According to a report in The Malay Mail, a notice of action was issued to Repsol Oil and Gas Ltd (Repsol) and SEA Hibiscus Sdn Bhd on July 8 when they failed to settle the arrears within the grace period given to them earlier.

The report said that in response to a question from assemblyman Yong Teck Lee at the state assembly sitting today, Sabah second finance minister Masidi Manjun said another notice was issued on July 8 to inform the companies that all work passes will be cancelled on Oct 1 if payment is not made by then.

Masidi said the government had had several engagements with the two companies over the state’s demand for some RM97.31 million, comprising RM65.65 million in sales tax and RM31.66 million in penalty incurred for late payment.

He clarified that the first notice to claim the payment for sales tax owed to the state was sent on June 8, followed by a payment notice on June 21 for the dues to be settled inclusive of penalty within 30 days of the notice, failing which the state would initiate civil action.

The two companies had refused to make sales and service tax (SST) payments on the grounds that they sold crude oil from the Kinabalu oil field at the Labuan crude oil terminal facility “outside the sovereignty and jurisdiction of the state of Sabah” and hence should not be charged the SST.

Hibiscus said Repsol, which has a production-sharing contract in the Kinabalu oil field, had been paying the SST “under protest” since 2020.

Repsol stopped paying the SST after the Sabah finance ministry did not respond to its appeal against the imposition of the tax.

The state began collecting sales tax on its petroleum products, namely crude petroleum oil and natural gas/liquefied gas as of April 1, 2020.

Masidi also announced that the state is planning to impose sales tax on ammonia and urea from Aug 1 this year, in an effort to diversify and increase its petroleum income resources.

“We estimate this will contribute some RM46 million to the state coffers this year,” he said.