Petronas agrees to pay Sarawak RM2 billion; state withdraws suit

As part of the agreement Sarawak will withdraw its civil suit against the national oil company.

Written by TheMole

KUCHING — May 8, 2020: Petronas will pay a state sales tax of RM2 billion on petroleum products to Sarawak after both parties reached a settlement. In return the state will withdraw its civil suit on the matter.

In a joint statement today, Petronas said it would also withdraw its appeal against a High Court decision that dismissed an application for judicial review to declare the sales tax unconstitutional.

Following the withdrawal of legal proceedings, Petronas will make a full payment of the sales tax imposed by Sarawak for last year amounting to RM2 billion, which is 5% of the sales value of the products, the statement said.

It was signed by state Assistant Minister for Law, State-Federal Relations and Project Monitoring Datuk Sharifah Hasidah Sayeed Aman Ghazali and Petronas chairman Datuk Ahmad Nizam Salleh.

Both parties also agreed that the tax will be at a reduced rate based on negotiations to be held later.

The 5% tax came into effect in January 2019 but Petronas refused to pay the sum, insisting that it was unconstitutional. This led to a suit from the state last November.

Chief Minister Datuk Patinggi Abang Johari Openg said Sarawak had achieved a significant milestone in reaching the settlement, adding that the state was committed to working with the federal Government and Petronas to ensure all parties can negotiate and reach an agreement on related issues.



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