Part One

GENERAL PROVISIONS

1. The guidances in this Circular shall apply to organizations and individuals conducting oil and gas prospection, exploration and exploitation activities in Vietnam under the provisions of the Petroleum Law and the Government�s Decree No. 48/2000/ND-CP of September 12, 2000 detailing the implementation of the Petroleum Law (hereinafter called Decree No. 48/2000/ND-CP for short).

2. Organizations and individuals conducting oil and gas prospection, exploration and exploitation activities shall comply with the tax provisions guided in this Circular according to each petroleum contract, concretely:

l For petroleum contracts signed in the form of production-sharing contract, the operators shall have to represent the contractors to declare and pay tax (hereinafter referred collectively to as tax payers).

l For petroleum contracts signed in the form of joint- administration contract, the joint- administration companies shall have to represent the contractors to declare and pay tax (hereinafter referred collectively to as tax payers).

l For petroleum contracts signed in the form of joint-venture contract for the establishment of joint-venture enterprises having Vietnamese legal person status, the joint-venture enterprises shall be the tax payers.

l For cases where Vietnam Oil and Gas Corporation conducts the oil and gas prospection, exploration and exploitation activities by itself, Vietnam Oil and Gas Corporation shall be the tax payer.

3. Where an organization or individual conducts oil and gas prospection, exploration and exploitation activities under different petroleum contracts, the implementation of tax provisions under this Circular�s guidance shall be effected separately according to each petroleum contract.

4. Where the contractors participating in petroleum contracts in form of production-sharing contract or joint-administration contract receive the contractual shares divided in oil and gas and take responsibility to consume their divided shares of oil and gas, the declaration and payment of taxes on petroleum activities shall comply with separate guidance.

5. Where international treaties and/or inter-governmental agreements, which the Vietnamese government has signed, contain tax provisions for oil and gas prospection, exploration and exploitation activities different from the tax provisions in this Circular, the tax payment by organizations and individuals conducting oil and gas prospection, exploration and exploitation shall comply with the signed international treaties and/or inter-governmental agreements.

Part Two

GUIDING THE IMPLEMENTATION OF TAX PROVISIONS

I. NATURAL RESOURCE TAX

1. Taxation objects:

The whole output of crude oil and natural gas actually exploited from the entire area under the petroleum contracts shall be liable to natural resource tax.

Where in the course of exploiting crude oil and natural gas, organizations and/or individuals conducting oil and gas prospection, exploration and exploitation activities are allowed to exploit other natural resources subject to natural resource tax as provided for by law on natural resource tax, the tax payment shall comply with current legislation.

2. Determining payable tax amounts:

The natural resource tax on crude oil and natural gas shall be determined on the basis of partial progress of the total net crude oil and natural gas output exploited in the period of tax payment calculated according to the daily average crude oil and natural gas output exploited from the entire contractual areas.

Determining payable natural resource tax in oil and gas:

The natural Daily average taxable The natural The number of days�
resource tax in crude = crude oil or natural gas x resource x exploiting crude oil or
oil, natural gas output in the tax tax rate natural gas tax in the
payment period payment period

In which:

l The daily average crude oil or natural gas output liable to natural resource tax is the total net crude oil or natural gas output liable to natural resource tax, exploited in the tax payment period, divided by the number of the exploitation days in the tax payment period.

l The natural resource tax rate: prescribed at the Natural Resource Tax Index, Article 44, Article 45 of Decree No.48/2000/ND-CP, concretely:

For crude oil:

l The number of days� exploiting crude oil or natural gas in the tax payment period is the number of days of carrying the activity of exploiting crude oil or natural gas in the tax payment period, excluding days on which production stops due to any reasons.

+ The total net natural gas output exploited in the tax payment period: 858,000,000 m3;

+ The number of production days in the quarter: 78 days;

+ The daily average natural gas output liable to natural resource tax in the tax payment period: 11,000,000 m3 (858,000,000 m3 : 78 days);

+ The natural gas exploited under contracts not on the list of projects with investment incentives (for cases where the natural gas is exploited under contracts on the list of projects with investment incentives, it shall be calculated similarly with the natural resource tax rates applicable to projects with investment incentives).

The natural resource tax in natural gas payable in the tax payment period:

{(5,000,000 x 5%) + (1,000,000 x 10%)} x 78 days = 27,300,000 m3.

