Harvest Natural Resources announced that Harvest Vinccler, C.A. (HVCA), its 80 percent owned Venezuelan subsidiary, received a preliminary income tax assessment claim of approximately 184 billion Venezuelan Bolivars from the SENIAT, the Venezuelan income tax authority, related to fiscal years 2001 through 2004. At the official exchange rate of 2,150 Bolivars per U.S. Dollar, the dollar equivalent of the preliminary tax assessment is approximately $85 million. In addition, the SENIAT imposed penalties equal to 10 percent of the preliminary tax assessment claim for a total claim of 202 billion Bolivars, or approximately $94 million. Previously, the SENIAT announced that it was auditing the tax payments for all companies delivering oil to PDVSA under operating service agreements and intended to retroactively increase the income tax rates.
The Company is in the process of reviewing the assessment, but believes HVCA has met its tax obligations in all material respects. HVCA and the Company intend to take all measures necessary to protect their rights, and will vigorously challenge all elements of the assessment that are not supported by Venezuelan law. HVCA has the right to challenge the assessment from SENIAT by filing an answer. SENIAT is required to respond to the answer within one year. During the period in which SENIAT considers the answer, any payment obligation is suspended.