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"Sound is Registered in England and Operates under the 2006 Company's Act......."
SEMS who are facing the major tax claim are registered in Rabat. SEMS is "Sound Energy Morocco SARL AU". The acronym stands for a particular type of Moroccan legal entity -- Société à Responsabilité Limitée Associé Unique -- a single-shareholder limited liability company.
Hi Smith
If only it was as simple as that.
Utility- I expect that the tax has a good chance of being paid of over a few years…..but there is no guarantee that Morocco will permit a payment plan.
'''They seem to be basing their judgements on HMRC'
Sound is Registered in England and Operates under the 2006 Company's Act.......
Very well explained ericnat17 Lets hope that Smithfields now understands. I must say there are an awful lot of Moroccan tax experts on this board. I wonder if they are aware that tax laws or rules vary from country to country as does common law. They seem to be basing their judgements on HMRC which is rather laughable. I do not include you in this ericnat17 as you have obviously done your research which is commendable. To finish smithfields no you have not got it right you have it totally wrong. Have a good day
Hi Smith
I think the issue is that the license may be intangible, but I think our balance sheet has the license as property. And is valued on the sound balance sheet at well over over $100million. They Morocco tax authorities are going to use that definition and defined value of the asset against us. That is my understanding anyway.
'The Moroccan Tax Administration sought to justify this tax claim asserting a so-called acquisition of intangible assets from SEMS by SEME.'
So let me see if I've got this right....The Moroccan Government are trying to create a 'Tangible Asset', ie hard cash, out of an 'Intangible Asset' ie, Non Physical Asset.......(In my book...that borders on an elusive magicians trick, ie, creating money out of thin air...The last person I know of who tried that trick was Robert Maxwell))
Agree PS
So we think this is the the potential additional outstanding
“ According to the Moroccan Tax Authority, its assessment of items 3 and 4 above are such that the payment of Corporate Tax, VAT and Withholding Tax are triggered, claiming that for SARL AU alone, additional 2017 liabilities of approximately US$22.5 million are due”
I dont understand all this panic about the cost of lurpak and its quickly becoming the new bog roll and trading on the stock market.
I bought a tub and when i took the lid off there seemed to be an image of jesus..my asian neighbour said..i cant believe its not budda.
"Hopefully, the LTC will decide that the majority of the SARL claim is invalid as they did with the SEME one"
I don't think it can be invalid for the same reason as the SEME one. That one was dropped after the LTC agreed that it was double taxation because of the amount already levied against SEMS. Summarised in the RNS of Aug 6th 2021:
https://www.soundenergyplc.com/investors/regulatory-news-rns/rns-announcement/?rid=3941945
Hopefully, the LTC will decide that the majority of the SARL claim is invalid as they did with the SEME one and SOU will left appealing to the higher courts over fairly small amounts. In any event, if we get Phase 2 up and running any claims upheld will be manageable without major impact on our operations. If claims are upheld, then we may have an action against the lawyers/tax experts who advised SARL and SEME originally.
Hi Green
Thanks for that summary. The reason I thought it was $14 million was a conversation at the AGM and a follow up initial email with the company.
But your reading of it looks correct. So 2.5 + 22.5 = a potential bill of 25 million to be decided relatively soon. I think that this may not be fully appreciated by all of the Share holders, do news needs to be managed. I am sure GL has some good ideas.
The situation is explained in Note 8 of the Financial Statements in the 2021 Annual Report.
The figure of $14m relates to a claim against SEME brought in August 2020. This related to two matters. One related to licensing matters on the Tendrara exploration permits. The second matter relates to the transfer of operator from SARL to SEME. In August 2021, the tax authority dropped the larger part of the claim relating to transfer of intangible assets but not a smaller assessment relating an asset transfer from SEME to Schlumberger. This claim for $2.5m is the one that has recently been upheld.
The claim of $22.2m plus $0.3m penalty charge is a claim against SARL relating to the change in the licensing and ownership arrangement. This is currently under appeal at the local tax committee.
Ok got it. Both claims in my opinion would not proof fatal and would be a bearable burden if spread over a ten year period. As i think it was yourself suggested. That i agree but reading Woundlick`s recent post it brings all of the current problems Sound have into focus.