3. Tax declaration, payment and final settlement:

The natural resource tax shall be paid either in cash or in oil and gas. Where it is paid in oil and gas, the tax office shall notify it in writing 6 months in advance and guide in detail the natural resource tax declaration and payment in oil and gas.

The natural resource tax payment period shall be quarter (3 months) according to calendar year.

- The first natural resource tax payment period shall last from the first day of oil and gas exploitation till the last day of a quarter.

- The last natural resource tax payment period shall last from the first day of a quarter till the day the oil and gas exploitation ends.

3.1. Temporary payment of natural resource tax:

3.1.1. The temporarily paid natural resource tax amount shall be determined as follows:

The temporarily paid The crude oil or natural The percentage of Price for calculation
natural resource = gas output actually x temporarily paid x of temporarily paid
tax amount delivered for sale natural resource tax natural resource tax

In which:

l The crude oil or natural gas output actually delivered for sale is the net crude oil or natural gas output already delivered for sale.

l The percentage of temporarily paid natural resource tax shall be determined under the guidance below:

The The natural resource tax projected
temporarily for payment in oil and gas in a year
paid natural = ������������� x 100%
resource tax The oil and gas output liable to
percentage natural resource tax in a year

+ The natural resource tax projected to be paid in oil and gas in a year shall be determined under the guidance at Point 2, Section I, Part Two of this Circular, on the basis of oil and gas output projected to be exploited in the year.

+ The oil and gas output liable to natural resource tax in a year shall be the net oil and gas output projected to be exploited in the year.

At least 60 days before the end of the calendar year, the tax payers shall have to forward to the Finance Ministry the projected net oil and gas output to be exploited and the projected number of days of oil and gas exploitation of the following year.

Basing itself on the net oil and gas output, the projected annual exploitation and the natural resource tax index for crude oil and natural gas, before December 15 every year, the Finance Ministry or the bodies authorized by the Finance Ministry shall determine and notify the tax payers of the percentage of temporarily paid natural resource tax for next year.

Where in the course of temporary payment of natural resource tax, the projected oil and gas output and the projected number of oil and gas exploitation days in the last six months of the year are at variance with the reported plans, thus increasing or reducing the percentage of temporarily paid resource tax by 15% or more as against the temporarily paid natural resource tax percentage already notified by the Finance Ministry, the tax payers shall have to report such to the Finance Ministry before May 31 for re-determination of the temporarily paid resource tax percentage in the last 6 months.

+ The net natural gas output projected to be exploited in the year: 3,432,000,000 m3;

+ The projected number of exploitation days in the year: 312 days;

+ The daily average natural gas output liable to natural resource tax: 11,000,000 m3;

+ The natural resource tax projected to be paid in the year (determined as guided at Point 2, Section I, Part Two of this Circular): 109,200,000 m3.

The percentage of temporarily paid natural resource tax from natural gas exploitation is:

109,200,000
������ x 100% = 3.181%
3,432,000,000

l The price for calculation of temporarily paid natural resource tax is the oil and gas selling price at the delivery and reception place up on each delivery for sale under square transaction contracts. Where oil and gas are not sold under square transaction contracts, the tax offices of the localities where the tax payers register tax (hereinafter called collectively the local tax offices) shall determine the price for natural resource tax calculation according to the following principles:

- For crude oil: The local tax offices shall determine the natural resource tax calculation price on the basis of the arithmetic mean of the selling price of crude oil of the same category on the international market of three weeks in a row: the week before, the week during and the week after the crude oil delivery. The tax payers shall have to supply the tax offices with information on the composition and quality of crude oil being exploited. When necessary, the tax offices may consult with the Oil and Gas Corporation of Vietnam on the determination of the price of crude oil being exploited by the tax payers among the categories of crude oil with their selling prices announced on the international market.

- For natural gas: The local tax offices shall determine the natural resource tax calculation price on the basis of the selling price of natural gas of the same category on the market, the delivery and reception place as well as other relevant factors. When necessary, the tax offices may consult with the Oil and Gas Corporation of Vietnam on the determination of natural resource tax calculation price for the natural gas.

3.1.2. Time limits for natural resource tax declaration and temporary payment:

- For crude oil exploitation:

Within 35 days as from the date of delivering crude oil for sale, the tax payers shall have to make and send to the tax offices the declaration on temporary payment of natural resource tax (made according to set form) and at the same time temporarily pay the natural resource tax as declared for the crude oil output actually delivered for sale into the State Treasury.

