Decree No. 48/2000/ND-CP detailing the implementation of the Oil Law

DECREE OF THE GOVERNMENT

Regulations for Implementing the Petroleum Law

 

THE GOVERNMENT

 Based on the Government Organization Law dated September 30, 1992;

Based on the Petroleum Law dated July 6, 1993;

Based on the Law Amending and Supplementing Certain Provisions of the Petroleum Law dated June 9, 2000;

At the proposal of the Minister and Head of the Government Office,

 

DECREE:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree provides detailed implementation regulations for the Petroleum Law adopted by the National Assembly of the Socialist Republic of Vietnam at its Ninth Session on July 6, 1993, and the Law Amending and Supplementing Certain Provisions of the Petroleum Law adopted by the National Assembly of the Socialist Republic of Vietnam at its Tenth Session on June 9, 2000 (hereinafter referred to collectively as the Petroleum Law).

Article 2.Applicability

This Decree applies to activities related to exploration, development of oil and gas fields, exploitation of oil and gas, including processing, collection, storage, transportation of oil and gas within the exploitation area up to the point of delivery, and oil and gas service activities within the territory, islands, internal waters, territorial sea, exclusive economic zone, continental shelf of the Socialist Republic of Vietnam, as well as on facilities, means, equipment serving oil and gas activities as stipulated in Article 47 of the Petroleum Law.

Article 3. Subjects Conducting Oil and Gas Activities

Organizations and individuals conducting oil and gas activities include:

1. Vietnam Oil and Gas Corporation;

2. Other state-owned enterprises established under the State Enterprise Law;

3. Enterprises established under the Enterprise Law;

4. Foreign-invested enterprises in Vietnam;

5. Foreign organizations and individuals investing directly in Vietnam;

6. Overseas Vietnamese investing in Vietnam.

Organizations and individuals specified in Clauses 2, 3, 4, 5, and 6 of this Article shall conduct oil and gas activities based on oil contracts signed with the Vietnam Oil and Gas Corporation.

In cases where it conducts oil and gas activities independently, the Vietnam Oil and Gas Corporation must prepare a project proposal to be submitted to the Prime Minister for approval and must comply with the provisions of the Petroleum Law, the State Enterprise Law, this Decree, and other relevant legal provisions of Vietnam.

Article 4. Definitions

In this Decree, the following terms shall be understood as follows:

1. "Fixed facility" means a structure built and installed permanently and used to serve oil and gas activities.

2. "Contract Area" means the area determined based on exploration blocks agreed upon in the oil contract or the remaining area after returning the area.

3. "Delivery Point" means the point agreed upon in the oil contract where oil and gas is transferred to the ownership of the parties involved in the oil contract.

4. "Arm's Length Transaction Contract" means a transaction contract between a buyer and a seller in market relations, excluding contracts for internal purchases and sales within a company, between governments, between government organizations, or any transactions, exchanges influenced by abnormal commercial relationships.

5. "Associated Gas" means hydrocarbons in gaseous form separated during the exploitation and processing of crude oil.

6. "Field Development" means the process of preparing and investing in construction of facilities, drilling for exploitation, installation of equipment to bring the field into oil and gas exploitation from the time the field is declared to have commercial value.

7. "Actual Oil and Gas Production" means the amount of oil and gas extracted and retained from the contract area, measured at the delivery point.

 

Chapter II

OIL AND GAS ACTIVITIES

Article 5. Project Proposals and Work Programs

1. Organizations and individuals conducting exploration and exploitation activities for oil and gas must prepare overall project proposals and detailed project proposals for these activities, to be submitted to the competent state management agency for oil and gas for examination and approval.

The time limit for examination and approval shall not exceed sixty days (60 days) for overall project proposals and thirty days (30 days) for detailed project proposals from the date of receipt of the proposals.

2. Organizations and individuals conducting exploration and exploitation activities for oil and gas must prepare annual work programs corresponding to each phase in accordance with the commitments made in the oil and gas contracts regarding deadlines, content of work, finance, and submit them to Vietnam Oil and Gas Corporation for agreement on implementation.

Article 6. Standards to be Applied

Organizations and individuals conducting oil and gas activities must apply Vietnamese standards related to safety, environment, technology, and science.

In cases where there are no Vietnamese standards, organizations and individuals conducting oil and gas activities may apply international standards under treaties or agreements to which Vietnam is a party.

The application of other standards must be approved by the Ministry of Science and Technology and Environment.

Article 7. Environmental and Safety Documents

Organizations and individuals must establish and submit to the competent state management authority with jurisdiction the following documents before commencing exploration and exploitation activities for oil and gas:

Environmental impact assessment report;

Safety management program and risk assessment including measures to prevent accidents and damage;

Emergency response plan for accidents including technical measures and the use of equipment and facilities to address accidents.

