Circular No. 56/2008/TT-BTC guiding the declaration, payment, and settlement of State revenues

CIRCULAR

Guidelines for the implementation of declaration, payment, and settlement of state revenues stipulated in Article 18 of the Financial Management Regulation of the Parent Company - Vietnam Oil and Gas Corporation issued together with Decree No. 142/2007/NĐ-CP dated September 5, 2007 of the Government

Pursuant to the Petroleum Law 1993 and the Law Amending and Supplementing Certain Provisions of the Petroleum Law 2000;

Pursuant to the Tax Administration Law 2006;

Pursuant to Decree No. 142/2007/NĐ-CP dated September 5, 2007 of the Government Issuing the Financial Management Regulation of the Parent Company - Vietnam Oil and Gas Corporation

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

The Ministry of Finance issues guidelines for the implementation of declaration, payment, and settlement of state revenues stipulated in Article 18 of the Financial Management Regulation of the Parent Company - Vietnam Oil and Gas Corporation issued together with Decree No. 142/2007/NĐ-CP dated September 5, 2007 of the Government as follows:

Part A

GENERAL PROVISIONS

I. SCOPE OF APPLICATION

This Circular guides the declaration, payment, and settlement of state revenues applicable to the Parent Company - Vietnam Oil and Gas Corporation, units engaged in exploitation or Vietnamese contractors authorized to declare and pay taxes into the State Budget as stipulated in Article 18 of the Financial Management Regulation of the Parent Company - Vietnam Oil and Gas Corporation issued together with Decree No. 142/2007/NĐ-CP dated September 5, 2007 of the Government (hereinafter referred to as the Financial Management Regulation).

II. DEFINITIONS

1"The Parent Company, units engaged in exploitation or Vietnamese contractors authorized by the Parent Company to declare and pay taxes" hereinafter referred to as "taxpayer".

2. "Host country's oil profit share from the Vietsovpetro Joint Venture Oil Enterprise" refers to the portion of profit after paying all types of taxes of the Vietnamese side distributed from the Vietsovpetro Joint Venture Oil Enterprise.

3"Host country's oil and gas profit share from product-sharing contracts" refers to the portion of profit after paying all types of taxes distributed to the host country from oil and gas contracts.

Part B

DECLARATION, PAYMENT, AND SETTLEMENT OF STATE REVENUES

The declaration, payment, and settlement of state revenues stipulated in Clause 1, 3, and 4 of Article 18 of the Financial Management Regulation of the Parent Company - Vietnam Oil and Gas Corporation shall be implemented as follows:

I. FOR TAXES AND OTHER STATE REVENUES REQUIRED TO BE PAID AS STIPULATED IN CLAUSE 1 OF ARTICLE 18 OF THE FINANCIAL MANAGEMENT REGULATION:

The Vietnam Oil and Gas Corporation shall implement and direct subsidiaries and associated companies to declare, pay taxes, and settle various taxes: resource tax, corporate income tax, export tax, import tax, and other revenues as prescribed by the Tax Law, the Tax Administration Law, the Petroleum Law, and guiding documents.

II. FOR OTHER STATE REVENUES STIPULATED IN CLAUSE 3 OF ARTICLE 18 OF THE FINANCIAL MANAGEMENT REGULATION:

1. The taxpayer shall declare and directly pay into the budget when actual revenue arises from the following items:

a) 50% of the host country's oil profit share from the Vietsovpetro Joint Venture Oil Enterprise;

b) 50% of the host country's oil and gas profit share from product-sharing contracts after deducting 1.5% management and supervision costs of the Parent Company for oil and gas contracts, specifically as follows:

After determining the host country's oil and gas profit share from product-sharing contracts, the taxpayer shall perform:

- Deduct 1.5% based on the total amount of the host country's oil and gas profit share from product-sharing contracts for the Parent Company to cover management and supervision costs of oil and gas contracts;

- The remaining profit share (after deducting 1.5%) shall be declared and paid 50% into the state budget.

