Circular No. 50/2006/TT-BTC guiding preferential treatment for import tax and corporate income tax for the Dung Quat Oil Refinery Project

CIRCULAR

Guidelines for Implementing Preferential Tax Rates on Import Duties and Corporate Income Taxes for the Dung Quat Oil Refinery Project

business for the Dung Quất Refinery Project

Pursuant to the Law on Export Duties and Import Duties No. 45/2005/QH11 of 2005;

Pursuant to the Decree No. 149/2005/NĐ-CP of December 8, 2005 of the Government detailing the implementation of the Law on Export Duties and Import Duties;

Pursuant to the Decree No. 164/2003/NĐ-CP of December 22, 2003 of the Government detailing the implementation of the Law on Corporate Income Tax;

Pursuant to Decision No. 546/QĐ-TTg of June 17, 2005 of the Prime Minister regarding the adjustment of the investment project for the first Dung Quat oil refinery;

The Ministry of Finance hereby issues guidelines for implementing preferential tax rates on import duties and corporate income taxes for the Dung Quat Oil Refinery Project as follows:

Chapter I. Preferential Treatment on Import Duties

Article 1. Subjects Exempted from Paying Import Duties

The subjects importing goods listed in Point 2, Section I of this Circular to serve the construction and warranty period of the Dung Quat Oil Refinery Project (hereinafter referred to as the project) are exempted from paying import duties, including:

- The Vietnam National Oil and Gas Group, which is the project's investor (hereinafter referred to as the investor) or organizations authorized by the investor;

- Domestic and foreign contractors participating in the project's tender packages (including both main contractors and subcontractors);

A main contractor is a domestic or foreign organization that wins one of the project's tender packages and directly signs a contract with the investor (or an organization authorized by the investor).

A subcontractor is an independent organization or individual who signs a contract with the main contractor to undertake part of the work under the contract signed between the main contractor and the investor (or an organization authorized by the investor).

- Enterprises entrusted by contractors to import goods according to the laws on entrusting importation.

Article 2. Goods Exempted from Import Duties

Goods imported to serve the construction and warranty period of the project are exempted from import duties, including:

2.1. Goods imported to form fixed assets for the project, including:

2.1.1. Equipment and machinery;

2.1.2. Special-purpose transportation vehicles within the production line confirmed by the Ministry of Science and Technology, including transportation vehicles for picking up and dropping off workers such as buses with more than 24 seats and watercraft;

2.1.3. Spare parts, components, detachable parts, accessories, molds, and accompanying items for assembling or using in conjunction with the equipment, machinery, and special-purpose transportation vehicles mentioned in Subpoint 2.1.1 and Subpoint 2.1.2 of this point;

2.1.4. Raw materials and supplies used to manufacture equipment and machinery within the production line or to manufacture spare parts, components, detachable parts, accessories, molds, and accompanying items for assembling or using in conjunction with the equipment and machinery mentioned in Subpoint 2.1.1 of this point;

2.1.5. Construction materials that cannot be produced domestically. Construction materials serving the project include materials constituting project components and consumables (chemicals, gases, lubricating oils, specialized catalysts) used during machine operation.

2.2. Equipment, machinery, spare parts, components, and special-purpose transportation vehicles (excluding cars with fewer than 24 seats) imported by contractors through temporary importation-reexportation procedures for project construction.

Article 3. Procedures for Exemption from Import Duties

3.1. Responsibilities of Importers

- Responsibilities of the Investor (or an organization authorized by the investor): The investor (or an organization authorized by the investor) is responsible before the law for confirming the detailed list of quantities, types, and values of imported goods (for consumables, consumption quotas must be provided).

- Responsibilities of Contractors Implementing Tender Packages:

Contractors implementing tender packages are responsible for managing and monitoring the list of temporarily imported goods for construction during the project's construction and warranty periods. At the end of the construction and warranty periods, contractors implementing tender packages are responsible for re-exporting the machinery, equipment, and special-purpose transportation vehicles mentioned above, including those that have been damaged. When re-exporting, contractors implementing tender packages are not required to pay export duties.