Article 8. Requirements for Protection of the Environment and Safety

Organizations and individuals conducting exploration and exploitation activities for oil and gas must carry out tasks related to environmental protection and safety as follows:

1. Establish safe zones and maintain safety signals for oil and gas facilities and machinery according to Article 11 of this Decree;

2. Implement safety measures according to the approved safety management program;

3. Carry out environmental monitoring programs, implement environmental protection plans, and measures to prevent pollution and mitigate the consequences of environmental pollution incidents as prescribed by environmental protection laws;

4. Minimize adverse impacts on the environment such as soil, water, forest, air pollution, harm to flora and fauna, disruption of ecological balance, or negative effects on the living environment;

5. Update data and complete risk assessment reports, and emergency response plan implementation reports;

6. Record all accidents and incidents thoroughly;

7. Issue urgent notifications and immediately apply remedial measures in case of accidents or incidents;

8.AApply measures to ensure workplace safety.

Article 9. Liability in Case of Incidents

Organizations and individuals conducting oil and gas activities must bear legal responsibility for damages to persons, property, and the environment, including the restoration and cleanup of the affected environment caused directly or indirectly by oil and gas activities.

Article 10. Requirements for the conservation of resources

Organizations and individuals conducting exploration and exploitation activities for oil and gas must comply with regulations on the conservation of natural resources, oil and gas resources, and oil and gas exploitation at an optimal recovery rate consistent with international oil industry practices.

Article 11. Oil and Gas Safety Zones

The safety zone distance for drilling and exploitation facilities at sea is five hundred meters (500 meters) or more from the outermost edge of the facilities or from the anchoring position for floating units, except in special cases decided by the Prime Minister. Within two nautical miles (2 nautical miles) from the outermost edge of the facilities, vessels are not allowed to anchor. In the safety zone, unauthorized persons are not permitted to enter, except in special cases decided by the Prime Minister.

The safety zones around facilities serving exploration and exploitation activities for oil and gas on land shall be determined by the state management agency for oil and gas, depending on the geographical and social conditions of the area where the oil and gas activities are carried out.

Article 12. Regulations During Drilling

During drilling operations, organizations and individuals must comply with the following provisions:

1. Drilling according to the approved design or modified design;

2. Not drilling outside the area specified in the oil and gas contract;

3. Retaining all drilling records and samples and submitting them to Vietnam National Oil and Gas Group;

4. Promptly reporting to Vietnam National Oil and Gas Group any other resources discovered during drilling.

Organizations and individuals conducting drilling operations must also comply with other current regulations.

Article 13. Regulations on Oil and Gas Exploitation

Organizations and individuals conducting oil and gas exploitation must comply with current regulations on oil and gas resource exploitation, implement the overall plan and the approved development plan for oil and gas fields accurately; they must apply advanced technical measures and equipment to achieve optimal oil and gas recovery without harming the subsurface, ecological environment, and mine safety.

Article 14. Right to Use Equipment and Means

The Government of Vietnam has the right to use equipment and means serving oil and gas activities, including pipelines and storage facilities managed and used by organizations and individuals conducting oil and gas activities, provided that it does not hinder oil and gas activities and does not increase costs for the Contractor.

Article 15. Obligation to Remove Facilities

Organizations and individuals conducting exploration, surveying, and exploitation of oil and gas must develop programs, plans, and cost estimates for removing fixed facilities serving exploration, surveying, and exploitation of oil and gas, and submit them to the state management agency for oil and gas for approval. Removal costs are included in recoverable oil and gas costs.

At the request of the state management agency for oil and gas, organizations and individuals conducting exploration, surveying, and exploitation of oil and gas may not remove or only partially remove such fixed facilities.

Article 16. Oil and Gas Insurance

Organizations and individuals conducting oil and gas activities must purchase insurance in accordance with Vietnamese laws and international oil industry practices, particularly insurance for facilities serving oil and gas activities, environmental pollution insurance, life insurance, property insurance, and third-party civil liability insurance.

It is encouraged to purchase insurance from Vietnamese insurance companies.

Article 17. Reporting Obligations of Vietnam Oil and Gas Corporation

Vietnam Oil and Gas Corporation shall submit to the State management agency for oil and gas the following documents:

1. Annual and long-term plans and schemes for oil and gas activities;

2. Quarterly and annual consolidated reports on the implementation and results of oil and gas activities;

3. Reports on the implementation of economic and technical projects related to oil and gas activities;

4. Reports on significant events and incidents related to oil and gas activities;

5. Other reports as required by the State management agency for oil and gas.

The deadlines and contents of each type of document shall be prescribed by the State management agency for oil and gas.

Article 18.Provide information

Contractors must provide complete information, data, and reports on oil and gas activities in accordance with the regulations of the State management agency for oil and gas.

Competent State management agencies may request contractors to provide information and reports when necessary, in accordance with their functions.

Article 19.Confidentiality of information

All reports and information must be kept confidential in accordance with Vietnamese law.

Organizations and individuals conducting oil and gas activities are permitted to use and must retain in Vietnam original documents, samples, and reports; they are allowed to temporarily export and re-import such documents and samples according to the regulations of competent State management agencies.

 

Chapter III

OIL AND GAS CONTRACTS

Article 20. Forms of Oil and Gas Contracts

Oil and gas contracts shall be concluded in the following forms:

Production Sharing Contract;

Joint Operating Contract;

Joint Venture Contract.

In addition to the above forms, Vietnam Oil and Gas Corporation and its counterparties may agree to choose other forms of contracts.

Article 21. Operator

The appointment or hiring of the Operator shall be agreed upon in the oil and gas contract or in a separate document.

