Malaysia legislation
Section 4
Section 4
The First Schedule to the principal Act is amended by inserting after paragraph 3 the following paragraph:
“3A. (1) Where prior to the basis period for the first year of assessment for which a chargeable person under a petroleum agreement is chargeable to tax and that chargeable person incurs qualifying exploration expenditure, there may be deducted from the gross income of another chargeable person in another petroleum agreement in the basis period for a year of assessment of the second-mentioned chargeable person the qualifying exploration expenditure referred to in paragraph 3:
Provided that the original parties to the petroleum agreements are the same.
(2)
The amount of qualifying exploration expenditure incurred by the first-mentioned chargeable person to be allowed as deduction against the gross income of the second-mentioned chargeable person shall be determined in accordance with the following formula:
A x
C
B where
A is the gross income of the second-mentioned chargeable person from a petroleum operation;
B is the total gross income of the second-mentioned chargeable person from petroleum operations;
and
C is the qualifying exploration expenditure; and in the case where the qualifying exploration expenditure exceeds the amount of gross income of petroleum operations or the gross income in respect of a petroleum operation of the second-mentioned chargeable person, the excess of the expenditure—
(a)
shall be allowed to be deducted from the gross income of that petroleum operations for the subsequent years of assessment of the second-mentioned chargeable person; or
(b)
may be deducted from the gross income of another chargeable person in another petroleum agreement in accordance with this subparagraph if the original parties to the petroleum agreements are the same.
(3)
Subparagraph (1) shall not apply to chargeable persons carrying on petroleum operations—
(a)
in the Joint Development Area; or
(b)
in an area under any agreement or arrangement made by the
Government with the government of any territory outside
Malaysia for the joint exploration and exploitation of petroleum in overlapping areas referred to in subsection 65b(1).
(4)
Any amount deducted under subparagraphs (1) and (2) shall be disregarded for the purpose of ascertaining the adjusted income—
(a)
of the first-mentioned chargeable person; or
(b)
where subsubparagraph (2)(b) applies, of the second-mentioned chargeable person.”.
KUALA LUMPUR