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(1) Subject to sections 8, 65 and this section, a person who calculates the income of another person from a separate petroleum operation for a year of assessment shall deduct the following from the assessable income:

(a) annual rental charges and royalties paid by the person under the Petroleum (Exploration and Production) Act,1984 (PNDCL 84) with respect to the petroleum operation;

(b) capital allowances granted with respect to the petroleum operation and calculated in accordance with Part II of the Third Schedule;

(c) contributions to and other expenses incurred in respect of a decommissioning fund for the petroleum operation in accordance with the rules established for that fund;

(d) expenses incurred by that person in the course of closure of the petroleum operation, where funds in the relevant decommissioning fund are not yet available or are inadequate; and

(e) any other amount incurred directly by that person in the course of the petroleum operation, which amount may be deducted under other provisions of this Act.

(2) In calculating income from a separate petroleum operation, the Commissioner-General shall not allow a deduction

(a) for research and development expenditure;

(b) for an amount, unless the amount

(i) is wholly, exclusively and necessarily incurred in the acquisition or improvement of a valuable asset used in the operation; or

(ii) is wholly, exclusively and necessarily incurred in acquiring services or facilities for the operation; and is income of the recipient which has a source in Ghana;

(c) if the amount contravenes section 31;

(d) for a bonus payment made in respect of the grant of the petroleum right; or

(e) for expenditure incurred as a consequence of a breach of a petroleum agreement.

(3) For the purpose of the application of section 14,

(a) “written down value” of a pool of depreciable assets means the written down value of all assets in that pool as determined under Part II of the Third Schedule; and

(b) excess expense referred to in section 12(3) shall be added to the pool of depreciable assets of the year in which the expense is incurred.

(4) In ascertaining the income of a person from a separate petroleum operation for a year of assessment, relevant financial costs incurred during the year may be deducted only to the extent that relevant financial gains are included in calculating that income.

(5) Without limiting section 16, a person may set off a loss in respect of a financial instrument against a gain in respect of a financial instrument only.

(6) A financial cost for which a deduction is not available under subsection (4) may be carried forward by the person and treated as incurred during any of the subsequent five years of assessment.

(7) Where a person carries forward a financial cost under subsection

(6), that cost shall be deducted by that person from the income of that person in the order in which the cost was incurred.

(8) Where there is a change in ownership of an entity in the manner referred to in section 62, a carry forward of financial cost under subsection (6) is subject to section 62.

(9) Subject to section 65 and for the purpose of granting a capital allowance, the cost of a depreciable asset with respect to a separate petroleum operation includes

(a) the cost of the petroleum right;

(b) the balance in the pool of exploration and development expenditure at the time production commences;

(c) expenditure incurred in developing petroleum operations and infrastructure, including expenditure which

(i) is capitalised in accordance with generally accepted accounting principles; and

(ii) does not otherwise qualify to be included in the cost of an asset; and

(d) bonus payments made in respect of the grant of the petroleum right.

(10) The Minister may, by legislative instrument, make Regulations to prescribe other deductions that may be allowed in calculating the income of a person from petroleum operations.