Decree No. 121/2007/ND-CP on direct investment abroad in oil and gas activities

DECREE

Provisions on direct investment abroad in oil and gas activities

_________________

THE GOVERNMENT

Based on the Law on the Organization of the Government dated December 25, 2001;

The Government issues this Decree on the re-registration and conversion of foreign-invested enterprises and the change of investment licenses for projects implemented under joint venture contracts.

Upon the proposal of the Minister of Industry,

DECREE:

PART I

GENERAL PROVISIONS

Article 1. Scope of application

1. This Decree stipulates the direct investment abroad by Investors in Vietnam in oil and gas activities.

2. In cases where international treaties to which Vietnam is a party provide different provisions from those of this Decree, such treaties shall be applied.

3. Investors in Vietnam conducting direct investment abroad in oil and gas activities must comply with the provisions of this Decree, regulations on foreign investment, and other relevant laws. Where the provisions of this Decree differ from those of related decrees, the provisions of this Decree shall apply.

Article 2. Applicability

This Decree applies to Investors in Vietnam, including:

1. Limited liability companies, joint stock companies, partnership companies, and private enterprises registered for business under the Enterprise Law.

2. Enterprises established under the State Enterprise Law that have not yet re-registered under the Enterprise Law.

3. Foreign-invested enterprises established under the Law on Investment that have not yet re-registered under the Enterprise Law and the Investment Law.

4. Enterprises belonging to political organizations or political-social organizations that have not yet re-registered under the Enterprise Law.

5. Cooperatives and cooperative unions established under the Cooperative Law.

6. Business households and individual Vietnamese citizens.

Article 3. Definitions

2. Self-generated and self-consumed electricity is electricity produced and consumed by an organization or individual to serve their own needs.

1. Oil and gas activities refer to the formation and implementation of oil and gas projects concerning exploration, development, extraction of oil and gas, including pipeline transportation, processing of crude oil, and other activities directly serving these operations.

2. An oil and gas contract is a document signed between the representative of the owner of oil and gas resources and the Investor or other partners, subsequently transferred to the Investor for participation in the oil and gas contract.

3. Oil and gas assets are values or products created during the investment process of oil and gas projects.

4. The total investment amount of an oil and gas project is the entire cost formed and implemented according to the classification and project formation specified in Article 4 of this Decree.

Article 4. Formation and Classification of Oil and Gas Projects

1. Oil and gas projects are formed through one of the following methods:

a) Signing an oil and gas contract;

b) Acquiring the right to participate in an oil and gas contract;

c) Acquiring part or all of a company.

2. Oil and gas projects include:

a) Exploration, development, and production projects carried out starting from the exploration phase;

b) Development and production projects carried out starting from the development and production phase of oil and gas.

Article 5. Application of Investment Incentives

1. In cases where new laws or policies grant higher benefits and incentives than those enjoyed by Investors under their Investment Certificate, Investors shall enjoy the new provisions' benefits and incentives from the date such laws or policies come into effect.

2. In cases where the benefits and incentives recorded in the Investment Certificate or the permit for direct investment abroad in oil and gas activities granted to Investors are more favorable than those currently applicable, such Investors shall continue to enjoy the benefits and incentives recorded in the Investment Certificate or the permit for direct investment abroad in oil and gas activities.

Article 6. Activities of Forming and Implementing Oil and Gas Projects

1. The activity of forming oil and gas projects conducted by Investors abroad or in Vietnam to directly or indirectly support the formation of oil and gas projects abroad includes:

a) Market research and investment opportunities;

b) On-site surveys;

c) Document studies;

d) Collecting and purchasing materials and information related to selecting oil and gas projects;

đ) Summarizing, evaluating, and appraising, including hiring consultants for evaluation and appraisal;

e) Participating in and organizing scientific seminars and conferences;

g) Operations of representative offices, liaison offices, branches, and management offices of Investors abroad related to the formation of oil and gas projects;

h) Participating in international bidding;

i) Negotiating oil and gas contracts;

k) Other necessary activities.

2. The implementation of oil and gas projects includes the execution of oil and gas projects based on work programs and budgets approved on the basis of oil and gas contracts or investment agreements with partners or transfer agreements of participation rights or partial or full company transfers already certified by the Investment Certificate.

