlands and the United Kingdom for the management of activities in third countries where mineral resources are located. These companies, in fact, are always present in these countries with formally registered branches (permanent establishments), fully subject to local legislation and the taxes paid are the same as those that would be paid by local companies.

The reasons for this corporate structure are not for tax purposes and are identified as follows:

• the need to prepare financial statements using the US dollar as the functional currency, which is the prevailing currency in the Oil & Gas sector, in order to avoid accounting for an exchange rate risk that does not exist in essence, which is a possibility precluded by many jurisdictions in which the Group operates;
• the need to operate according to known and somewhat standardised corporate law in order to facilitate the group's operations without fragmenting them from a corporate point of view among the more than 70 jurisdictions where the group is present;
• the possibility of preparing the financial statements for the individual group companies according to the same accounting principles used for the consolidated group financial statements.

Eni published the Country by Country Report developed by the OECD in order to make the contribution in terms of income tax paid in the jurisdictions where the Group operates transparent and intelligible to various stakeholders by providing summary information on its presence. 

First of all, it notes the fact that intra-group services are provided almost entirely by Eni S.p.A. In particular, intra-group services for upstream technical services provided by Italy in 2018 totalled approximately 610 million euros.
Locating insurance business in Ireland generated a net profit of 48.7 million euros in 2018 and does not pursue tax objectives, but rather is the result of a more accessible authorisation regime that this type of business is subject to in Ireland. As far as Eni International BV is concerned, the taxable income identified by you does not derive to a negligible extent from the provision of services but from the provision of financing to the investees of Eni International Holding.

In the sale to Exxon, the capital gains tax of US$ 354 million was determined on the basis of the domestic standard in force in Mozambique. No tax reduction was granted 'after a long negotiation', as stated. The Mozambican tax authorities transparently described the tax determination process in an official announcement on 21 March 2017. Eni did not oppose the determination of the tax despite the taxing power being exclusively attributed to Italy on the basis of the Double Taxation Convention between Italy and Mozambique.

Given that Eni holds a 25% stake in the J/V on Area 4 Rovuma in Mozambique, the company in the UAE is considered as a special purpose entity for the project and is authorised by the Government of Mozambique. The Mozambican state company ENH is also a partner with a 10% stake in the Emirati company. The financing contract with an international consortium of banks was also approved by the government. The application of the 0% withholding tax was also subject to authorisation by the Mozambican Tax Authority.  In view of the above facts, to conclude that 'resources equivalent to the withholding tax on interest payments are taken away from the Mozambican government' and that 'resources are indirectly taken away from developing countries' is not a correct objective assessment of the facts considering first and foremost the consent and concurrence of the Mozambican governmental authorities in defining the contractual schemes for gas resource development projects and their ratification. All of Eni's intragroup loans to its Mozambican subsidiaries for the amounts not covered by the bank loan are subject to the 20% domestic withholding tax and are not made through the vehicle company in the Emirates.