KOTA KINABALU: The Sabah government will cancel all work permits issued to two oil and gas companies if they fail to settle overdue state sales tax (SST) amounting to more than RM97mil.
Sabah Finance Minister II Datuk Seri Masidi Manjun said the government has issued notices to Repsol Oil & Gas Ltd (Repsol) and SEA Hibiscus Sdn Bhd (SEAH), both wholly-owned by Hibiscus Petroleum Berhad, on July 8 requiring them to pay what they owe the state.
“The letters... notified the companies that the state government will stop (issuing) as well as terminate all work passes for their operations in Sabah effective Oct 1 if they fail to settle the SST,” he said during question time at the Sabah state assembly sitting here on Tuesday (July 19).
He added that the SST director had issued notice assessments to both firms on June 21 to claim RM97.31mil which comprised RM65.65mil in overdue taxes and RM31.66mil in penalties.
He said the amount was supposed to be settled in full within 30 days of the notices, adding that the state reserved the right to pursue a civil lawsuit if the companies failed to comply.
This meant the companies needed to make the payments by Thursday (July 21).
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Masidi said, however, a decision was made in a June 22 meeting involving the state government, PETRONAS and the companies concerned that they would apply for a grace period to settle the payments.
“The companies requested a grace period of one week to speak to PETRONAS and inform the state of their decision after that,” he said.
Masidi was replying to nominated assemblyman Datuk Seri Yong Teck Lee on the progress of the action being taken against Repsol and SEAH.
It was reported on June 6 that Repsol had stopped paying SST after the Sabah Finance Ministry did not respond to its appeal against the tax enforcement.
Masidi had then issued a warning to both companies that they were legally obliged to settle the overdue tax.
Hibiscus said Repsol, which has a production-sharing contract (PSC) in the Kinabalu Oil Field, had been paying the SST "under protest" since 2020.
In a group filing, the group said SEAH, which is the holder and operator of the 2011 North Sabah Enhanced Oil Recovery PSC, had not made any SST payment to the state at all.
Hibiscus said Repsol had contested in September 2020 that it sold its crude oil entitlement from the Kinabalu Oil Field at the Labuan Crude Oil Terminal (LCOT) facility "outside the sovereignty and jurisdiction of the state of Sabah" and hence should not be charged the SST.
As Repsol did not receive any reply to its appeal for 20 months since then, Hibiscus said its board had resolved to discontinue the payment of SST, commencing from the lifting of crude oil undertaken on May 24.
Masidi also explained to the assembly that the government reserved the right to take a number of actions to claim payments from non-paying taxable companies under the State Sales Tax Enactment 1998.
Among other measures, he said, the SST director can cancel a company’s sales tax licence, rendering it unable to do business in Sabah.
“The SST director can also request for the Immigration Department director-general to stop anyone (in the company) from leaving Malaysia,” he said.