Chapter II

AUTHORITY TO APPROVE INVESTMENT AND PROCEDURES FOR ISSUANCE,

AMENDMENT OF INVESTMENT CERTIFICATE

Article 7. Approval Authority for Investment

1. The Prime Minister shall approve investment for oil and gas projects using state capital of VND 1,000 billion or more or capital from economic sectors of VND 3,000 billion or more.

2. Oil and gas projects not covered by Clause 1 of this Article shall be decided upon by the representative of the owner or the Investor.

Article 8. Investment Certificate

1. Oil and gas projects approved shall be in the form of an Investment Certificate issued by the Ministry of Planning and Investment.

2. Issuance of the Investment Certificate for oil and gas projects shall be carried out according to one of the following two procedures:

a) Registration and issuance of the Investment Certificate for projects with investment capital under VND 15 billion;

b) Examination and issuance of the Investment Certificate for projects with investment capital of VND 15 billion or more.

Article 9. Application Documents for Registration and Issuance of the Investment Certificate

The application documents for registration and issuance of the Investment Certificate include:

1. An application document for registration and issuance of the Investment Certificate in the format issued by the Ministry of Planning and Investment.

2. A certified copy of the Investment Certificate for foreign investors; Business Registration Certificate or establishment decision for domestic investors who are organizations; Identity Card or Passport for individual investors.

For foreign investors who were granted an Investment License before July 1, 2006 but did not re-register or convert according to the Investment Law, they must provide a certified copy of the Investment License.

3. Decision on foreign investment by the competent authority as stipulated in Clause 2, Article 7 of this Decree.

4. Oil and gas contract or investment agreement with partner or agreement on the transfer of participation rights or partial or full transfer of the company.

The application documents for registration and issuance of the Investment Certificate shall be submitted to the Ministry of Planning and Investment in three sets, including one original set.

Article 10. Procedure for Registration and Issuance of the Investment Certificate

1. The Ministry of Planning and Investment shall examine the validity of the application documents for registration and issuance of the Investment Certificate as stipulated in Article 9 of this Decree.

In cases where clarification of certain contents related to the application documents for registration and issuance of the Investment Certificate is required, within three working days from the date of receipt of the documents, the Ministry of Planning and Investment shall issue a document requesting the investor to explain.

2. Within fifteen working days from the date of receipt of valid documents, the Ministry of Planning and Investment shall issue the Investment Certificate to the investor.

If the application documents for registration and issuance of the Investment Certificate are not approved, the Ministry of Planning and Investment shall notify in writing, specifying the reasons for not issuing the Investment Certificate. The investor has the right to appeal against the non-approval of the issuance of the Investment Certificate in accordance with the law.

3. The Ministry of Planning and Investment shall send copies of the Investment Certificate to the Ministry of Industry, the Ministry of Finance, the State Bank of Vietnam, and the People's Committee of the province where the investor registers business operations (for organizational investors) or where the investor has permanent residence (for Vietnamese individual investors).

Article 11. Application Documents for Examination and Issuance of the Investment Certificate

The application documents for examination and issuance of the Investment Certificate include:

1. A request for examination and issuance of the Investment Certificate in the format issued by the Ministry of Planning and Investment.

2. A certified copy of the Investment Certificate for foreign investors; Business Registration Certificate or establishment decision for domestic investors who are organizations; Identity Card or Passport for individual investors.

For foreign investors who were granted an Investment License before July 1, 2006 but did not re-register or convert according to the Investment Law, they must provide a certified copy of the Investment License.

3. An explanation document regarding the feasibility of the oil and gas project, including contents about objectives, location, scale, investment capital sources, implementation schedule, and economic efficiency of the project.

4. Financial capability report prepared and responsible by the investor.

5. Decision on foreign investment by the competent authority as stipulated in Clause 2, Article 7 of this Decree.

6. Oil and gas contract or investment agreement with partner or agreement on the transfer of participation rights or partial or full transfer of the company.

The application documents for examination and issuance of the Investment Certificate shall be submitted to the Ministry of Planning and Investment in eight sets, including one original set.

Article 12. Procedure for Examination and Issuance of the Investment Certificate

1. The content of examination and issuance of the Investment Certificate includes:

a) Legal status of the investor;

b) Legality of the investment capital;

c) Project implementation schedule (for development and exploitation projects).