The scope of operational authority shall be agreed upon by the parties to the contract in the oil and gas contract or in the document appointing or hiring the Operator.

The Operator shall represent the parties to the oil and gas contract in conducting exploration and production activities and performing rights and obligations within the authorized scope as agreed upon in the appointment or hiring document and in compliance with other relevant provisions of Vietnamese law.

Article 22. Joint Operating Company

The Joint Operating Company shall be established to represent the parties to the oil and gas contract in conducting exploration and production activities and performing rights and obligations within the authorized scope as agreed upon in the joint operating agreement and in compliance with other relevant provisions of Vietnamese law.

The Joint Operating Company shall have a seal, open bank accounts, hire employees, sign economic contracts, and conduct other activities within the authorized scope.

The Ministry of Planning and Investment shall prescribe the organization and operation of the Joint Operating Company.

Article 23. Tendering of Blocks

The State management agency for oil and gas shall organize the tendering of blocks in accordance with the regulations on tendering exploration and production blocks issued by the Government of Vietnam.

In cases where only one bidder participates in the tender or in special circumstances, the Prime Minister shall decide on direct award at the proposal of the State management agency for oil and gas.

Article 24. Exploration Phase

The exploration phase as stipulated in Article 17 of the Petroleum Law may be divided into smaller phases. The duration of these smaller phases shall be agreed upon by the parties to the petroleum contract. ||| The parties to the petroleum contract shall agree on this matter.

Article 25. Extension of the Exploration Phase Duration

In cases where the exploration phase expires but the contractor has not yet completed the work program, the duration of the exploration phase may be extended according to the provisions of Article 17 of the Petroleum Law. The contractor and Vietnam Oil and Gas Corporation must submit a document clearly stating the reasons for requesting an extension of the exploration phase duration to the Ministry of Planning and Investment for review and approval before the end of the exploration phase., |||

Article 26. Retaining the Discovered Gas Area

Discovering gas with commercial potential as defined in Article 17 of the Petroleum Law means discovering gas that, through initial assessment and evaluation by the contractor, would be profitable to develop.

The contractor and Vietnam Oil and Gas Corporation must submit a document clearly stating the reasons and proposing the retention period for the discovered gas area to the Prime Minister for consideration and decision. If the retention period for the discovered gas area has been extended to five years (5 years) by the Prime Minister and the contractor still has not found a market for gas consumption, the Prime Minister may extend it further by two years (2 years) at the request of the contractor and Vietnam Oil and Gas Corporation.

In cases where the contractor intentionally delays or lacks good faith in negotiating the gas purchase and sale contract, the permission to retain the discovered gas area may be suspended or not considered for further extension.

Article 27. Suspension of Certain Rights and Obligations under the Petroleum Contract

1. Suspension in case of force majeure.

The parties to the petroleum contract may agree on methods to suspend the performance of certain rights and obligations under the petroleum contract in cases of force majeure as stipulated in Article 17 of the Petroleum Law. The force majeure events shall be agreed upon by the parties to the petroleum contract within the petroleum contract.

In cases where the force majeure event ceases, but its consequences have not yet been fully resolved, the continuation of the suspension of certain rights and obligations under the petroleum contract shall be decided by the Prime Minister. |||

2. Suspension in special cases.

Special cases allowing the suspension of certain rights and obligations under the petroleum contract as stipulated in Article 17 of the Petroleum Law include situations due to national defense, security, or other special reasons. The Prime Minister will consider and decide each specific case based on the proposal of the contractor and Vietnam Oil and Gas Corporation.

Article 28. Returning the Exploration Area

The contractor must return the exploration area according to the following provisions:

1. At least 20% of the original contract area at the end of each small phase of the exploration phase.

2. The entire remaining contract area after the completion of the exploration phase, excluding areas currently being evaluated, areas for developing oil fields, areas for gas exploitation, and areas retained according to Article 17 of the Petroleum Law.

The contractor may voluntarily return the area at any time during the exploration phase. Voluntarily returned areas shall be exempted from the obligation to return the area. Voluntary return of the area does not reduce the obligations already committed in the petroleum contract.

The returned area must form simple geometric shapes.

Fixed structures must be removed from the returned area according to the provisions of Clause 15 of this Decree.

Article 29. Commitment to Work

The Contractor and Vietnam Oil and Gas Corporation must agree on a work program during the exploration phase with minimum commitments regarding the volume of geophysical surveys, drilling wells, other comprehensive studies, and commitments regarding training, recruitment, and technology transfer.

The estimated cost for the aforementioned minimum work commitments shall be considered the minimum financial commitment. The Contractor shall be deemed to have fulfilled the minimum financial commitment when all minimum work commitments have been completed.

In the event that the Contractor requests to terminate the oil and gas contract but has not completed the minimum work commitments, the Contractor must refund Vietnam Oil and Gas Corporation an amount corresponding to the volume of work committed to be performed but not completed according to the minimum financial commitment.

Article 30. Early Production

During the exploration phase, if the Contractor conducts early production in areas within the oil and gas contract area, it must submit to the competent state management agency for petroleum approval of the early production plan in accordance with the Petroleum Law and this Decree.

