Finance Act 2014 Chapter iV — AMENDMENTS TO THE PETROLEUM (iNcOME TAX) AcT 1967

commencement of amendments to the Petroleum (Income tax) act 1967

s 36

(1) Sections 37, 38, 40, 42 and 43 shall have effect for the year of assessment 2014 and subsequent years of assessment. (2) Sections 39 and 41 come into operation on the coming into operation of this Act. amendment of section 2

s 37

The Petroleum (income Tax) Act 1967, which is referred to as the “principal Act” in this chapter, is amended in subsection 2(1), in the definition of “entertainment” by inserting after the words “an employee of his” the words “, with or without any consideration paid whether in cash or in kind, in promoting or”. amendment of section 30

s 38

Section 30 of the principal Act is amended by inserting after subsection (2) the following subsection: “(3) The return furnished by the chargeable person under this section shall be based on accounts audited by a professional accountant, together with a report made by that accountant which shall contain, in so far as they are relevant, the matters set out in subsections 174(1) and (2) of the companies Act 1965.”. amendment of section 46

s 39

Section 46 of the principal Act is amended— (a) in subsection (1), by inserting after the words “Subject to subsection” the words “(1a) or”; and (b) by inserting after subsection (1) the following subsection: “(1a) Where a person has made an application to invoke a mutual agreement procedure pursuant to an arrangement under section 65 a and the ground in which the application is made is similar with the appeal filed under this Act— (a) no appeal shall be sent forward to the Special commissioners until the determination of the mutual agreement procedure; (b) the person may within thirty days from the determination of the mutual agreement procedure request to the Director General in writing to forward such appeal to the Special commissioners; and (c) the Director General shall within three months after receiving the request send the appeal forward to the Special commissioners.”. new chapter 1A

s 40

The principal Act is amended by inserting after section 71 the following chapter: “Chapter 1a—Ruling advance Pricing arrangement

s 71A

(1) Subject to this section and any rules prescribed under this Act, on the application made to the Director General by any chargeable person who carries out a cross border transaction— (a) the Director General may enter into an advance pricing arrangement with that chargeable person; or (b) in the case where section 65a applies, the competent authorities may enter into an advance pricing arrangement, in order to determine the transfer pricing methodology to be used in any future apportionment or allocation of income or deduction to ensure the arm’s length transfer prices in relation to that transaction. (2) An application under subsection (1) shall be made in the prescribed form and shall contain particulars as may be required by the Director General. (3) The transactions referred to in subsection (1) shall be construed as a transaction between— (a) companies one of which has control over the other; or (b) companies both of which are controlled by some other person. (4) in this section, “transaction” has the same meaning assigned to it under subsection 72(7). (5) in the case of a petroleum agreement, chargeable person referred to under subsection (1) shall refer to the person in that agreement that enters into a transaction with another company where it has control in accordance with subsection (3).”. amendment of section 72A 41. Section 72a of the principal Act is amended by inserting after subsection (6) the following subsection: “(7) in the case of a petroleum agreement, chargeable person referred to under subsection (2), (3) or (4) shall refer to the person in that agreement that enters into a transaction with another company where it has control in accordance with subsection (5).”. amendment of section 83 42. Subsection 83(1) of the principal Act is amended by inserting after paragraph (ba) the following paragraph: “(bb) providing for the scope and procedure applied in relation to any arrangement made under section 71a;”. amendment of First schedule 43. Paragraph 3a of the First Schedule to the principal Act is amended— (a) in subparagraph (1), by substituting for the proviso to that paragraph the following proviso: “Provided that— (a) the original parties to the petroleum agreement are the same; and (b) the amount of qualifying exploration expenditure of the first mentioned chargeable person is from an agreement area where chargeable petroleum is not being produced.”; and (b) by substituting for subparagraph (2) the following subparagraph: “ (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 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 and any excess thereof shall not be used by another chargeable person in another petroleum agreement where the original parties to the petroleum agreement are the same.”.