2. Within three working days from the date of receipt of valid examination and issuance of the Investment Certificate documents, the Ministry of Planning and Investment shall forward the documents to relevant ministries and agencies for comments.

3. Within ten working days from the date of receipt of the documents, the ministries and agencies shall submit their comments in writing to the Ministry of Planning and Investment. Beyond this period, if any agency does not submit written comments, it will be deemed to have agreed with the investor's examination and issuance of the Investment Certificate request.

4. Within twenty-five working days from the date of receipt of all valid documents, the Ministry of Planning and Investment shall conduct an examination of the oil and gas project and issue the Investment Certificate.

5. If the application documents for examination and issuance of the Investment Certificate are not approved, the Ministry of Planning and Investment shall notify in writing, specifying the reasons for not issuing the Investment Certificate. The investor has the right to appeal against the non-approval of the issuance of the Investment Certificate in accordance with the law.

6. For oil and gas projects within the approval authority of the Prime Minister, within twenty working days from the date of receipt of all valid documents, the Ministry of Planning and Investment shall submit a report on the examination results along with comments from relevant ministries and agencies and recommendations on the approval of the issuance of the Investment Certificate to the Prime Minister.

Within five working days from the date of approval by the Prime Minister, the Ministry of Planning and Investment shall issue the Investment Certificate.

7. The Ministry of Planning and Investment shall send copies of the Investment Certificate to the Ministry of Industry, the Ministry of Finance, the State Bank of Vietnam, and the People's Committee of the province where the investor registers business operations (for organizational investors) or where the investor has permanent residence (for Vietnamese individual investors).

Article 13. Shortening the Examination and Issuance Period of the Investment Certificate

In case the oil and gas project requires urgent deadlines, the Investor shall submit a written explanation for requesting shortened review time to the Ministry of Planning and Investment and relevant ministries and sectors along with the dossier as prescribed in Article 11 of this Decree. Within five working days from the date of receiving the valid dossier, the Ministry of Planning and Investment shall convene a meeting with relevant ministries and sectors to review and issue the Investment Certificate without going through the procedures of seeking opinions from ministries and sectors as stipulated in Clauses 2 and 3 of Article 12 of this Decree.

For oil and gas projects approved for investment by the Prime Minister in accordance with Clause 1 of Article 7 of this Decree, within three working days from the completion of the review process, the Ministry of Planning and Investment shall report the results of the review to the Prime Minister.

Within two working days from the date of the Prime Minister's approval for investment, the Ministry of Planning and Investment shall issue the Investment Certificate.

Article 14. Amendment of the Investment Certificate

1. When there is a need to amend the oil and gas project that has been issued an Investment Certificate concerning the form of investment, the implementation period of the project, or the total investment amount of the project changes by more than 30% compared to the total investment amount recorded in the Investment Certificate, the Investor must go through the procedures to amend the Investment Certificate.

2. The amendment of the oil and gas project shall be carried out according to one of the following procedures:

a) Registration and issuance of an amended Investment Certificate;

b) Review and issuance of an amended Investment Certificate.

Article 15. Conditions and procedures for registration and issuance of an amended Investment Certificate

1. Oil and gas projects eligible for registration and issuance of an amended Investment Certificate are those that have been amended regarding the form of investment, the implementation period of the project, or the total investment amount of the project changes by more than 30% compared to the total investment amount recorded in the Investment Certificate, but the new total investment amount does not exceed 15 billion VND.

2. The dossier for registration and issuance of an amended Investment Certificate includes:

a) A request for issuance of an amended Investment Certificate in the format issued by the Ministry of Planning and Investment;

b) The decision on amending the oil and gas project by the competent authority as prescribed in Clause 2 of Article 7 of this Decree;

c) Report on the operation status of the oil and gas project up to the time of requesting the amendment of the Investment Certificate;

d) Notarized copy of the Investment Certificate.

3. The dossier for registration and issuance of an amended Investment Certificate shall be submitted to the Ministry of Planning and Investment in three sets, including one original set.

In cases where clarification of certain contents related to the dossier for registration and issuance of an amended Investment Certificate is required, within three working days from the date of receiving the dossier, the Ministry of Planning and Investment shall request the Investor to provide explanations in writing.