Article 31. Activities After Oil Discovery

Upon discovery of oil, the Contractor must promptly notify and report the results of research, assessment, and related documents to the competent state management agency for petroleum and Vietnam Oil and Gas Corporation.

The Contractor and Vietnam Oil and Gas Corporation must include in the oil and gas contract provisions on the basis for determining whether a field has commercial value, the deadline for submitting the field evaluation program, the general development plan, and the development plan.

The Contractor must report the evaluation results to Vietnam Oil and Gas Corporation. If the evaluation results indicate that the field has commercial value, the Contractor may declare a commercial discovery.

The Contractor and Vietnam Oil and Gas Corporation must submit to the competent state management agency for petroleum reports on reserves, the field development plan for approval by the Prime Minister.

After the field development plan is approved, if the Contractor does not proceed with field development and oil production according to the time limit specified in the approval document, the competent state management agency for petroleum has the right to reclaim the field.

Article 32. Use of Oil and Gas for Exploration Activities

During the oil and gas production process, the Contractor may use oil and gas extracted from the contract area for exploration and production activities in accordance with appropriate international oil industry standards.

Article 33.Periodic Report

During the oil and gas production process, the Contractor must submit periodic reports on production volumes, composition, and the proportion of oil and gas extracted from each field and each production target to Vietnam Oil and Gas Corporation.

Such reports must include information on the volume of oil and gas used for exploration and production activities, as well as the volume of oil and gas lost or burned.

Article 34. Use of Associated Gas

The Contractor may use associated gas extracted within the contract area as fuel for oil and gas operations at the field or reinject it back into the field.

Associated gas can only be flared with the permission of the competent state management agency for petroleum.

The Government of Vietnam has the right to use without payment associated gas that the Contractor intends to flare if such action does not hinder the Contractor's operations. In such cases, the Contractor must facilitate the implementation of such work.

Article 35. Oil and gas fields exceeding the contract area

In cases where an oil and gas field exceeds the contract area and extends to an area that has not yet been tendered for or designated for bidding, PetroVietnam and the Contractor shall establish a cooperation project to exploit the entire field and submit it to the Prime Minister for approval.

Article 36. Consolidation of Fields

In cases where an oil and gas field within the contract area extends into an area that has already been tendered for, designated for bidding, or signed a contract, the relevant parties shall negotiate to establish a project to jointly exploit the entire field and submit it to the Prime Minister for approval.

 

Chapter IV

RIGHTS AND OBLIGATIONS OF ORGANIZATIONS AND INDIVIDUALS

CONDUCTING OIL AND GAS ACTIVITIES

Article 37. Right to Enter into Contracts for Serving Oil and Gas Activities

Organizations and individuals conducting exploration, search, and exploitation of oil and gas have the right to enter into contracts for purchasing goods and oil and gas service contracts with subcontractors or other organizations and individuals to serve oil and gas activities.

Contractors and subcontractors must prioritize purchasing goods produced and supplied by Vietnam; they must also prioritize entering into service contracts with Vietnamese organizations and individuals on the principle of ensuring competitive prices and quality.

Article 38. Labor Regulations

The Contractor must establish labor regulations, salary scales, reward systems, allowances, and other benefits for workers in accordance with Vietnamese laws on labor, taking into account international practices in the oil and gas industry; they must also prepare staffing tables, annual recruitment plans, and training plans.

Article 39. Recruitment and Signing of Employment Contracts

Foreign organizations and individuals conducting oil and gas activities must prioritize employing Vietnamese workers and may recruit foreign workers for jobs that Vietnamese workers cannot undertake, but they must provide funding and training programs to enable Vietnamese workers to replace foreign workers as soon as possible.

Recruitment of workers must comply with Vietnamese laws on labor.

Foreign organizations and individuals conducting oil and gas activities may directly recruit and sign employment contracts with individuals holding work permits.

Article 40. Right to Open Accounts and Purchase Foreign Currency

1. Foreign organizations and individuals acting as Contractors may open accounts in Vietnam and abroad. When opening accounts abroad, the Contractor must register with the State Bank of Vietnam.

2. After fulfilling all tax obligations as prescribed by Vietnamese law, foreign organizations and individuals acting as Contractors may transfer their income from selling oil and gas, which includes recovery costs, profits, and other lawful incomes obtained during oil and gas operations, out of the country or retain it abroad.

3. Foreign organizations and individuals acting as Contractors may purchase foreign currency from commercial banks or credit institutions authorized to deal in foreign exchange in Vietnam to meet their current transactions or other permitted transactions according to Vietnamese laws on foreign exchange management.

Article 41. Ensuring Balance of Foreign Currency

1. Important projects ensured a balance of foreign currency are those oil and gas exploitation projects conducted by foreign organizations and individuals, selling all or part of the oil and gas in the Vietnamese market to serve particularly important investment projects under the Government's program and projects selling oil and gas as required by the Vietnamese Government as stipulated in Clause 9, Article 30 of the Petroleum Law.

2. The amount of foreign currency guaranteed by the Vietnamese Government for balance as provided for in this clause is the shortfall in foreign currency after the foreign organization or individual acting as the Contractor has purchased from commercial banks and credit institutions authorized to deal in foreign exchange in Vietnam, but not exceeding the amount of Vietnamese Dong received from selling oil and gas in the Vietnamese market.