Example: In 2007, the host country's oil and gas profit share after paying all types of taxes arising from Block 15.2 - Rang Dong Field was 150 million USD - the distribution, declaration, and payment of this amount shall be carried out as follows:

+ The cost of contract management and supervision retained by the Parent Company (PVN) is: 150 million USD x 1.5% = 2.25 million USD

+ The amount directly paid into the state budget:[150 million USD - (150 million USD x 1.5%)] x 50% = 73.875 million USD.

+ The amount centralized to the Parent Company to reflect revenue and expenditure through the state budget: 73.875 million USD.

c) All revenue from various oil and gas commissions (signature commission, discovery commission, production commission...);

d) 30% of revenue from reading and using oil and gas data.

2. The taxpayer shall declare and pay the revenues specified in Clause 1, Section II, Part B of this Circular to the Tax Office managing them, specifically:

a) For the revenues specified in Point 1(a) and Point 1(b):

- For crude oil and condensate exports: declare and pay provisional amounts according to each sale transaction under each oil and gas contract.

- For natural gas and domestic oil and gas consumption: declare and pay provisional amounts monthly.

b) For the revenues specified in Point 1(c) and Point 1(d):

Declare and pay when the contractor makes payments according to the terms of the signed oil and gas contracts.

3. Declaration forms:

a) For the revenues specified in Point 1(a) and Point 1(b):

- The declaration form for the revenues specified in Point 1(a) is the Tax Declaration Form and Other Payments to the State Budget (for the Vietsovpetro Joint Venture Oil Enterprise) according to Model No. 01A/TNS issued together with this Circular.

- The declaration form for the revenues specified in Point 1(b) is the Tax Declaration Form and Other Payments to the State Budget (for product-sharing contracts) according to Model No. 01B/TNS issued together with this Circular.

If a single sale includes both oil and gas, they must be declared and paid separately for each type.

b) For the revenues specified in Point 1(c) and Point 1(d):

The declaration form for the revenues specified in Point 1(c) and Point 1(d) is the Other Payments to the State Budget Declaration Form according to Model No. 01C/TNS issued together with this Circular.

4. Deadline for declaration and payment of revenues:

a) For the revenues specified in Point 1(a) and Point 1(b):

- For provisional declarations made according to each sale transaction and each contract: the deadline for declaration and payment is no later than the 35th day after completing the export procedures for crude oil. If the 35th day falls on a Saturday, Sunday, public holiday, or Tet holiday (collectively referred to as non-working days), the deadline for submitting the declaration and payment forms is the next working day after the non-working day.

- In case of provisional declaration on a monthly basis: the deadline for declaration and payment shall be the twentieth day of the following month. If the twentieth day falls on a Saturday, Sunday, public holiday, or Tet holiday (collectively referred to as holidays), the deadline for submitting the declaration and paying the amounts due shall be the next working day after the holiday.

b) For the revenues specified in Point 1(c) and Point 1(d):

The deadline for declaration and payment: within ten (10) working days from the date when the parent company receives the money paid by the contractor according to the terms of the signed oil and gas contract.

III. FOR THE REVENUES AS PROVIDED IN CLAUSE 4, ARTICLE 18 OF THE FINANCIAL MANAGEMENT REGULATION:

1. The taxpayer shall concentrate the following payments to the parent company:

a) The remaining 50% of the host country's oil profit share from the Vietsovpetro Joint Venture Oil and Gas Enterprise;

b) The remaining 50% of the host country's oil and gas profit share after having paid the State Budget of the joint venture product-sharing contracts;

Example: The amount concentrated to the parent company to reflect revenue and expenditure through the State Budget as stated in the above example is 73,875 million USD.

c) Seventy percent of the revenue from reading and using oil and gas documentation.

2. Deadline for payment to the parent company:

Along with the declaration and payment of the revenues specified in points 1(a), 1(b), and 1(c) to the State Budget at the prescribed percentage and guidance provided in Section II above, the taxpayer shall submit the remaining portion to the parent company - Vietnam Oil and Gas Group. This revenue will be reflected as income and expenditure through the State Budget.

3. Purpose of use:

The funds submitted to the parent company above shall be retained by the parent company for investment and development of key oil and gas projects approved by competent authorities and partially added to the Exploration and Appraisal Fund for Oil and Gas as stipulated in Article 19 of the Financial Management Regulation.

