Updated guidelines for upstream petroleum industry tax incentive claim

Updated guidelines for upstream petroleum industry tax incentive claim

The IRB has published on its website, updated guidelines for upstream petroleum industry tax incentive claims dated 30 December 2020. The guidelines are in Bahasa Malaysia and are titled “Garis Panduan Tuntutan Insentif Bagi Industri Petroleum Huluan Di Bawah Akta Petroleum (Cukai Pendapatan) 1967 (Pindaan)” (Guidelines). The new 23-page 2020 Guidelines replace the earlier Guidelines dated 22 May 2014 (see Tax Alert No. 13/2014).

The new Guidelines are broadly similar to the earlier guidelines, and provide clarification on whether chargeable persons undertaking petroleum operations in marginal fields and in fields that require intensive capital investment, would qualify for the incentives listed below:

• Petroleum Income Tax (Accelerated Capital Allowances) (Marginal Field) Rules 2013 [P.U.(A) 119] as amended by the Petroleum Income Tax (Accelerated Capital Allowances) (Marginal Field) (Amendment) Rules 2014 [P.U.(A) 58]
• Petroleum Income Tax (Exemption) Order 2013 [P.U.(A) 122] (as amended by the Petroleum Income Tax (Exemption) (Amendment) Order 2014 [P.U.(A) 57]
• Petroleum Income Tax (Marginal Field) Regulations 2013 [P.U.(A) 121]
• Petroleum Income Tax (Investment Allowances) Regulations 2013 [P.U.(A) 120] (as amended by the Petroleum Income Tax (Investment Allowance) (Amendment) Regulations 2014 [P.U.(A) 69]

The key changes are outlined below:

• As highlighted in the earlier tax alert, the previous Guidelines stated that applications for the above incentives are to be submitted to the Malaysian Petroleum Management, Petroliam Nasional Berhad (PETRONAS) for verification of eligibility, before onward submission to the Upstream Petroleum Industry Incentive Commission at the Ministry of Finance for approval. The new Guidelines stipulate that the application for the incentives must be submitted to PETRONAS not later than five years from the date of approval of the Field Development Plan (FDP).
• Examples 8 and 9 of the new Guidelines have been updated to reflect that pursuant to Regulation 13(1) of the Petroleum (Income Tax) (Investment Allowances) Regulations 2013, the chargeable person’s assessable income from petroleum operations in respect of a qualifying project for a YA (i.e. relevant year) shall consist of the amount of his statutory income in respect of a qualifying project for the relevant year from that petroleum operations, reduced by –

(a)    The amount of any adjusted loss for the basis period from the YA preceding the relevant YA; then

(b)    The amount of any investment allowance or the aggregate amount of investment allowance

Previously, the examples showed the utilisation of “investment allowance” before the utilisation of “adjusted loss”.