4. Within fifteen working days from the date of receiving the valid dossier, the Ministry of Planning and Investment shall issue the amended Investment Certificate to the Investor.

If the dossier for registration and issuance of an amended Investment Certificate is not approved, the Ministry of Planning and Investment shall notify in writing, specifying the reasons for not approving the issuance of the amended Investment Certificate. The Investor has the right to appeal against the non-approval of the issuance of the amended Investment Certificate in accordance with the provisions of the law.

5. The Ministry of Planning and Investment shall send copies of the amended Investment Certificate to the Ministry of Industry, the Ministry of Finance, the State Bank of Vietnam, and the People's Committee of the province where the Investor registers business operations (for organizational Investors) or has permanent residence (for individual Vietnamese Investors).

Article 16. Conditions and procedures for reviewing and issuing Investment Certificate amendments

1. Oil and gas projects subject to review and issuance of Investment Certificate amendments are those that, after adjustment, have a total investment amount changed by 30% compared to the total investment amount recorded in the original Investment Certificate and exceed 15 billion VND.

2. The dossier for reviewing and issuing Investment Certificate amendments includes:

a) A request for review and issuance of Investment Certificate amendments according to a form issued by the Ministry of Planning and Investment;

b) The decision on amending the oil and gas project by the competent authority as prescribed in Clause 2 of Article 7 of this Decree;

c) Report on the operation status of the oil and gas project up to the time of requesting amendment;

d) Notarized copy of the Investment Certificate;

đ) Explanation of the amended contents.

3. Procedures for reviewing and issuing Investment Certificate amendments:

a) The dossier for reviewing and issuing Investment Certificate amendments shall be submitted to the Ministry of Planning and Investment with six sets, including one original set.

 b) Within three working days from the date of receiving a complete and valid dossier, the Ministry of Planning and Investment will send the dossier for review and issuance of Investment Certificate amendments to relevant ministries and sectors for their comments;

c) Within fifteen working days from the date of receiving the dossier for review and issuance of Investment Certificate amendments, relevant ministries and sectors must submit their comments in writing to the Ministry of Planning and Investment. If any agency does not provide comments beyond this period, it will be considered as agreeing with the investor's proposal in the dossier for review and issuance of Investment Certificate amendments;

d) For oil and gas projects within the decision-making authority of the State-owned enterprise representative or the investor, the Ministry of Planning and Investment will conduct a review of the dossier and issue the Investment Certificate amendments within thirty working days from the date of receiving a complete and valid dossier;

đ) For oil and gas projects within the approval authority of the Prime Minister or projects where, after adjustment, the total investment amount uses state capital of 100 billion VND or more or economic sector capital of 300 billion VND or more, within twenty-five working days from the date of receiving a complete and valid dossier, the Ministry of Planning and Investment will report to the Prime Minister on the results of the review along with comments from relevant ministries and sectors and propose opinions on allowing the amendment of the Investment Certificate.

Within five working days from the date of the Prime Minister's approval, the Ministry of Planning and Investment will issue the Investment Certificate amendments.

e) In case the dossier for review and issuance of Investment Certificate amendments is not approved, the Ministry of Planning and Investment will notify in writing, specifying the reasons for not approving the Investment Certificate amendments. Investors have the right to appeal against the non-approval of the Investment Certificate amendments in accordance with the law.

4. The Ministry of Planning and Investment will send copies of the Investment Certificate amendments to the Ministry of Industry, the Ministry of Finance, the State Bank of Vietnam, and the People's Committee of the province where the investor registers business (for corporate investors) or has permanent residence (for individual Vietnamese investors).

Chapter III

IMPLEMENTATION OF OIL AND GAS PROJECTS

Article 17. Notification of Implementation of Oil and Gas Projects

1. Within sixty days from the date the oil and gas project is approved in accordance with the laws of the host country, the investor must submit a notification regarding the implementation of the oil and gas project along with a copy of the project approval document or an equivalent legal document to the following ministries: Planning and Investment, Finance, Trade, Industry, Foreign Affairs, State Bank of Vietnam, and the People's Committee of the province where the investor registers business (for corporate investors) or has permanent residence (for individual Vietnamese investors).