In cases where the temporary importation-reexportation period expires and the temporarily imported goods are allowed by competent state authorities to be transferred, contractors implementing tender packages are responsible for declaring and paying import duties, value-added tax, and special consumption taxes (if applicable) according to current regulations.

3.2. Procedures and Documents for Exemption from Import Duties

Importers of goods exempted from import duties as specified in Point 2, Section I of this Circular, in addition to having complete customs documents as stipulated in Circular No. 112/2005/TT-BTC dated December 15, 2005 of the Ministry of Finance guiding customs procedures, inspection, and supervision, must submit the following documents to the Customs Office handling the procedures:

a) For the first import of each tender package:

- Import permit issued by the Ministry of Trade or relevant management agencies (for goods imported to serve the project that require permits according to the law);

- Detailed list of quantities, types, and values of imported goods (for consumables, consumption quotas must be provided), prepared by the contractor implementing the tender package and confirmed by the investor (or an organization authorized by the investor);

- Commitment to use goods for the purpose exempted from import duties by the taxpayer;

- Backward Deduction Form (according to the model of the Customs Office) prepared by the contractor implementing the tender package or the enterprise entrusted by the contractor to import goods and registered with the General Department of Customs where the enterprise has its headquarters or the Customs Office deemed most convenient by the enterprise.

- A consignment import contract (for cases where the enterprise is entrusted by the contractor to import);

b) For subsequent imports under the tender package (the importing entity continues to import according to the List which has been stamped with confirmation by the Customs authority at the location where the enterprise first registered for customs clearance procedures):

- An advance-against-duty tracking form that has been stamped with confirmation by the Customs authority at the location where the enterprise first registered for customs clearance procedures;

- A list of quantities, types, and values of imported goods that has been stamped with confirmation by the Customs authority at the location where the enterprise first registered for customs clearance procedures;

- Detailed list of quantities, types, and values of imported goods (for consumables, consumption quotas must be provided), prepared by the contractor implementing the tender package and confirmed by the investor (or an organization authorized by the investor);

- A consignment import contract (for cases where the enterprise is entrusted by the contractor to import);

The Customs authority responsible for the customs clearance procedures of the importing entity shall inspect the actual imported goods, compare them with the documentation to determine that the imported goods fall within the scope of duty exemptions as guided by this Circular, and simultaneously adjust the advance-against-duty tracking form according to the quantities, values, and types of goods imported in each importation;

4. Recovery of tax

In cases where imported goods subject to duty exemption are used for purposes other than those exempted from duty, the importing entity must declare and pay all taxes that were previously exempted upon importation, except in cases where they are transferred to entities eligible for duty exemption or considered for duty exemption in accordance with current laws;

Chapter II. Corporate Income Tax Benefits

The Dung Quat Refinery Project will enjoy corporate income tax benefits as follows:

- Apply a corporate income tax rate of 10% for a period of 15 years, starting from the date when the Dung Quat refinery officially commences production and business operations;

- Be exempt from corporate income tax for four years, starting from the year it begins to generate taxable income; and be granted a 50% reduction on the amount of tax payable for the next nine years;

To be eligible for tax benefits, Vietnam National Oil and Gas Group must separately account for the taxable income of the Dung Quat Refinery Project;

The principles and procedures for granting corporate income tax exemptions and reductions shall be implemented in accordance with the guidance provided in Section IV, Part E of Circular No. 128/2003/TT-BTC dated December 22, 2003, issued by the Ministry of Finance to guide the implementation of Decree No. 164/2003/NĐ-CP dated December 22, 2003, promulgated by the Government detailing the implementation of the Law on Corporate Income Tax;

Chapter III. Implementation Organization

This Circular shall take effect fifteen days after its publication in the Official Gazette. Any difficulties encountered during implementation should be reported to the Ministry of Finance for timely resolution;