OT19414 - PRT: Appendices

Model Illustrative Agreement

The main features of the model Illustrative Agreement for tax purposes were:

The licensee remained responsible for meeting all obligations under the licence;

1. The X company undertook to fund all exploration development and operating expenditure for operations under the licence with no provision for reimbursement by the licensee;
2. In return the X company acquired title to all oil won and saved under the licensee’s interest in the licence;
3. The X company was required either to have its central management and control exercised within the UK so as to be resident in the UK for tax purposes, or to conduct its activities under the agreement through a UK branch which would fall to be treated as a permanent establishment within the meaning of the relevant Double Taxation Agreement. Failure to comply with this requirement automatically resulted in the termination of the agreement and the licence.