Malaysia

Shell has been present in Malaysia since 1891. Shell Malaysia has a number of production sharing contracts (PSC) for oil and gas production, including its deep-water platforms in Sabah. Shell MDS (Malaysia) Sdn. Bhd. (Shell MDS) produces gas-to-liquids products, high-quality waxes, specialty chemicals and transport fuels, which are marketed in more than 50 countries. Shell Malaysia has around 950 retail sites. In March 2018, Shell completed the divestment of its 50% interest in the North Sabah enhanced oil recovery PSC (North Sabah EOR PSC) to Sea Hibiscus Sdn. Bhd, a third party. We also have Shell Business Operations in Malaysia which provide support services to other Shell companies.

Country Financial Analysis

Shell pays corporate income tax at the rate of 24% for downstream entities and petroleum income tax of 38% for upstream entities. The sale of North Sabah EOR PSC resulted in a gain of $245 million, but this capital gain is not taxable.

The tax accrued in the table above includes a deep-water investment tax allowance on qualifying capital investment in the Baram Delta enhanced oil recovery PSC (BDO EOR PSC) which reduces the tax due for that PSC. In addition, there were four fields (Betty, Tukau, West Lutong and Baram) under the BDO EOR PSC, which were relinquished in the first quarter of 2018. This resulted in the remaining value of the assets being deductible for tax purposes. This also reduces the tax payable amount.

The goods and services tax was revoked and a sales and service tax (SST) was reintroduced on September 1, 2018 on taxable services procured from local service providers, as well as on imported services, at the rate of 5%. No credit is given on SST paid on business purchases. Therefore, SST incurred is a cost to the business and reduces the profit.

Our Payments to Governments Report for 2018 also shows around $4.4 billion of payments in production entitlements, royalties and fees.