Guidelines

Remarks
(Please access the Guidelines for the full details)

Guidelines on Tax Treatment for Reseach and Development ("R&D") Expenditure under Petroleum (Income Tax) Act ("PITA") 1967
(22 Jun 2023)

These Guidelines explain the tax treatment on expenditurre incurred for R&D activities in petroleum operations by chargeable person as follows:

  1. Allowed as a deduction under S.15(1) of PITA 1967
    · R&D expenditure in production phase if it complies with the provisions under S.15(1).
    · Examples in Appendix 1 of the Guidelines.
  2. Eligible for qualifying exploration expenses under First Schedule of PITA 1967
    · R&D expenditure in the exploration phase prior to the production if it complies with the provisions under the First Schedule.
    The above applies to a chargeable person other than Petroliam Nasional Berhad or Malaysia-Thailand Joint Authority.
    · Examples in Appendix 1 of the Guidelines.
  3. Not eligible for deduction under S.15(1) and First Schedule of PITA 1967
    · R&D activity expenditure that is funded by any receivables, grant or subsidy.
    · Study on the development of new block of a Production Sharing Contract ("PSC") which yet to be awarded.
Guidelines on Tax Treatment on Lease Expenses for Special Assets under PITA 1967
(20 Jun 2023)
These Guidelines provide clarity on the tax treatment of lease expenses for special assets such as Floating Production System (“FPS”), Floating Production Storage & Offloading (“FPSO) and Floating Storage & Offloading (“FSO”) under the provisions of S.15(1) of PITA 1967 as follows:
  1. The lease applicable under these Guidelines is the lease for the use of an asset with the ownership rights of the asset remaining with the lessor at the end of the lease period.
  2. Generally, lease expenses are recurring rental payments, revenue in nature and part of the expenditure in generating income.
  3. Lease expenses incurred by the lessee are allowed under S.15(1) provided that the expenditure is wholly and exclusively incurred in the basis period in the production of gross income.
  4. lf the expenditure incurred is a qualifying capital expenditure under the Second Schedule of PITA 1967,a claim for capital allowance is allowed.
An example is provided in Para 5.3 of the Guidelines.

References:

1.  HASiL - Technical Guidelines on Tax Treatment for R&D Expenditure under PITA 1967(22 Jun 2023)

2. HASiL - Technical Guidelines for Tax Treatment on Lease Expenses for Special Assets under PITA1967 (20 Jun 2023)

Tag / Keywords: