Accruable income for Contractors under Contracts for Exploration and Extraction of Hydrocarbons
Pursuant to the provisions set forth in Article 31, paragraph II of the LISH, Contractors must have as their sole corporate purpose the Exploration and Extraction of Hydrocarbons; this matter is extremely relevant to determine the origin of accruable income that such entities are enabled to receive.
As a result of this restriction in their corporate purpose, Contractors may not carry on with any kind of activity other than Exploration and Extraction of Hydrocarbons, which from the Income Tax perspective implies that such entities will only receive accruable income from these activities, and cannot receive any other kind of income for any other activities.
Accruable income from the Exploration and Extraction of Hydrocarbons are the considerations received according to the nature of each of the Contracts in which Contractors take part; it is therefore essential to analyze the several considerations set forth in each one of those Contracts for this purpose, since these considerations will constitute accruable income when they represent a positive change in the Contractor's assets and estate.
That in the understanding that pursuant to the provisions set forth in Article 29 of the LISH, the consideration that Contractor is entitled to receive for its participation in the Contracts for Exploration and Extraction of Hydrocarbons, shall be paid once the Contractual Production is obtained; understanding as such these Hydrocarbons extracted in the Contractual Area, measured pursuant to the provisions issued by the CNH in the Point of Measurement, for the corresponding Period. Until there is such Contractual Production, Contractor is not entitled to receive any consideration or advance payment whatsoever.
While the Contractors' corporate purpose is limited to Exploration and Extraction of Hydrocarbons, the above does not imply such Contractors are prevented from carrying out any other activities that are required for the adequate compliance of such corporate purpose; therefore, such entities may well acquire real estate properties, obtain credits, subscribe credit instruments and, in general, carry on with any activity geared to the full execution of its corporate purpose.
The above opens the possibility to accidental or extraordinary acts that cause accruable income, such as the sale of those real estate properties; in which case, the Contractor must accrue such accidental or extraordinary income to those coming from...