Key oil and gas projects funded from the retained state capital must be implemented in accordance with the Financial Management Regulation of the parent company - Vietnam Oil and Gas Group, regulations on state capital management and construction laws, as well as other relevant laws.

4. Procedures and formalities for recording income and expenditure through the State Budget:

a) Preparation of budget estimates for income and expenditure:

Annually, the parent company - Vietnam Oil and Gas Group bases its plans on the exploitation and consumption capacity of oil and gas, forecasts the retained income for investment according to the prescribed regime, and the capital needs for key oil and gas projects approved by the Prime Minister. It prepares a report on the budget estimate of the retained funds and expenditures from this source, and reports it to the competent state agencies for approval.

b) Consolidation of income and expenditure figures proposed for recording:

Quarterly, the taxpayer prepares a consolidated table of taxes and other revenues paid to the State Budget and sends it to the Tax Administration for confirmation of the amount paid into the State Budget, specifically as follows:

- For the Vietsovpetro Joint Venture Oil and Gas Enterprise: quarterly report on taxes and other revenues paid to the State Budget according to Form No. 02A/TNS issued together with this Circular;

- For product-sharing contracts: quarterly report on taxes and other revenues paid to the State Budget according to Form No. 02B/TNS issued together with this Circular.

After receiving the confirmation from the Tax Administration (the confirmation form of the Tax Administration according to Form No. 04/TNS issued together with this Circular), the taxpayer sends the payment report along with the tax authority's confirmation to the parent company - Vietnam Oil and Gas Group and the General Department of Taxation (Ministry of Finance) for reporting (accompanied by detailed declarations of oil and gas profits by each sale lot or monthly).

Based on the taxpayer's report on revenues paid to the State Budget as stipulated in Clause 3, Article 18 and the transferred funds to the parent company as stipulated in Clause 4, Article 18 of the Financial Management Regulation, the parent company consolidates and prepares a record proposal for income and expenditure to be sent to the Ministry of Finance.

The quarterly record proposal for income and expenditure of the parent company includes:

+ A letter requesting income and expenditure recording sent to the Ministry of Finance (General Department of Taxation);

+ A consolidated report proposing income and expenditure recording from the State Budget for host country's oil and gas profits and other revenues according to Form No. 02C/TNS issued together with this Circular;

+ Confirmation tables of the Tax Administrations according to Form No. 04/TNS issued together with this Circular;

+ Other relevant documents.

IV. SETTLEMENT OF STATE BUDGET REVENUES AS STATED IN CLAUSE 3 AND CLAUSE 4, ARTICLE 18 OF THE FINANCIAL MANAGEMENT REGULATION SHALL BE IMPLEMENTED AS FOLLOWS:

1. Settlement procedures for revenues:

Annually, the taxpayer must prepare and submit settlement reports on the aforementioned State Budget revenues to the Tax Administration and the parent company according to each oil and gas contract.

The parent company is responsible for preparing a tax settlement report and retained investment revenues report to send to the Ministry of Finance (accompanied by the taxpayer's revenue settlement reports confirmed by the Tax Administration) and pay any outstanding amounts according to the settlement report into the State Budget.

When key oil and gas projects approved by competent authorities are completed, the parent company shall settle the value of the completed project in accordance with the provisions of the law.

2. Settlement documents for revenues:

a) For taxpayers:

- Vietsovpetro Joint Venture Oil and Gas Enterprise: the settlement declaration form is the consolidated report on taxes and other State Budget revenues according to Form No. 03A/TNS issued together with this Circular;

- Product-sharing contracts: the settlement declaration form is the consolidated report on taxes and other State Budget revenues according to Form No. 03B/TNS issued together with this Circular.

In cases where both oil and gas revenues arise in the same product-sharing contract in a year, they should be declared and settled separately for oil and gas.

b) For the parent company:

The settlement documents for revenues are the consolidated reports on host country's oil and gas profit revenues and other revenues according to Form No. 03C/TNS issued together with this Circular.

3. The deadline for declaring and settling revenues is within ninety (90) days from the end of the calendar year.

4. The currency for paying revenues into the State Budget: is the currency for tax payment as prescribed by the Tax Law, State Budget Law, and current guiding documents.

