Circular No. 22/2010/TT-BTC guiding the implementation of Decree No. 100/2009/NĐ-CP dated November 3, 2009 of the Government on the collection of additional revenue from the profit oil share of oil contractors when crude oil prices increase.

CIRCULAR

Guidelines for Implementing Decree No. 100/2009/NĐ-CP dated November 3, 2009

of the Government on the collection of additional fees on the portion of profit oil distributed to contractors when crude oil prices increase

of the oil and gas contractor when the price of crude oil fluctuates upward

Pursuant to the Oil Law and guiding documents;

Pursuant to the Tax Administration Law and guiding documents;

Pursuant to Decree No. 100/2009/NĐ-CP dated November 3, 2009 of the Government on the collection of additional fees on the portion of profit oil distributed to contractors when crude oil prices increase;

Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

The Ministry of Finance hereby provides guidelines for implementing the provisions on the collection of additional fees on the portion of profit oil distributed to contractors when crude oil prices increase as follows:

Article 1. Scope of Regulation and Applicability

Article 1. These Guidelines provide guidance on the collection of additional fees on the portion of profit oil distributed to contractors when crude oil prices increase.

Article 2. Contractors referred to herein are organizations or individuals, either domestic or foreign, conducting oil and gas activities in Vietnam in accordance with the Oil Law (hereinafter referred to collectively as contractors).

Article 3. Persons Paying Additional Fees

Clause 1. For oil and gas contracts concluded in the form of product-sharing contracts, the person paying the additional fee is the operator representing all participating contractors.

Clause 2. For oil and gas contracts concluded in the form of joint operation contracts, the person paying the additional fee is the joint operating company representing all participating contractors.

Clause 3. For oil and gas contracts concluded in the form of joint venture contracts, the person paying the additional fee is the joint venture enterprise representing all participating contractors.

Clause 4. In cases where the Vietnam Oil and Gas Group or its subsidiaries conduct oil and gas operations independently, the person paying the additional fee is the Vietnam Oil and Gas Group or its subsidiaries.

Clause 1. Where crude oil is sold in US dollars or freely convertible foreign currencies, the currency for payment of the additional fee is US dollars or freely convertible foreign currencies.

Clause 2. Where crude oil is sold in Vietnamese dong, the currency for payment of the additional fee is Vietnamese dong.

Clause 3. Where crude oil is sold partly in US dollars or freely convertible foreign currencies and partly in Vietnamese dong, the currency for payment of the additional fee is Vietnamese dong.

Clause 4. The conversion from US dollars or freely convertible foreign currencies to Vietnamese dong for tax purposes shall be carried out at the average inter-bank exchange rate published by the State Bank of Vietnam at the time of payment of the additional fee.

The location for registration, declaration, and payment of the additional fee is the local tax office where the person paying the additional fee has their main operational office, except in cases where registration, declaration, and payment of the additional fee are made at another location in accordance with specific guidelines issued by the Ministry of Finance.

Article 6. Objects Subject to Additional Fees

The entire volume of profit oil distributed quarterly to contractors is subject to additional fees. Specifically:

Clause 1. Profit oil is crude oil remaining after deducting resource tax oil and cost recovery oil from actual production volumes as stipulated by the Oil Law. If the oil and gas contract does not specify a cost recovery ratio, the cost recovery ratio for determining profit oil under this clause is 35%, except for fields that continue to be exploited after the termination of the oil and gas contract.

Clause 2. Quarterly profit oil distributed to contractors is the portion of profit oil as defined in Clause 1 above allocated to contractors according to the signed oil and gas contract.

Clause 3. In cases where the Vietnam Oil and Gas Group or its subsidiaries conduct oil and gas operations independently, the object subject to additional fees is the entire volume of profit oil obtained quarterly by the Vietnam Oil and Gas Group or its subsidiaries.

Article 6. Determination of the Amount of Additional Revenue to be Paid

1. For encouraged investment oil and gas projects: The amount of additional revenue to be paid quarterly at a rate of 30% on the quarterly profit oil volume share of the contractor when the average crude oil selling price of the quarter actually fluctuates more than 20% higher than the base price of the corresponding year shall be determined as follows:

Where:

a) The average crude oil selling price of the quarter is the price calculated by the contractor based on actual daily selling price statistics for each quarter. Specifically:

- Quarter I runs from January 1 to March 31;

- Quarter II runs from April 1 to June 30;

- Quarter III runs from July 1 to September 30;

- Quarter IV runs from October 1 to December 31.

b) The base price of the corresponding year is the forecasted price in the approved development plan corresponding to the implementation year. In cases where the approved development plan has been amended or supplemented compared to the initial development plan, the base price of the corresponding year is the forecasted price in the approved amended or supplemented development plan corresponding to the implementation year. For fields that continue to be exploited after the end of the oil and gas contract, the base price of the final year of the oil and gas contract applies.

c) Encouraged investment oil and gas projects are those conducting oil and gas activities in deep waters, far offshore areas, regions with particularly difficult geographical conditions, complex geological formations, and other areas listed in the blocks decided by the Prime Minister.