- For natural gas exploitation:

Not later than the 10th day of the following month, the tax payers shall make and send the declaration on temporary payment of resource tax (made according to set form) and pay the natural resource tax on the net natural gas output exploited in the previous month into the State Treasury according to the time limits inscribed in the tax notices, but must not be later than the 25th of the following month.

Past the above time limits, if the tax payers still fail to send the declarations on temporary payment of natural resource tax and enclose documents thereon to the tax offices, the latter may set the natural resource tax amounts and notify the tax payers of the natural resource tax amount to be temporarily paid, issue decisions on sanction against the late tax declaration and payment according to the current law provisions and notify the time limits for the payment of natural resource tax set by the tax offices and fines (if any).

3.2. Final settlement of natural resource tax:

The natural resource tax shall be settled on the basis of net oil and gas output actually exploited in the period of tax payment, concretely as follows.

3.2.1. The settlement of natural resource tax for crude oil exploitation:

3.2.1a. Determining the natural resource tax to be paid in crude oil in the tax payment period:

The natural resource The daily average crude The The number of crude
tax to be paid in oil output liable to natural oil exploitation
crude oil in the tax = natural resource tax x resource x days in the tax
payment period in the tax payment period tax rate payment period

3.2.1b. Determining the percentage of natural resource tax in crude oil of the exploitation output in the tax payment period:

The natural resource tax to be paid
The percentage of natural in crude oil in the tax payment period
resource tax in crude oil = ���������������� x 100%
in the tax payment period The crude oil output exploited
in the tax payment period

3.2.1c. Determining the natural resource tax in crude oil delivered for sale in the tax payment period:

The natural resource tax The crude oil The percentage of natural
in crude oil delivered for sale = output x resource tax in crude oil
in the tax payment period delivered for sale in the tax payment period

3.2.1d. Determining the natural resource tax in crude oil not yet delivered for sale in the tax payment period for use as basis for settling the natural resource tax in crude oil to be paid for the subsequent tax payment period:

The natural The natural resource The natural The natural
resource tax in crude tax in crude oil not resource oil resource tax in
oil not yet delivered = yet delivered for sale + payable in the - crude oil delivered
for sale in the tax in the previous tax tax payment for sale in the tax
payment period payment period period payment period

3.2.1e. Determining the payable amount from the natural resource tax crude oil delivered for sale in the tax payment period:

The payable amount The natural The
from the natural resource resource tax natural resource
tax in crude oil delivered = in crude oil delivered x tax calculation
for sale in the tax for sale in the tax price for
payment period payment period crude oil

In which:

l The natural resource tax in crude oil delivered for sale in the tax payment period shall be determined as guided at Point 3.2.1c above;

l The natural resource tax calculation price for crude oil is the weighted average price of crude oil sold at the delivery place under the square transaction contract in the tax payment period.

l The amount of money from the sale of natural resource tax in crude oil underpaid (or overpaid) in the previous tax payment period shall be determined according to the natural resource tax settlement declaration of the previous tax payment period.

l The amount of money from the sale of natural resource tax in crude oil to be paid in the tax payment period shall be determined under the guidance at Point 3.2.1e, Section I, Part Two of this Circular.

l The temporarily paid natural resource tax amount shall be determined under the guidance at Point 3.1, Section I, Part Two of this Circular.

3.2.2. Settlement of natural resource tax for natural gas exploitation:

3.2.2a. Determining the natural resource tax in natural gas to be paid in the tax payment period:

The natural The daily average
resource tax in natural gas output The natural The number of days of
natural gas to be = liable to natural x resource x natural gas exploitation
paid in the tax resource tax in the tax rate in the tax payment period
payment period tax payment period

3.2.2b. Determining the amount to be paid from the natural resource in tax natural gas delivered for sale in the tax payment period:

The payable amount from the sale The natural resource tax The natural resource
of natural resource tax in natural = in natural gas to be paid x tax calculation
gas in the tax payment period in the tax payment period price for natural gas

In which:

l The natural resource tax in natural gas to be paid in the tax payment period shall be determined as guided at Point a above;

l The natural resource tax calculation price for natural gas is the selling price under the square transaction contract at the delivery and receipt place in the tax payment period.

Where the natural gas is not sold under square transaction contracts, the natural resource tax calculation price shall be determined as guided at Point 3.1, Section I, