Improving Malaysian petroleum income tax act: interpretation of chargeable person among oil and gas industry players

The Petroleum Income Tax Act of 1967 (PITA) governs the taxation of joint ventures and implements the ring-fencing concept for upstream activities taxation in Malaysia's oil and gas sector. However, robust interpretative frameworks are essential to prevent revenue leakage and protect the government's tax base. This study examines the interpretation of chargeable person (CP) among oil and gas industry taxpayers within the context of Malaysia Petroleum Income Tax Act of 1967 (PITA), focusing on joint ventures (JV) status. Using action research methodology, this study engaged 18 participants involved with oil and gas industry who are IRBM auditors, taxpayers and policymakers through focus group discussions. The research was conducted in two systematic cycles. The first cycle encompassed planning, observation, action, and reflection, addressing critical issues identified in the preliminary study: ring-fencing, selling price determination, and cost allocation. These issues were analyzed and presented to the focus group for comprehensive discussion until theoretical saturation was reached. The second cycle developed an interpretative model based on the focus group findings. The intervention results confirm that JVs qualify as CPs under PITA despite their status as unincorporated partnerships. This interpretation stems from the binding nature of memoranda of understanding between parties, which provides legal standing for dispute resolution through court proceedings. The findings provide a detailed framework for interpreting CP status, strengthening tax compliance and protecting government revenue. While participants did not recommend PITA amendments, they emphasized the need for comprehensive rulings and guidelines for taxpayers. This research significantly expands upon the public ruling issued in November 2023, providing an analytical framework for interpreting JV status as CP under tax law. The findings contribute to theoretical understanding and practical application of petroleum taxation in Malaysia.