3. The conversion of Vietnamese Dong to freely convertible foreign currency shall be carried out at the buying and selling rates published by commercial banks at the time of conversion.

Article 42. Obligation to Sell Crude Oil on the Domestic Market

In case of emergency, upon request of the Government of Vietnam, the Contractor shall be obligated to sell a portion of its crude oil owned at the domestic market of Vietnam.

The portion of crude oil required by the Government of Vietnam for each Contractor to sell on the domestic market shall be determined based on the percentage ratio between the amount of crude oil owned by that Contractor and the total amount of crude oil owned by all Contractors operating in the exploration and production of petroleum in Vietnam.

The selling price of crude oil requested by the Government of Vietnam shall be the competitive international selling price.

Article 43. Rights and Obligations of Joint Venture Enterprises

In cases where a petroleum contract is concluded in the form of a joint venture contract, the joint venture enterprise shall enjoy rights and fulfill obligations agreed upon in the joint venture contract, as well as the rights and obligations of the Contractor stipulated in this Chapter and corresponding provisions of the Law on Foreign Investment in Vietnam.

 

Chapter V

PROVISIONS ON TAXATION AND FINANCE

Article 44. Resource Tax on Crude Oil

Organizations and individuals conducting the exploitation of crude oil must pay resource tax.

The resource tax on crude oil is determined based on a progressive scale of the total actual crude oil production exploited during each tax period, calculated according to the average daily crude oil production of the entire area covered by the petroleum contract.

The resource tax rate table for crude oil is specified as follows:

Article 45. Resource Tax on Natural Gas

Organizations and individuals conducting the exploitation of natural gas must pay resource tax.

The resource tax on natural gas is determined based on a progressive scale of the total actual natural gas production exploited during each tax period, calculated according to the average daily natural gas production of the entire area covered by the petroleum contract.

The resource tax rate table for natural gas is specified as follows:

Article 46. Tax Base for Resource Tax

The tax base for resource tax on crude oil is the weighted average price of crude oil sold at the delivery point under arm's length transaction contracts during the tax period.

The tax base for resource tax on natural gas is the sale price under arm's length transaction contracts at the delivery point during the tax period.

In cases where petroleum is sold without arm's length transaction contracts, the tax base for resource tax shall be determined by the Ministry of Finance based on market prices taking into account the quality of petroleum, location, and other related factors.

Article 47. Method of Payment for Resource Tax

Resource tax may be paid in petroleum or in cash, or partly in cash and partly in petroleum, depending on the choice of the tax authority.

The tax authority shall notify organizations and individuals conducting the exploitation of petroleum six months in advance regarding payment of resource tax in cash or in petroleum.

Resource tax is temporarily paid monthly and settled quarterly.

If resource tax is collected in petroleum, the place of payment is the delivery point. In cases where the tax authority requires payment of resource tax at another location, the taxpayer is allowed to deduct transportation costs and other direct costs incurred due to the change in the place of payment from the amount of resource tax payable.

Article 48. Corporate Income Tax

Organizations and individuals conducting exploration and exploitation of oil and gas must pay corporate income tax.

The basis for calculating corporate income tax is the total taxable income during the tax payment period and the tax rate specified in Article 33 of the Petroleum Law.

Total taxable income includes income from exploration and exploitation activities of oil and gas and other income.

Income from exploration and exploitation activities of oil and gas is calculated as revenue minus related costs for such activities during the tax payment period as stipulated in Articles 49 and 50 of this Decree.

Other income includes:

1. Differences from securities trading;

2. Income from ownership and use rights of assets;

3. Income from transfer;

4. Income from deposits and loans;

5. Differences from foreign currency sales;

6. Collection of previously written-off bad debts;

7. Collection of unidentifiable creditors' debts;

8. Income from other revenues related to exploration and exploitation of oil and gas after deducting expenses incurred to generate such income;

9. Other income.

Article 49. Revenue

Revenue for determining taxable income from exploration and exploitation of oil and gas is the entire value of oil and gas sold under arm's length transactions.

In cases where oil and gas are sold without arm's length transactions, the revenue for determining taxable income is determined by multiplying the volume of oil and gas sold with the price determined by the Ministry of Finance as prescribed in Article 46. 2. Civil servants, officials, and officers belonging to the armed forces working directly and regularly in the field of foreign affairs and international integration shall be recognized as being proficient in rare foreign languages if they meet the following conditions:

Article 50. Deductible Expenses for Determining Taxable Income

Deductible expenses for determining taxable income include:

1. Recoverable expenses as agreed upon in the petroleum contract;

2. Resource tax;

3. Export tax;

4. Petroleum commission agreed upon in the petroleum contract;

5. Contributions and sponsorships for social and charitable purposes.

Article 51. Expenses Not Included in Recoverable Expenses

Expenses not included in recoverable expenses include:

1. Expenses incurred before the petroleum contract becomes effective, except those agreed upon in the petroleum contract or approved by competent state management agencies; 2. Types of petroleum commissions and other commitments that are not recoverable as agreed upon in the petroleum contract;

3. Interest on investment for exploration, development, and exploitation of oil and gas;

4. Penalties, compensation for damages, and losses caused by the fault of organizations and individuals; 5. Payments of resource tax, export tax, value-added tax, corporate income tax in Vietnam and abroad, and profit repatriation tax;

6. Damages already compensated by insurance;

7. Contributions and sponsorships for social and charitable purposes;

8. Unreasonable and undocumented expenses that cannot be proven in audits, tax settlements, and inspections.

Article 52. Exemption and Reduction of Corporate Income Tax

Organizations and individuals conducting exploration and exploitation of oil and gas in encouraged investment projects are exempted from corporate income tax for the first year they have taxable income and are granted a fifty percent (50%) reduction in corporate income tax payable for the following year.