Part C

ORGANIZATION AND IMPLEMENTATION

I. PARENT COMPANY - VIETNAM OIL AND GAS GROUP:

1. Implement and direct subsidiaries to declare, pay, settle, and report revenues in accordance with the provisions of tax laws, the Law on Tax Administration, and the guidelines set forth in this Circular.

2. Specifically guide the payment of concentrated revenues to the Parent Company as stipulated in Point 3, Section I of this Circular, and allocate and transfer 1.5% of the amount calculated based on the host country's share of oil and gas profits from product-sharing contracts for management and supervision of oil and gas contracts. The Parent Company is responsible for managing, using, and settling these management and supervision costs in accordance with the current Financial Management Regulations and financial revenue and expenditure systems.

II. UNITS UNDER THE MINISTRY OF FINANCE:

1. Responsibilities of the General Department of Taxation:

a) Direct provincial tax offices to manage and implement:

- Guide the Parent Company and subsidiaries of the Vietnam Oil and Gas Group to declare and pay state revenues according to the guidelines in this Circular and record state budget revenues in accordance with the State Budget Chart.

- Quarterly, within three working days from the date of receiving the taxpayer's report, the provincial tax office shall verify and confirm the amount paid to the state budget for state revenues using Form No. 04/TNS issued together with this Circular, and send it to both the taxpayer and the General Department of Taxation.

- Organize the verification and inspection of declarations, payments, settlements of revenues into the state budget to ensure compliance with legal regulations.

- In cases where the Parent Company and subsidiaries, associated companies have not fully paid the required revenues as prescribed, the provincial tax office must promptly notify and urge them to comply and handle the situation in accordance with the law.

b) Quarterly, within three working days from the date of receiving complete documentation requesting the recording of revenues and expenditures from the Parent Company, the General Department of Taxation will compile and submit to the Ministry of Finance (State Budget Department, Investment Department, Corporate Tax Department) for approval to record revenues and expenditures through the state budget for retained investment funds of the Parent Company as stipulated.

2. Responsibilities of the Investment Department:

Annually, based on plans, production capacity, consumption forecasts for oil and gas, anticipated state revenues retained for investment under the prescribed regime, and capital requirements for key oil and gas projects approved by the Prime Minister, the Investment Department is responsible for reviewing and reporting the list of key investment projects proposed for approval by competent authorities, as reported by the Parent Company - Vietnam Oil and Gas Group.

Quarterly, within two working days from the date of receiving confirmation from the General Department of Taxation regarding the amount paid to the state budget and requests for recording revenues and expenditures through the state budget concerning host country oil and gas profits and state budget revenues, the Investment Department is responsible for reviewing and issuing instructions to approve the budget transfer to the State Budget Department to process the recording of revenues and expenditures.

Guide and organize the review and assessment for submission to the Ministry for approval of final settlement of investment capital for key investment projects already approved by competent authorities of the Vietnam Oil and Gas Group.

3. Responsibilities of the State Budget Department:

Prepare the budget for revenues and expenditures of the state budget for host country oil and gas profits from oil and gas contracts of the Parent Company - Vietnam Oil and Gas Group in accordance with regulations and actual conditions.

Quarterly, within two working days from the date of receiving the documentation requesting the recording of revenues and expenditures in the state budget transferred by the Investment Department, the State Budget Department is responsible for reviewing and processing the recording of revenues and expenditures through the state budget for recorded revenues reflected by each category and item, and the total expenditure recorded for investment in the Parent Company - Vietnam Oil and Gas Group.

4. Responsibilities of the Corporate Finance Department:

Guide and inspect the Parent Company and subsidiaries in implementing legal provisions on corporate finance, state-owned enterprise asset management, and the establishment and use of reserve funds in accordance with the system.

III. EFFECTIVE DATE OF IMPLEMENTATION:

This Circular takes effect fifteen days after its publication in the Official Gazette and applies to state budget revenues arising from the fiscal year 2007.

During implementation, if difficulties arise, units are requested to report to the Ministry of Finance for timely resolution or amendment to ensure compatibility.