How does joint venture between government and oil companies work?

Primarily the joint venture between the government (through its entity, the NNPC) and oil companies can take place by virtue of the joint participation in the oil prospecting license (OPL) or oil mining lease (OML) or production sharing contract (PSC).

What is the profit of a joint venture?

Combining all the transactions, the memorandum income statement would be as follows: From the joint venture memorandum income statement, we can see that the profit of the joint venture is 11,400, Business A will receives 60% (6,840) and Business B will receive 40% (4,560).

What are the benefits of joint ventures in Nigeria?

In the oil and gas operations, JV partners in proportion to their participatory interests contribute funds. Finally, joint ventures have also provided sustainable development through contribution to environmental, social and economic sustainability in Nigeria.

When to use a joint venture ( JV ) agreement?

A joint venture agreement may be the ideal arrangement for your business entity if you need to accomplish a short-term project. What is a Joint Venture (JV)? A joint venture, or JV, is a type of business arrangement where two or more parties make an agreement to pool all of their resources to achieve a specific goal.

How are profits extracted from a joint venture company?

Shareholders could extract profits from a joint venture company by the payment by the joint venture company of dividends, interest or royalties or licence fees. Interest, royalties and licence fees may be tax deductible for the joint venture company, subject to anti avoidance provisions such as the transfer pricing rules.

What happens if shares are transferred in a joint venture?

If shares are transferred in stamp duty could become payable by the joint venture company. For more on this see Out-Law’s introduction to stamp duty guide. The transfer could also give rise to a VAT liability.

When do you need to use a joint venture?

A joint venture is particularly useful where the joint venture partner is familiar with the local market and has existing business relationships. It is also often used in scenarios where there are foreign ownership restrictions prevalent in the relevant jurisdiction.

What happens to the tax liability of a joint venture?

If the partnership disposes of a capital asset each partner will make a disposal of its share in the asset and will be subject to tax depending upon their personal circumstances. A change in profit sharing ratios can result in a tax liability for a partner whose share is reduced.