Circular No. 1698-TC/TCT regarding tax payment for the Vietnam-Soviet Joint Venture Oil Enterprise

LETTER

OF THE MINISTRY OF FINANCE NO. 1698 TC/TCT DATED 16-11-1991 ON PAYING TAXES FOR THE VIETSO-PETRO JOINT VENTURE

Pursuant to the Law on Foreign Investment in Vietnam and current tax laws; based on the Agreement on Cooperation in the Field of Geological Exploration and Exploitation of Oil and Gas in the Southern Continental Shelf of the Socialist Republic of Vietnam within the framework of the Joint Venture "Vietso-Petro" signed on 16-7-1991 between the Government of the Socialist Republic of Vietnam and the Government of the Soviet Union hereinafter referred to as the "Agreement dated 16-7-1991", the Ministry of Finance stipulates and guides the payment of various types of taxes for the Vietso-Petro Joint Venture as follows:

I- TAX PAYMENT OBLIGATIONS

1. The Vietso-Petro Joint Venture The Vietso-Petro Joint Venture (hereinafter referred to as the Joint Venture) has the obligation to pay all types of taxes related to the taxable activities of the Joint Venture in accordance with the provisions of the Law on Foreign Investment in Vietnam, current tax laws, and the Agreement dated 16-7-1991.

2. The foreign party (Soviet side) participating in the Joint Venture when transferring profits abroad has the obligation to pay the tax on repatriation of profits according to the provisions of the Law on Foreign Investment in Vietnam.

3. Vietnamese economic organizations signing contracts to act as agents for the import and export of products for the Joint Venture have the responsibility to pay export duties and import duties in accordance with the provisions of the Law on Export Duties and Import Duties on Trading Goods.

In the case where the Joint Venture directly imports or exports, the Joint Venture has the responsibility to pay export duties and import duties in accordance with the provisions of the Law on Export Duties and Import Duties on Trading Goods.

II- TAX COLLECTION REGIME

A- INCOME TAX:

1. Determining taxable income:

Based on the provisions of the Agreement dated 16-7-1991, the portion of product retained by the Joint Venture annually shall not exceed 35% of the quantity of product goods (oil) and to cover reasonable production costs as stipulated by the Law on Foreign Investment in Vietnam, land and sea rental fees, and agency commissions paid to organizations acting as agents for import and export. If the total of these expenses determined at year-end is less than the value of the portion of product retained by the Joint Venture (35%), then the difference will be added to the income of the Joint Venture and must be subject to income tax as prescribed in this document.

2. Income tax rate:

According to the provisions of the Agreement dated 16-7-1991, the Joint Venture must pay income tax at a rate of 40% on the total taxable income.

The Joint Venture is exempt from income tax in 1991 and is granted a 50% reduction in income tax for 1992.

The rate of 40% will be adjusted after the parties participating in the Joint Venture have recovered their invested capital.

3. Procedures for paying income tax:

Monthly or after each completion of the export procedures for each batch of product goods (if the interval between two shipments exceeds 30 days), the Joint Venture must submit a declaration of income tax to the tax collection authority, which will calculate the tax based on the declaration and notify the Joint Venture and the organization acting as agent for export of the provisional amount of income tax to be paid. Based on the tax notification from the tax collection authority, the organization acting as agent for export or the Joint Venture (if the Joint Venture directly exports) must pay the income tax into the State budget within 24 hours of receiving payment from the buyer.

At the end of each fiscal year, the tax collection authority will settle the annual income tax of the Joint Venture in accordance with the Law on Foreign Investment in Vietnam and the implementing regulations.

According to this document, any unit (Joint Venture or organization acting as agent for export) that fails to pay or underpays the tax as notified by the tax authority will be subject to penalties as prescribed by current laws.

B- RESOURCE TAX (ROYALTY):

1. Determining the amount of resource tax payable:

According to the provisions of the Agreement dated 16-7-1991, the amount of resource tax payable by the Joint Venture is determined as follows:

2. Procedures for paying resource tax:

Monthly or after completing the export procedures for each batch of goods (if the interval between two export shipments exceeds 30 days), the Joint Venture must submit a declaration of resource tax to the tax collection authority, which will verify, calculate the tax, and notify the organization acting as agent for export or the Joint Venture (if the Joint Venture directly sells the product) of the amount of tax payable. Based on the notification from the tax collection authority, the organization acting as agent for export or the Joint Venture must pay the resource tax into the State budget within 24 hours of receiving payment from the buyer.

