Petroleum income tax is a tax imposed on the Chargeable Person on gains or profits derived from upstream petroleum operations pursuant to section 3 of the Petroleum (Income Tax) Act 1967 (PITA).
The petroleum operations definition for this guideline is referred to the interpretation in subsection 2(1) PITA.
Research and development expenditure (R&D) for the purpose of this guideline refers to research and development expenses (including research or study) incurred by the chargeable person to ensure an increase in process efficiency or improvements in the production of existing crude oil and natural gas products.
This guideline explains the tax treatment on expenditure incurred for R&D activities in petroleum operations by chargeable persons under subsection 15(1) and paragraph 1 of the First Schedule of PITA.
R&D expenditure in the exploration phase before the production is eligible for qualifying exploration expenses (Qualifying Exploration Expenses -QEE) under the First Schedule of PITA if it complies with the provisions under the Schedule.
Tax treatment above applies to chargeable persons other than the Petroliam Nasional Berhad and Malaysia-Thailand Joint Authority.
R&D expenditure in the production phase is allowed as a tax deduction under subsection 15(1) of the PITA if it complies with the provisions under that subsection.
R&D activity expenditure funded by any receivables, grant or subsidy is not eligible for tax deduction under subsection 15(1) and First Schedule, PITA.
R&D expenditure examples can be referred to in Appendix 1.
The examples in this guideline are for illustrative purposes only and are not exhaustive.
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