Example: Determining the amount of additional revenue to be paid for an encouraged investment oil and gas project:

Assuming:

- Base price of the year: 50 USD/barrel.

- Field production volume: 24 million barrels/year.

- Oil recovery cost ratio: 35%/Revenue.

- Resource tax: 8%/Revenue.

- Host country's profit share: 50%.

- Contractor's share: 50%.

With the above assumptions, the average quarterly profit oil volume share of the oil and gas contractor is determined as follows:

Crude oil price forecast for the year as follows:

Based on the above data, the contractor must pay additional revenue for Quarter III and Quarter IV, calculated specifically as follows:

Quarter III:

Quarter IV:

Total for the year = Quarter III + Quarter IV = 1,539,500 + 10,260,500 = 11.800.000 (USD)

2. For oil and gas projects not covered under Clause 1 of this Article: The amount of additional revenue to be paid quarterly at a progressive rate determined as follows:

a) In case the average crude oil selling price of the quarter actually fluctuates more than 20% but less than 50% higher than the base price of the corresponding year, the quarterly amount of additional revenue to be paid is determined as follows:

Where:

- The average crude oil selling price of the quarter is the price calculated by the contractor based on actual daily selling price statistics for each quarter according to the guidance at Point a Clause 1 Article 6 of this Circular, but not exceeding 150% of the base price of the corresponding year.

- The base price of the corresponding year is implemented according to the guidance at Point b Clause 1 Article 6 of this Circular.

b) In case the average crude oil selling price of the quarter actually fluctuates more than 50% higher than the base price of the corresponding year, the quarterly amount of additional revenue to be paid is determined as in Point a of this Clause and additionally includes the following additional revenue:

Where:

- The average crude oil selling price of the quarter is the price calculated by the contractor based on actual daily selling price statistics for each quarter according to the guidance at Point a Clause 1 Article 6 of this Circular, but applied at a level higher than 150% of the base price of the corresponding year.

- The base price of the corresponding year is implemented according to the guidance at Point b Clause 1 Article 6 of this Circular.

Example: Determining the amount of additional revenue to be paid for an oil and gas project that is not an encouraged investment project: Assuming the criteria as specified in Point b Clause 1 of this Circular, but not an encouraged investment oil and gas project, the contractor must pay additional revenue for Quarter III and Quarter IV, calculated specifically as follows:

Quarter III:

Quarter IV:

- The amount of additional revenue to be paid at a rate of 50% when the average crude oil selling price of the quarter increases up to 50% higher than the base price:

- The amount of additional revenue to be paid at a rate of 60% when the average crude oil selling price of the quarter increases more than 50% higher than the base price:

- The amount of additional revenue to be paid for Quarter IV = 12,825,000 + 5,130,000 = 17.955.000 (USD)

Total for the year = Quarter III + Quarter IV = 2,565,500 + 17,955,000 = 20.520.500 (USD)

Article 7. Declaration and Payment of Additional Revenue

1. Declaration and Payment of Provisional Additional Revenue

a) Determination of the Amount of Provisional Additional Revenue:

- For encouraged investment oil and gas projects: The amount of provisional additional revenue to be paid quarterly shall be determined as follows

In which: The provisional quarterly oil profit volume distributed to the contractor is determined according to the regulations on oil and gas at the time of oil extraction, calculated based on the estimated actual oil production volume for that quarter according to the exploitation schedule for that quarter. Other indicators are still determined in accordance with the guidance provided in Clause 1, Article 6 of this Circular.

- For projects that are not encouraged investment oil and gas projects: The amount of provisional additional revenue to be paid quarterly shall be determined as follows:

+ In case the average crude oil selling price of the actual quarter increases by more than 20% but not exceeding 50% compared to the base price of the corresponding year:

+ In case the average crude oil selling price of the actual quarter increases by more than 50% compared to the base price of the corresponding year:

In which: The provisional quarterly oil profit volume distributed to the contractor is determined according to the regulations on oil and gas at the time of oil extraction, calculated based on the estimated actual oil production volume for that quarter according to the exploitation schedule for that quarter. Other indicators are still determined in accordance with the guidance provided in Clause 2, Article 6 of this Circular.

