A complete rewrite of the Ninth Schedule "the Schedule" is contained in the 2014 Finance Bill that has now been published. All players in upstream and midstream oil and gas subsector have been impacted by the revamped Schedule to the Income Tax Act. Changes to the Schedule also impact stakeholders in the mining and geothermal subsectors.
Generally the proposed Schedule has attempted to remove inconsistencies between the Production Sharing Contracts (PSC’s) and the Income Tax Act (ITA). The proposed changes have tried to align the tax provisions in the ITA with the tax provisions in the PSCs.
The changes have abolished the withholding tax (WHT) regime that was applicable on farmout transactions and share sale transactions. This should be a welcome move as the oil and gas sector was being adversely impacted by the tax.
The revamped Schedule does not, however, deal with natural gas and its peculiar tax and accounting issues. New defi nitions have been introduced and existing ones expanded e.g. consideration, exploration and development costs, disposal, person, underlying ownership amongst others.