Joe Creed stated all African governments are crooked so i truly hope we have not invited our nemesis to lunch in the form of the Moroccan bank which has strong links to the powers to be in Morocco. Sound can still make it. We have the acreage the gas is there but do we have the time. Lets hope so. Fingers and toes crossed.
Hi Utility
Yes you are right they are waiting for the details.
But I have asked them a different question. I have asked them to detail the value of the other Claim that they referred to in the recent RNS. It is believed to be either $14 or $22 million, they have just sent me a link to an RNS dated in July 21, which seems to indicate $22 million. That would be a surprise to me as I thought is $14 million. The reason for the 2.5 million judgement looks unrelated to the outstanding claims that are in Due process.
Classic Ramble classic
Ericnat i thought Sound were waiting for the post tribunal reasons for their challenge to the ruling being declined. They cannot give a reason or appeal until that has been received. There see how nice i can be
The Vicar's Salary
At Sunday church the local Vicar explains that he must move on to a larger congregation that will pay him more. There is a hush within the congregation.
No one wants him to leave because he is so popular.
Fred Smith, who owns several car dealerships in Queensland & NSW, stands up and proclaims:
'If the Vicar stays, I will provide him with a new Holden every year and his wife with a Honda mini-van to transport their children!'
The congregation sighs in appreciation and applauds.
Sam Brown, a successful entrepreneur and publican, stands and says, if the Vicar will stay on here, I'll personally double his salary and establish a foundation to guarantee private secondary school education for all of his children!'
More sighs and loud applause.
Agnes Jones, age 88, stands and announces with a smile,
'If the Vicar stays, I will give him free sex.'
There is total silence.
The Preacher, blushing, asks her:
'Mrs. Jones, you're a wonderful and holy lady, whatever possessed you to say that?'
Agnes's 90-year old husband, Joe, is now trying to hide, holding his forehead with the palm of his hand and shaking his head from side to side, while his wife replies:
'Well, I just asked my husband how we could help, and he said, ‘**** him’'.
Hope you're right ericnat17. My concern is that we are now in a situation where everything *should* be extremely favourable to Sound. When progress *should* be very easy (in comparison to the immediate post Parsons era/approaching the last licence renewal date). So why is that a concern? Because if it's not sorted soon I fear it never will be. Very high gas prices/demand, situation in Ukraine, tax situation very manageable in the long term (assuming all other income streams go to plan) etc. If it's not sorted this time, when will it be? I'd say probably never, or only by a different operator.
Despite positive words from GL in the conference call 'everyone wants Sound's gas' - or words to that effect - I am once again at my wits end with this share. The good news is that Sound have a habit of pulling something positive out when I'm about to completely lose my sanity and give up all hope. So who knows? There may be something good in the horizon! GLA
Hi Johnny
Sound team say they had mitigation plans in place, so I should imagine they can pay it off if we can organise a payment plan (not a guarantee)
My concern is that we have x2 big pieces of license work to complete. One within 12weeks and the other by the end of the year. ….the chance of getting a third extension on the license looks a challenge, but not impossible. Now we have a bit of confusion about the TAX of $22 million.
They have to keep a lot of plates spinning….I am sure they have the bandwidth to deal with it all.
If we a couple of bits of not so good news….the SP will take a hit. But if they can get over the tax and licences issues then the SP will recover to a very decent level.
Eric,
Can we absorb that if there is a 10 year deal in place for gas supply?? Do you think it will put off investment?? Cheers.
This is from the link that as sent to me by Sound.
“According to the Moroccan Tax Authority, its assessment of items 3 and 4 above are such that the payment of Corporate Tax, VAT and Withholding Tax are triggered, claiming that for SARL AU alone, additional 2017 liabilities of approximately US$22.5 million are due. These amounts are claimed to be in addition to the approximately US$14 million claimed under the September 2020 Notification in relation to SEMEL. “
Hi Job
I got a response from Sound. Not much in the form of a clarification it is just a link to the 1Jun 21 RNS. Sound don’t appear to be keen on sorting out this confusion. I asked a very clear question about the full potential amount of exposure we have on the Tax issues.
From that RNS the additional amount of liability looks like $22.5 million. As they have sent that link I think we are being asked to assume that is the outstanding amount.
Not after the initial clarification email to which they responded the only outstanding liability is $2.55m.
Much of the conversation that followed (on here) suggested there was more outstanding though.
Have you asked for clarification as well?