Circular No. 35/1998/TT-BTC guides procedures for exemption from import tax for organizations and individuals conducting oil and gas activities as stipulated by the Oil and Gas Law.

CIRCULAR

Guidelines on procedures for exemption from import tax for organizations and individuals conducting petroleum activities as prescribed by the Petroleum Law

Pursuant to the Petroleum Law adopted by the National Assembly of the Socialist Republic of Vietnam on July 6, 1993; Decree No. 84/CP dated December 17, 1996 of the Government detailing the implementation of the Petroleum Law;

Pursuant to the Law on Foreign Investment in Vietnam adopted by the National Assembly of the Socialist Republic of Vietnam on November 12, 1996; Decree No. 12/CP dated February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam; Decree No. 10/1998/NĐ-CP dated January 23, 1998 of the Government regarding certain measures to encourage and ensure foreign direct investment activities in Vietnam;

Pursuant to the Law on Export Tax and Import Tax of the Socialist Republic of Vietnam; Decree No. 54/CP dated August 28, 1993 of the Government detailing the implementation of the Law on Export Tax and Import Tax;

Pursuant to the Intergovernmental Agreement signed on July 16, 1991 concerning the continued exploitation in the field of geological exploration and oil and gas extraction in the southern continental shelf of the Socialist Republic of Vietnam within the framework of the joint venture enterprise "Vietsovpetro";

Pursuant to the directive of the Prime Minister in Circular No. 6158/KTTH dated December 3, 1997 regarding the exemption from import tax for petroleum contracts;

The Ministry of Finance guides the implementation of the exemption from import tax for organizations and individuals conducting petroleum activities based on petroleum contracts as stipulated by the Petroleum Law as follows:

1. Organizations and individuals conducting petroleum activities are the subjects exempted from paying import tax according to this Circular include:

I. SCOPE OF APPLICATION

Joint ventures engaged in petroleum operations defined in Clause 10, Article 3 of the Petroleum Law;

Contractors defined in Clause 8, Article 3 of the Petroleum Law;

2. Goods of organizations and individuals conducting petroleum activities that are exempted from import tax include:

Goods imported in accordance with Article 11 of the current Law on Export Tax and Import Tax;

Goods imported in accordance with Article 63 of Decree No. 12/CP of the Government dated February 18, 1997 and Article 10 of Decree No. 10/1998/NĐ-CP of the Government dated January 23, 1998;

Materials, equipment, and fuel imported for petroleum activities in accordance with Clause 5, Article 28 of the Petroleum Law, and Article 41 of Decree No. 84/CP dated December 17, 1996;

Materials and equipment imported under the temporary importation-reexportation method for petroleum activities in accordance with Clause 5, Article 28 of the Petroleum Law, and Article 41 of Decree No. 84/CP dated December 17, 1996;

Consumer goods including food and medical supplies serving outside drilling platforms that Vietnam has not yet produced.

3. Organizations and individuals conducting petroleum activities must pay import tax and other taxes and fees (if applicable) for all types of imported vehicles (except specialized transportation means within the production process and transportation means for employee pick-up including buses over 24 seats and watercraft) and must pay other taxes and fees (if applicable) for goods exempted from import tax as specified in Point 2, Section I of this Circular.

II. PROCEDURES FOR EXEMPTION FROM IMPORT TAX

Upon the proposal of the Vietnam Oil and Gas Corporation, based on the scale of each petroleum contract, the Ministry of Trade approves the list of materials, equipment, fuel, food, and various medicines exempted from import tax for each petroleum contract. For consumer goods such as food and various medicines, they must be goods that Vietnam cannot produce and must have the approval of relevant management agencies.

Based on the list of materials, equipment, and fuel exempted from import tax approved by the Ministry of Trade, the Customs Departments of provinces and centrally administered cities monitor the importation of tax-exempt goods by organizations and individuals conducting petroleum activities.

In cases where subcontractors import goods under the authorization of organizations and individuals conducting petroleum activities through service contracts based on the list of tax-exempt goods approved by the Ministry of Trade for organizations and individuals conducting petroleum activities, the Customs Departments of provinces and centrally administered cities will monitor the tax exemption as if it were for organizations and individuals conducting petroleum activities.

III. COLLECTION OF IMPORT TAX

1. Organizations and individuals using goods, materials, equipment, and transportation means that have been exempted from import tax and special consumption tax (if applicable), if used for purposes other than those intended to serve petroleum activities or sold domestically, must obtain permission from the Ministry of Trade and declare and pay import tax, special consumption tax (if applicable), and other related taxes within two working days from the date the reason for tax exemption changes.

For materials and equipment imported under the temporary importation-reexportation method and exempted from import tax, if they are not re-exported out of Vietnam upon completion of the contract or sold domestically, they must declare and pay import tax within two working days from the date the reason for tax exemption changes.

If organizations and individuals conducting petroleum activities transfer vehicles exempted from import tax and special consumption tax (if applicable) to the Vietnam Oil and Gas Corporation as agreed in petroleum contracts, the Vietnam Oil and Gas Corporation shall be responsible for declaring and paying import tax and special consumption tax (if applicable).

The declaration and payment of import tax and special consumption tax (if applicable) shall be carried out in accordance with the guidelines set forth in the Law on Export Tax, the Law on Special Consumption Tax, current legal documents guiding these laws, and Circular No. 65/TT-TCT dated September 24, 1996 of the Ministry of Finance on the determination of taxable prices for imported goods exempted from tax that now change the reason for tax exemption.

2. Organizations and individuals conducting petroleum activities are not required to collect import tax and other related taxes in the following cases:

2. Organizations and individuals conducting petroleum activities shall not be subject to retroactive collection of import tax and other related taxes in the following cases:

Transfer of imported tax-exempt materials and equipment to Vietnam Oil and Gas Corporation pursuant to the agreements in petroleum contracts for petroleum activities.

Transfer of imported tax-exempt automobiles to other organizations and individuals conducting petroleum activities in cases where the rights and obligations stipulated in petroleum contracts are transferred. This provision only applies to automobiles that were exempted from import tax before this Circular was issued.

Organizations and individuals conducting petroleum activities are not required to pay back import taxes but must pay other related taxes for cases where they transfer imported tax-exempt materials and equipment to other organizations and individuals for petroleum activities.

IV. IMPLEMENTATION PROVISIONS

This Circular applies to customs declarations from January 1, 1998. All previous regulations contrary to this Circular are hereby abolished.

This Circular replaces Circular No. 75/TC-TCT dated October 20, 1995 of the Ministry of Finance.

Any difficulties encountered during implementation should be reported to the Ministry of Finance for timely supplementary guidance./.