The Prime Minister decides specific cases exempted from corporate income tax for the first two years they have taxable income and granted a fifty percent (50%) reduction in corporate income tax payable for the following two years.

Organizations and individuals conducting exploration and exploitation of oil and gas in encouraged oil and gas projects shall be exempted from corporate income tax for the first year they generate taxable income and shall have their corporate income tax reduced by fifty percent (50%) for the following year.

The Prime Minister decides specific cases to be exempted from corporate income tax for the first two years they generate taxable income and shall have their corporate income tax reduced by fifty percent (50%) for the next two years.

Article 53. Methods of Paying Corporate Income Tax

Corporate income tax shall be paid in cash and temporarily submitted quarterly, with annual settlement.

Article 54. Exemption from Import Duties

1. The following goods imported directly or through agency by organizations and individuals conducting oil and gas exploration and exploitation activities shall be exempted from import duties:

Specialized equipment, machinery, transportation means necessary for oil and gas operations, transportation means used to pick up and drop off workers (buses with 24 seats or more, watercraft), including spare parts, components, detachable parts, replacement parts, molds, accessories accompanying specialized equipment, machinery, transportation means mentioned above;

Necessary materials for oil and gas operations that cannot be produced domestically;

Medical equipment and emergency medicines used on drilling platforms and facilities when approved by the Ministry of Health;

Goods temporarily imported for re-export serving oil and gas operations;

Office equipment serving oil and gas operations.

2. Goods specified in Clause 1 of this Article imported by subcontractors and other organizations and individuals to supply to organizations and individuals conducting oil and gas exploration and exploitation activities through oil service contracts or goods supply contracts shall be exempted from import duties.

Article 55. Value Added Tax

1. The following goods imported directly or through agency by organizations and individuals conducting oil and gas exploration and exploitation activities shall not be subject to value added tax:

Specialized equipment, machinery, replacement parts, transportation means belonging to types not yet produced domestically and necessary for oil and gas exploration and exploitation activities.

In cases where imported production lines, equipment, and complete sets of machinery are not subject to value added tax, but the production lines, equipment, and complete sets of machinery include domestic products, then value added tax shall not be applied to the entire production line, equipment, and complete set of machinery; Materials imported belonging to types not yet produced domestically and necessary for oil and gas exploration and development;

Goods temporarily imported for re-export serving oil and gas exploration and exploitation activities.

2. Goods specified in Clause 1 of this Article imported by subcontractors and other organizations and individuals to supply to organizations and individuals conducting oil and gas exploration and exploitation activities through oil service contracts or goods supply contracts shall not be subject to value added tax.

Article 56. Collection of Back Taxes

Goods exempted from import duties according to Article 54 or not subject to value added tax according to Article 55 of this Decree, if:

1. Transferred within Vietnam for purposes other than serving oil and gas activities must be permitted by the Ministry of Trade and back taxes for import duties and other taxes as prescribed by Vietnamese law must be paid;

2. Transferred within Vietnam for purposes serving oil and gas activities must be permitted by the Ministry of Trade and exempted from back payment of import duties but other taxes as prescribed by Vietnamese law must be paid;

3. Transfer of ownership of materials and equipment

to the Vietnam Oil and Gas Corporation as agreed upon in the oil contract, the contractor shall be exempted from back payment of import duties and other taxes, but the Vietnam Oil and Gas Corporation must pay related taxes and fees for transferring ownership of assets and pay capital usage fees for the capital value received from the contractor. For PetroVietnam under the terms agreed upon in the oil and gas contract, the Contractor shall be exempted from import tax and other taxes, but PetroVietnam shall pay all related taxes and fees concerning the transfer of ownership of assets and shall pay capital usage fees for the capital value received from the Contractor.

Article 57. Determination of the List of Equipment, Machinery, and Materials Produced Domestically

The Ministry of Planning and Investment shall issue the list of equipment, machinery, specialized transportation means, and domestically produced materials as the basis for exemption from import tax as stipulated in Article 54 and to determine goods not subject to Value Added Tax as provided in Article 55 of this Decree. 3. Build-Operate-Transfer Contract (hereinafter referred to as BOT Contract) is a contract signed between the competent state agency and the investor, project enterprise to construct infrastructure works; after completion of the works, the investor, project enterprise has the right to operate the works for a certain period of time; at the end of the period, the investor, project enterprise transfers the works to the competent state agency.