2. The notification of implementation of oil and gas projects includes the following contents:

a) Name and main office address of the foreign legal entity (if applicable); name and branch or representative office address (if applicable);

b) Objectives and fields of investment;

c) Capital investment of the foreign enterprise, the portion invested by the investor;

d) Information about the investor's representative and the foreign enterprise's representative including: full name, permanent address (in Vietnam and abroad), position, ID card number or passport number.

3. In case there is a change in the content stipulated in Clause 2 of this Article, within thirty days from the date of such change, the investor must submit a notification regarding the changes to the Ministry of Planning and Investment.

Article 18. Time Limit for Implementing Oil and Gas Projects

1. Within twelve months from the date of issuance of the Investment Certificate, if the oil and gas project is not approved by the host country or within six months from the date of approval by the host country but the project is not implemented, the investor must submit a document detailing the reasons and requesting an extension of the project implementation period or requesting termination of the oil and gas project to the Ministry of Planning and Investment.

2. Within fifteen working days from the date of receipt of the document requesting an extension of the project implementation period or termination of the project, the Ministry of Planning and Investment will issue a document approving or not approving the aforementioned request, and simultaneously send it to the following ministries: Finance, Trade, Industry, Foreign Affairs, State Bank of Vietnam, and the People's Committee of the province where the investor registers business (for corporate investors) or has permanent residence (for individual Vietnamese investors).

3. Extension of the implementation period of oil and gas projects shall be carried out in accordance with the oil and gas contract or investment agreement with the partner or agreement on the transfer of participation rights or partial or full transfer of the company.

Article 19. Establishment of New Legal Entities

To prepare for investment or to carry out activities forming an oil and gas project or to implement an oil and gas project, investors are permitted to establish or participate in establishing new enterprises in Vietnam, in the host country, or in a third country in accordance with relevant laws.

Article 20. Reporting System

Annually, within six months from the end of the fiscal year of the host country, investors must submit reports on operational status and audited financial statements or financial statements certified by authorized bodies of the host country to the following ministries: Planning and Investment, Industry, Finance, State Bank of Vietnam, and the registration authority.

Article 21. Termination and Liquidation of Oil and Gas Projects

The cessation of operations of an oil and gas project shall be carried out in accordance with the provisions of the oil and gas contract and the laws of the host country.

Article 22. Transfer of Oil and Gas Projects

When transferring part of an oil and gas project, or transferring the entire oil and gas project but the Investor still retains rights in that project, the Investor shall register to adjust the Investment Certificate in accordance with Articles 14, 15, and 16 of this Decree. In cases where the transfer of an oil and gas project generates profit, the Investor shall fulfill tax obligations in accordance with the laws on taxation.

Article 23. Unrecoverable Costs

In cases where an oil and gas project cannot recover costs, the Investor is permitted to allocate such costs to the production and business expenses of the Investor for a period not exceeding five years from the date of completion of the oil and gas project.

Article 24. Using Profits for Foreign Investment

1. After fulfilling all tax obligations under the laws of the host country and Vietnamese law, the Investor may retain profits from the oil and gas project abroad for the following purposes:

a) Reinvestment in an oil and gas project that has been granted an Investment Certificate;

b) Investment in other oil and gas projects in the host country that have been granted Investment Certificates.

2. Investors using profits from the oil and gas project as stipulated in Clause 1 of this Article must register with the State Bank of Vietnam and report annually to the Ministry of Planning and Investment on the situation of using post-tax profits for reinvestment.

Article 25. Repatriation of Profits

1. Within six months from the date of final settlement of taxes or equivalent legal documents according to the laws of the host country, the Investor must repatriate all profits to Vietnam, except for profits retained in accordance with Clause 1 of Article 24 of this Decree.

2. In cases where there is a need to extend the time limit specified in Clause 1 of this Article, the Investor must submit a document clearly stating the reasons and request the State Bank of Vietnam for consideration and decision. The extension can be made no more than twice, each time not exceeding six months.

Article 26. Accountant

The Investor is allowed to apply an accounting system for the oil and gas project in compliance with the provisions of the oil and gas contract. The Investor is responsible for reporting the Ministry of Finance on the applied accounting system.

