Income Tax Act (Cap. 123), article 23

23. (1) Where any person engaged in the business of exploration for, and the production of, petroleum (hereinafter referred to as "the Contractor") derives, or aims to derive, ga ins or profits through a Production Sharing Contract (hereinafter refe rred to as "the Contract") granted to such person by the Government of Malta by way of licence in accord ance with the provisions of th e Petroleum Production Act, the Continental Shelf Act and the Petroleum (Production) Regulations, or any provision amending o r substituting the said Acts or Reg ulations, the chargeable incom e of the said person from such busine ss shall be determined as set o ut in this article. (2) ( a) The gains or profits derived by the Contractor from the production of petroleum for any basis year, being the year immediately preceding a year of assessment, shall be arrived at by deducting the recoverable costs as defined in the Contract and not yet fully recovered by the Contractor, from the total of the value of the cost recovery petroleum and of the share of profit petroleum, as defined in the Contract, allotted to the Contractor for that year, to which shall be added any *Applicable from year of assessment 2025. INCOME TAX [CAP. 123. 109 ancillary or incidental income for the same year. (b) Where after such deduction as is referred to in paragraph ( a) there remains any balance of unabsorbed recoverable costs, the amount of such unabsorbed costs shall be carried forwa rd to the following year and shall be added to and become part of the recoverable costs for that year. (c) The procedure referred to in paragraph ( b) shall be followed in subsequent years until all recoverable costs shall have been absorbed. (3) ( a) For the purposes of this art icle, particularly for the purposes of sub-article (2) , each Contract shall be deemed to constitute a separ ate and distinct source of income and any Contractor deriving gains or profits from more than one Contract shall be subject to tax as if he were a separate and unconnected person with respect to each such Contract. (b) Where more than one petroleum field is in production in an area covered by the same Contract, the gains or profits from each such field shall be determined as if each such field constitutes a separate and distinct source of income arising to a separate person, so however that the Contractor shall have the right to identify the fields in the said area where the cost of exploration and development operations are to be taken into account in determining the relative gains or profits. (4) The provisions of articles 16 to 22 shall not apply in the case of any company in any year in which the company is operati ng under a licence referred to in sub-article (1). (5) ( a) Notwithstanding anything contained in the Income Tax Acts, where a non-resident sub-contractor renders services to a Contractor in Malta, such Contractor shall withhold tax at the rate s et out in article 56(13)( b) on payments made to the sub -contractor for services rendered in Malta and shall pay to the Commissioner any tax so withheld within thirty days from the making of the deduction. Cap. 372. (b) Where a Contractor fails to deduct and pay tax in accordance with paragraph ( a), the provisions of article 73(4) of this Act a nd of article 40(1) of the Income Tax Management Act shall apply mutatis mutandis . (c) The tax withheld in accordance with paragraph ( a) shall be considered as a final withholding tax unless the sub-contractor notifies the Commissioner that this tax is to be considered as a provisional tax payment to be credited against the tax liability of the said sub- contractor’s chargeable income for the relevant year of assessment computed i n accordance with the 110 CAP. 123.] INCOME TAX provisions of the Act. (d) The notification referred to in paragraph ( c) shall be made by not later than the tax return date for the relevant year of assessment and in such form as the Commissioner may require. (6) Except for gains or profits derived from the production of petroleum referred to in sub-articles (1) and (2), any income o r deemed income derived by a Contractor and subject to tax under any of the provisions of this Act shall be s o brought to charge in accorda nce with the said provisions and at the a pplicable rates, but no deducti on shall be granted thereagainst in resp ect of any loss or outgoing expe nse incurred in connection with the exploration for or the producti on of petroleum. Balancing statement, balancing allowance and charge. Added by: XXV . 1960.7. Amended by: XLII. 1975.5; XXVI.1977.7; XXVIII. 1978.8. Renumbered by: XVII. 1994.2. Amended by: XVII. 1994.14.