Article 58. Exemption from Export Tax

1. Goods temporarily imported or imported but not fully utilized may be exempted from export tax when re-exported.

2. Petroleum products belonging to the State's resource tax are exempt from export tax upon export.

Article 59. Corporate Income Tax on the Transfer of Capital Participation in Oil and Gas Contracts

1. Foreign contractors conducting exploration and exploitation activities for oil and gas must pay corporate income tax on income generated from transferring capital participation in oil and gas contracts according to the provisions of the Law on Foreign Investment in Vietnam.

2. Vietnamese organizations and individuals conducting exploration and exploitation activities for oil and gas must pay corporate income tax on income generated from transferring capital participation in oil and gas contracts according to the provisions of the Law on Corporate Income Tax.

Article 60. Taxes on Subcontractors

Subcontractors and other organizations and individuals entering into contracts to supply goods and services with organizations and individuals conducting exploration and exploitation activities for oil and gas must pay taxes as prescribed by current tax laws, except for cases of importing goods as stipulated in Article 54 and Article 55 of this Decree.

Article 61. Fiscal Year for Tax Purposes

The fiscal year for organizations and individuals conducting exploration and exploitation activities for oil and gas begins on January 1 and ends on December 31 of each calendar year.

Organizations and individuals conducting exploration and exploitation activities for oil and gas may request the Ministry of Finance to apply their own 12-month fiscal year for calculating and paying corporate income tax.

Article 62. Registration of Accounting System

Organizations and individuals conducting exploration and exploitation activities for oil and gas must register their accounting system with the Ministry of Finance and be subject to financial inspection.

Article 63. Financial Reporting

Organizations and individuals conducting exploration and exploitation activities for oil and gas must submit annual financial reports to the investment permit issuing authority, the state management agency for oil and gas, the Ministry of Finance, and the General Statistics Office within three months from the end of the fiscal year.

Prior to submission to these authorities, the annual financial report must be audited by an independent auditing company in Vietnam or another independent auditing company permitted to operate in Vietnam according to Vietnamese auditing laws.

 

Chapter VI

STATE MANAGEMENT OF OIL AND GAS ACTIVITIES

Article 64. State Management Authority over Oil and Gas Activities of the Government and the Prime Minister

1. The Government exercises unified state management over oil and gas activities. The Government performs the following tasks and powers:

Issuing legal regulations governing oil and gas activities;

Deciding on strategic plans, policies, and development planning for the oil and gas sector;

Deciding on cooperation in oil and gas activities in overlapping areas with foreign countries;

Deciding on international cooperation schemes for oil and gas exploration and exploitation;

Reviewing and deciding on other matters within its jurisdiction.

2. The Prime Minister performs the following tasks and powers:

Issuing lists of blocks; delineating and adjusting block boundaries;

Approving oil and gas contracts on behalf of the Government;

Reviewing and deciding on behalf of the Government on the transfer of rights and obligations under oil and gas contracts;

Reviewing and deciding on tender designation to select partners to sign oil and gas contracts;

Reviewing and deciding on other matters within its jurisdiction.

Article 65. Competence of State Management Agencies for Petroleum

State management agencies for petroleum shall perform state management functions over petroleum activities as prescribed by the Government; their tasks and powers include:

1.Preparing and submitting to competent state agencies for issuance, or issuing within their authority, legal normative documents on petroleum;

2.Preparing and submitting to the Government for approval strategic plans and development master plans for the petroleum industry;

3.Preparing and submitting to the Government for approval plans for development and important petroleum investment projects;

4.Submitting to the Government policies to encourage exploration and exploitation of petroleum;

5.Submitting to the Prime Minister for decision on tender designation to select partners to sign petroleum contracts;

6.Inspecting, auditing, and supervising petroleum activities;

7.Deciding on other matters within the scope of state management competence over petroleum activities.

Article 66. Competence of Ministries, Agencies Equivalent to Ministries, and Government Agencies in State Management of Petroleum Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).provincial People's Committees

1.The Ministry of Planning and Investment shall review and submit to the Prime Minister for approval the results of bidding for exploration and production blocks; take the lead in reviewing and issuing investment permits and adjusting investment permits for petroleum projects according to foreign investment laws in Vietnam; submit to the Prime Minister for decision on allowing the transfer of rights and obligations under petroleum contracts; report to the Prime Minister on the situation of investment permit issuance in the petroleum sector in Vietnam; carry out other tasks delegated by the Prime Minister.

2.Ministries, agencies equivalent to ministries, government agencies, Provincial People's Committees within their respective authorities, shall be responsible for resolving or coordinating with the state management agency for petroleum, the Ministry of Planning and Investment, and related agencies to resolve issues related to land, rational use of water resources, especially aquaculture areas, marine biodiversity conservation areas, rest and recreation areas, tourism activities, and other issues related to the implementation of petroleum activities.

 

Chapter VII

INSPECTION OF PETROLEUM ACTIVITIES

Article 67. Specialized Inspection

Inspecting petroleum activities is specialized inspection aimed at ensuring compliance with the Petroleum Law and related legal normative documents concerning petroleum activities. The state management agency for petroleum shall organize the performance of specialized petroleum inspection functions and issue decisions on inspecting petroleum activities.

The inspection decision shall include the following main contents:

Composition of the Inspection Team;

Inspection Object;

Scope of Inspection;

Inspection Location;

Duration of Inspection;

Requirements for the inspected entity.