Article 27. Commerce

The Investor may conduct bidding activities for services, procurement of materials and equipment, means of transport to serve the oil and gas project in compliance with the provisions of the oil and gas contract.

Article 28. Export and Import within Vietnam

1. The Investor shall comply with the laws of Vietnam on export and import when exporting and importing equipment, machinery, materials, raw materials, fuel serving the oil and gas project. In cases where there is no commercial contract or oil and gas contract, the Investment Certificate may be used as a substitute in the export and import documentation.

2. The Investor shall comply with the laws of Vietnam on export and import when importing crude oil extracted from the oil and gas project owned by the Investor. The Investor is allowed to import and re-export technical documents, tapes, samples for research and analysis purposes.

3. The Investor may apply the temporary importation and re-exportation regime for materials and equipment, samples, and other devices and documents for research, processing, explanation, manufacturing to serve the oil and gas project.

Article 29. Taxation

1. When determining the corporate income tax payable in Vietnam for overseas oil and gas projects, the Investor may deduct the corporate income tax already paid abroad or paid on behalf by the host country (with valid documentation), but the deductible corporate income tax shall not exceed the amount calculated at the prescribed tax rate under the Law on Corporate Income Tax.

2. Individuals working for oil and gas projects must pay personal income tax on high-income earners as provided by Vietnamese law. When determining the personal income tax payable in Vietnam for high-income earners, individuals may deduct personal income tax already paid abroad or paid on behalf by the host country (with valid documentation), but the deductible tax shall not exceed the amount of personal income tax payable for high-income earners as provided by Vietnamese law on personal income tax for high-income earners.

3. Equipment, means of transport, materials, raw materials, fuel subject to export tax and value-added tax exported by the Investor to foreign countries to implement oil and gas projects shall be exempt from export tax and subject to a zero percent (0%) value-added tax rate.

4. Samples, technical documents (tapes, paper tapes, and other documents) imported for research and analysis purposes to implement oil and gas projects shall be exempt from import tax and not subject to value-added tax.

5. Specialized equipment and materials for oil and gas activities that are not yet produced domestically, temporarily imported for processing and then re-exported to implement oil and gas projects shall be exempt from import tax, export tax, and not subject to value-added tax.

Article 30. Capital Outflow for Overseas Investment

1. The Investor may transfer investment capital abroad to carry out investment activities after meeting the following conditions:

a) Having obtained an Investment Certificate;

b) The oil and gas project has been approved by the competent authority of the host country in accordance with the laws of the host country.

2. The transfer of foreign currency abroad before obtaining an Investment Certificate for research and preparation of oil and gas projects shall be carried out in accordance with the laws on foreign exchange management and other relevant laws.

3. The transfer of investment capital abroad must comply with the laws on foreign exchange management, export, technology transfer, and other relevant laws.

Chapter IV

STATE MANAGEMENT OF FOREIGN DIRECT INVESTMENT

IN OIL AND GAS ACTIVITIES

Article 31. Rights and Responsibilities of State Management Agencies

The Ministries, ministerial-level agencies, agencies under the Government, People's Committees of provinces and centrally governed cities, and Vietnamese diplomatic missions abroad shall perform state management functions regarding investment outside the country in oil and gas activities in accordance with Chapter IV of Decree No. 78/2006/NĐ-CP dated August 9, 2006, issued by the Government on foreign direct investment.

Article 32. Responsibilities of the Ministry of Industry

Coordinate with the Ministry of Planning and Investment in formulating policies and planning related to foreign direct investment in oil and gas activities; provide opinions on issues within their areas of state management upon request from the Prime Minister or at the proposal of the Ministry of Planning and Investment; supervise and inspect foreign direct investment in oil and gas activities from the time investment certificates are granted for oil and gas projects until the investment certificates cease to be effective.

Article 33. Handling of violations

Organizations and individuals violating the provisions of this Decree shall be subject to legal sanctions.

Chapter V

IMPLEMENTING PROVISIONS

Article 34. Effectiveness

This Decree shall take effect fifteen days after its publication in the Official Gazette.

Article 35. Responsibility for Implementation

1. The Ministry of Planning and Investment, the Ministry of Industry, and the Ministry of Finance shall be responsible for guiding the implementation of this Decree.

2. Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial People's Committees directly under the central government shall be responsible for enforcing this Decree./.