Any unit (organization acting as agent for export or Joint Venture) violating the rules for paying resource tax will be subject to penalties as prescribed by the Ordinance on Resource Tax.

C- EXPORT AND IMPORT DUTIES:

Organizations acting as agents for import and export or the Joint Venture (if the Joint Venture directly imports or exports products) are responsible for paying export duties and import duties in accordance with the current Law on Export Duties and Import Duties on Trading Goods.

As for the customs procedures for export and import tax payment, after each delivery, the entrusted export organization or joint venture enterprise must file a declaration with the tax collection agency. Within eight hours (one working day), the tax collection agency will officially notify the amount of tax to be paid to the entrusted export organization or joint venture enterprise. Based on the notification from the tax collection agency, the entrusted export organization or joint venture enterprise must pay the full amount of export tax into the State budget within twenty-four hours from the time they receive the sales proceeds from the buyer.

The amount of export and import tax paid into the State budget by the entrusted export and import organization shall be deducted from the amount transferred to the joint venture enterprise.

D- LAND AND SEAWATER LEASE FEES

The joint venture enterprise is responsible for paying land and seawater lease fees according to Decision No. 210a TC/VP dated April 1, 1990, issued by the Ministry of Finance.

The area of land used as the basis for calculating land tax is the total area of land that the joint venture enterprise is permitted to use.

The area of seawater used as the basis for calculating lease fees is the total area that the joint venture enterprise is permitted to use to conduct marine exploitation activities.

The amount of land and seawater lease fees is determined by the State Committee on Cooperation and Investment.

E- INCOME TAX

All income earned by Vietnamese and foreign individuals working for the joint venture enterprise and paid by the joint venture enterprise must be subject to income tax according to the Income Tax Ordinance for High-Income Individuals.

The joint venture enterprise is authorized by the Ministry of Finance to deduct and pay income tax of officers, employees working for the joint venture enterprise according to the Income Tax Ordinance.

G- OTHER TAXES

In addition to the taxes mentioned above, if other taxable objects arise during the operation of the joint venture enterprise according to current tax laws, the joint venture enterprise has the responsibility to pay taxes in accordance with the Law.

III- IMPLEMENTATION

1. The customs authority specified in this document is the provincial or municipal customs office where the export procedures are carried out.

2. The agencies responsible for collecting other types of taxes are assigned by the Ministry of Finance as follows:

- The Southern Revenue General Department (representative office in the South) establishes a petroleum tax collection team directly under the General Department located next to the Ba Ria-Vung Tau Provincial Tax Bureau to directly collect important taxes such as profit tax, resource tax, profit repatriation tax, and the share of profits allocated to the Vietnamese side participating in the joint venture enterprise.

- The Ba Ria-Vung Tau Provincial Tax Bureau collects the following taxes: income tax, land and seawater lease fees, and other types of taxes.

3. Profit tax, resource tax, and profit repatriation tax are central government revenues collected directly in foreign currency from the sale of products (oil) by the joint venture enterprise. The tax revenue is recorded in the "centralized foreign exchange reserve fund" account at the Vietnam Foreign Trade Bank.

Land and seawater lease fees, income tax, and other types of taxes are local government revenue sources.

4. These provisions shall take effect from January 1, 1991. During implementation, if there are any issues, relevant agencies should promptly report to the Ministry of Finance for guidance.

5. Other provisions:

- Although the aforementioned regulations apply, for the year 1991, the portion of products left for the joint venture enterprise is not determined based on a 35% volume ratio but is calculated as an absolute value of 225 million USD. All foreign currency revenue from crude oil sales in 1991 will be collected by the Ministry of Finance into the national budget account.

- The entire share of profits allocated to the Vietnamese side participating in the joint venture enterprise must be paid into the State budget. The Ministry of Finance will consider and stipulate a reasonable profit amount to be retained for the Vietnamese side.