Article 68. Powers and Responsibilities of the Inspection Team

1.The Inspection Team has the following powers:

Bringing along necessary technical equipment to serve inspection activities.

Requesting the inspected entity to provide necessary documents within a specified period. If this deadline is exceeded and the Inspection Team's request is not fulfilled, the Inspection Team shall issue a decision to apply other necessary measures to collect documents in accordance with Vietnamese law.

Issuing a decision to temporarily suspend petroleum activities that pose a risk of causing serious accidents, damage to people, property, and the environment.

The duration of temporary suspension shall not exceed fifteen days. Within twenty-four hours from the time of issuing the decision, the Inspection Team must notify its decision to the competent state management agency and propose handling measures. Within fifteen days from the date the Inspection Team issues the decision to temporarily suspend, the competent state management agency must issue a handling decision.

Proposing to competent state agencies to handle violations of petroleum-related laws.

2.When conducting inspections, the Inspection Team must comply with legal provisions and bear responsibility before the law for their decisions.

Article 69. Decision of the Inspection Team

After completing the inspection, the decision of the Inspection Team shall be notified to the inspected entity and sent to the competent state management agency.

In case the inspected entity disagrees with the decision of the Inspection Team, within thirty days from the date of receipt of such decision, the inspected entity has the right to lodge a complaint with the competent state management agency.

Within thirty days from the date of receipt of the complaint, the competent state management agency must respond regarding the resolution of the complaint.

Article 70. Enforcement of the Inspection Team's Decision

The inspected entity must comply with the decision of the Inspection Team. In case of a complaint, the inspected entity still must comply with the decision of the Inspection Team while awaiting the result of the complaint resolution.

In case the inspected entity does not enforce the decision of the Inspection Team, it shall be handled according to the provisions of the law on administrative violation handling.

 

Chapter VIII

HANDLING VIOLATIONS

Article 71. Fine Levels for Violations

1. Fine levels in monetary terms for violations stipulated in Article 43 of the Petroleum Law are detailed as follows: a) Conducting unauthorized petroleum activities shall be subject to a fine up to one hundred thousand (100,000) US dollars;

b) Failing to comply with technical procedures, norms, and regulations concerning petroleum exploration and exploitation, causing damage to petroleum resources or the environment, or damaging state property and individuals, in addition to compensating for the losses, shall be subject to a fine up to one hundred thousand (100,000) US dollars;

c) Conducting petroleum exploration and exploitation activities beyond the contractual area without permission from the state management agency for petroleum shall be subject to a fine up to fifty thousand (50,000) US dollars; (100,000) US Dollars;

d) Misrepresenting or evading resource taxes, corporate income tax, and other types of taxes, in addition to paying the full amount of underpaid taxes, shall also pay fines for misrepresentation and tax evasion according to Vietnamese law;

e) Failing to report to the state management agency for petroleum and Vietnam Oil and Gas Corporation other minerals besides petroleum or antiques, valuable assets discovered within the petroleum contract area shall be subject to a fine up to ten thousand (10,000) US dollars and confiscation of those samples, antiques, and assets;

f) Obstructing inspection activities shall be subject to a fine up to ten thousand (10,000) US dollars.

2. In addition to the above monetary fine provisions, organizations and individuals committing administrative violations may also be subject to other forms and measures of administrative penalties according to the law on administrative violation handling.

Article 72. Authority to Handle Violations

The authority to handle the above violations is defined as follows:

1. The head of the state management agency for petroleum shall handle violations and set fine levels specified in points a, b, c, d, and e of Clause 1, Article 71 of this Decree.

2. The head of the inspection team shall handle violations and set fine levels specified in point f of Clause 1, Article 71 of this Decree.

Application of Law

 

Chapter IX

IMPLEMENTING PROVISIONS

Article 73.AFor petroleum contracts signed before the effective date of the Law Amending and Supplementing Certain Provisions of the Petroleum Law dated June 9, 2000, the parties to the petroleum contract shall continue to perform the rights and obligations agreed upon in the petroleum contract.

The provisions of the Law Amending and Supplementing Certain Provisions of the Petroleum Law dated June 9, 2000 shall also apply to petroleum contracts signed prior to that date; such application shall only take effect from the date this Law comes into force.

This Decree shall come into effect fifteen days after its signing and replace Decree No. 84/CP dated December 17, 1996. Any previous regulations related to petroleum activities that conflict with this Decree shall be abolished.

Article 74.Effectiveness of the Decree

State management agencies, within their functions and powers, shall have the responsibility to guide the implementation of this Decree.

State management agencies within their respective functions and authorities shall be responsible for guiding the implementation of this Decree.

Article 75. Responsibility for implementation

Ministers, Heads of ministerial-level agencies, Heads of agencies under the Government, Chairmen Within 10 working days from the date of receipt of the dossier as mentioned in Sub-clause b, Clause 1, Article 3 above, the Ministry of Foreign Affairs will review and submit to the competent authority for decision (Issues exceeding the Ministry of Foreign Affairs' jurisdiction will be referred to the Prime Minister for consideration and decision).The people's committees of the provinces and centrally governed cities, and the Vietnam Oil and Gas Corporation shall be responsible for implementing this Decree./.