Accounts Payable Policy Is Revised For U.S. and Foreign Vendors

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1 HESS CORPORATION 1501 McKinney Street Houston, Texas To: To Whom It May Concern From: Daniel Fridie Date: November 26, 2014 RE: Revised Accounts Payable Policies for U.S. and Foreign Vendors Accounts Payable Policy Is Revised For U.S. and Foreign Vendors Summary: Effective January 1, 2015, Hess Corporation will adopt updated policies and procedures with respect to disbursements through the Accounts Payable systems company wide in order to ensure compliance with the Foreign Account Tax Compliance Act ( FATCA ), recent legislation that enacted a new U.S. withholding tax regime that operates alongside existing U.S. withholding tax rules. Regarding the Accounts Payable Policy for U.S. vendors, the existing policy to generally require a Taxpayer Identification Number and Form IRS W-9 prior to making a payment to a U.S. vendor is revised to subject formerly exempt payees to the policy; namely, payees with Corporation and Incorporated in their name. Regarding the Accounts Payable Policy for Foreign Vendors, the existing policy to generally require invoices from foreign payees to indicate the nature of the payment and the amount of payment that is U.S. source is revised to subject payees to the policy that have not provided a form establishing status as a U.S. person (and withholding was not performed under the U.S. vendor policy). In addition, invoices from foreign vendors will need to state whether a payment is solely for services. The revisions to the Accounts Payable policies for U.S. and foreign vendors should ensure that Hess obtains the information required from the appropriate vendors to determine whether U.S. withholding is required under FATCA and the existing U.S. withholding tax rules. Based on this information and any tax forms received from the vendor, Accounts Payable will continue to determine whether the payment is exempt from withholding, subject to a reduced withholding rate, or subject to full withholding under the U.S. withholding tax rules (now including FATCA) and proceed accordingly. Revised Accounts Payable Policy for FATCA_Nov Land Admin External Posting Version Page 1 of 512/16/2014

2 Background: FATCA s overall purpose is to impose extensive reporting obligations on foreign financial institutions with respect to accounts used by U.S. persons to evade U.S. tax. To enforce this disclosure, FATCA imposes 30% withholding tax on certain payments made to certain foreign persons unless the reporting obligations are met and reflected on the vendor provided tax form. FATCA also provides some uniformity between FATCA s withholding tax regime and existing U.S. withholding tax rules for U.S. and foreign payees. Any payment made to a foreign vendor through Accounts Payable potentially requires U.S. federal withholding taxes under FATCA unless a specific determination is made, based on certain documentation, that the payee and/or the payment qualifies for an exemption from such rules. Generally, FATCA requires 30% withholding on a payment made to a foreign payee unless the payment: constitutes foreign sourced income to the vendor; constitutes a payment for tangible goods, materials or equipment; constitutes a payment for services; constitutes a payment for ocean transportation; or a vendor-provided tax form establishes an exemption from withholding under applicable FATCA regulations. Though it is anticipated that many of our payments to foreign vendors will constitute payments for tangible goods or for services, it is important to note that certain payments made to foreign payees may require withholding. For any payments which require FATCA withholding, Hess bears liability for payment to the IRS for the amount of any taxes it improperly fails to withhold plus interest and potential penalties. For any payment subject to FATCA withholding rules, Hess must file certain information returns with the IRS and provide the relevant foreign payee with a copy. Failure to comply with the information reporting requirements will expose Hess to potential penalties. Revised Accounts Payable Policy for FATCA_Nov Land Admin External Posting Version Page 2 of 512/16/2014

3 Revised Accounts Payable Policy for U.S. Vendors: Effective January 1, 2015, to assure compliance with recent regulations related to the Foreign Account Tax Compliance Act, Hess Corporation has adopted updated policies and procedures with respect to disbursements through the Accounts Payable systems within Corporate and E&P. Your help is needed for us to have a smooth transition to such new policies. A new Accounts Payable Policy now applies for U.S. vendors. All new U.S. payees and existing payees regarding new contracts will be required to provide a properly executed IRS Form W-9 before the payee is set-up in the master payee account, and the Taxpayer Identification Number will be entered in the master payee account. Certain payees that have been identified by Accounts Payable as being exempt from the IRS information reporting rules will not be subject to such requirements. Revised Accounts Payable Policy for FATCA_Nov Land Admin External Posting Version Page 3 of 512/16/2014

4 Revised Accounts Payable Policy for Foreign Vendors: Effective January 1, 2015, to assure compliance with the Foreign Account Tax Compliance Act, Hess Corporation will adopt updated policies and procedures with respect to disbursements through the Accounts Payable systems company-wide. Your help is needed for us to have a smooth transition. Revised Accounts Payable Policy For all new payees and existing payees regarding new contracts, the following policy applies: 1) Any invoice from a vendor that (a) has not provided a Form W-9 establishing status as a U.S. person and no withholding was performed under the U.S. vendor policy, or (b) has a non-u.s. address or is otherwise known to be a non-u.s. person, will not be paid unless the invoice contains a notation: a) stating, where appropriate, information regarding the nature of the payment that is relevant for U.S. federal withholding tax analysis: i. Payment solely for services, ii. Payment solely for services performed outside the United States, iii. Payment solely for tangible goods, materials or equipment, or iv. Payment solely for services performed outside the United States and tangible goods, materials or equipment b) where the notations in (a)(ii)-(iv) are not applicable, stating the amount of the invoice, if any, that is U.S. source, for example: i. $ of this invoice is U.S. source ii. % of this invoice is U.S. source iii. $ of this invoice is foreign source iv. % of this invoice is foreign source 2) Any payment of an invoice from a vendor that a) has not provided a Form W-9 establishing status as a U.S. person and no withholding was performed under the U.S. vendor policy, or (b) has a non-u.s. address or is otherwise known to be a non-u.s. person, will be subject to 30 percent U.S. federal withholding tax unless Accounts Payable determines the payment (or a portion thereof) is exempt from withholding or qualifies for a reduced withholding rate based on the information gathered in (1)(a) and (b) above and on any documentation received from the vendor indicating that a reduced rate of withholding or an exemption from withholding applies. Requested Action Please advise your foreign vendor contacts of our new policy with emphasis on the need to provide the required notation and any tax forms to establish exemption from or a reduced U.S. withholding tax rate. Of course, solicit assistance from your local Corporate Tax representative as needed to provide explanations to vendors if they make inquiries concerning why information or documentation has been requested. Revised Accounts Payable Policy for FATCA_Nov Land Admin External Posting Version Page 4 of 512/16/2014

5 Thanks for your help in reducing any interruption in timely payments to our foreign vendors during implementation of this new policy. Revised Accounts Payable Policy for FATCA_Nov Land Admin External Posting Version Page 5 of 512/16/2014