- Based on the annual crude oil production volume, the provisional quarterly oil profit volume distributed, the base price of the year, and the average crude oil selling price of the previous quarter, the person paying the additional revenue shall self-determine the amount of provisional additional revenue to be paid for the quarter according to the Provisional Additional Revenue Declaration Form No. 01/PTHU-DK issued together with this Circular and submit the declaration form to the local tax authority where the tax registration is made no later than the 30th day of the following quarter. In case the 30th day falls on a Saturday, Sunday, holiday, or public holiday (hereinafter referred to as a non-working day), the deadline for submitting the declaration form for provisional additional revenue is the next working day after the non-working day. In case the calculation period of the first quarter or the last quarter is less than or equal to one month, it will be added to the next quarter's calculation period or the last quarter's calculation period to form a complete quarter for calculation.

- Deadline for payment of provisional additional revenue: As specified in the submission deadline for the declaration form for provisional additional revenue.

2. Settlement of Additional Revenue

a) Determination of the Amount of Additional Revenue to be Paid: Implemented according to the guidance provided in Article 6 of this Circular.

b) Determination of the Amount of Underpaid (or Overpaid) Additional Revenue in the Year:

- The Additional Revenue Settlement Declaration Form issued together with this Circular: Form No. 02/PTHU-DK applies to encouraged investment oil and gas projects; Form No. 03/PTHU-DK applies to other oil and gas projects;

- The Production Volume and Crude Oil Selling Price Declaration Table according to Form No. 04/PTHU-DK issued together with this Circular;

- The Provisional Additional Revenue Paid Declaration Table according to Form No. 05/PTHU-DK issued together with this Circular.

- Not later than the 90th day from the end of the calendar year.

- Not later than the 45th day from the end date of the petroleum contract.

In case the 90th or 45th day is a non-working day, the deadline for submission of documents for declaration of additional revenue settlement is the next working day after the non-working day.

- If the provisional additional revenue paid during the year exceeds the additional revenue payable, the excess additional revenue paid can be deducted from the additional revenue payable for the next provisional additional revenue payment or processed for refund of the excess additional revenue paid according to the current tax refund regulations.

- If the provisional additional revenue paid during the year is less than the additional revenue payable, the person paying the additional revenue must pay the remaining additional revenue due into the State Treasury along with the deadline for submission of the declaration form for additional revenue settlement.

Article 8. Exemption from Additional Revenue Collection

For oil and gas projects that require higher investment incentives than those provided for in Clause 1, Article 4 of Decree No. 100/2009/NĐ-CP, the project investor or the person responsible for additional revenue collection must submit a written request accompanied by a detailed explanation (clearly stating the necessity to request the Prime Minister's decision to exempt additional revenue collection for the project; specific calculation data and the impact of additional revenue collection on the project according to Decree No. 100/2009/NĐ-CP and the guidance provided in this Circular) to the Ministry of Finance for the Ministry of Finance to submit to the Prime Minister for consideration and decision.

Article 9. Implementation Organization

1. This Circular takes effect 45 days from the date of signature.

2. The additional revenue collected from the profit share of the oil contractor when crude oil prices increase shall be recorded under a new sub-item 3706 "Additional Revenue from Oil and Gas Profits of Contractors" within Item 3700 "Revenue from Price Differences of Exported and Imported Goods and Additional Revenues".

3. In cases where the average selling price of crude oil in a quarter actually increases by no more than 20% compared to the base price of the corresponding year, the person responsible for additional revenue collection still implements provisional additional revenue declaration and final settlement of additional revenue according to the guidance provided in this Circular.

4. Oil and gas contracts signed or not yet signed but approved by the Prime Minister before January 1, 2010 shall not apply the additional revenue collection as stipulated in Decree No. 100/2009/NĐ-CP and the guidance provided in this Circular. For oil and gas projects negotiating and signing or re-signing oil and gas contracts from January 1, 2010 onwards, the additional revenue collection shall be applied according to Decree No. 100/2009/NĐ-CP and the guidance provided in this Circular.

5. The additional revenue collected from the profit share of the oil contractor when crude oil prices increase, if the contractor pays value-added tax under the deduction method and corporate income tax based on declared revenue and expenses to determine taxable income, shall be considered as deductible expenses when determining taxable income. If the contractor pays value-added tax under the direct calculation method on added value and corporate income tax at a percentage rate based on revenue, the taxable revenue for corporate income tax is the total revenue excluding value-added tax received by the contractor, without deducting taxes payable (if any) and this additional revenue.

6. During implementation, if any issues arise, they should be promptly reported to the Ministry of Finance for timely resolution./.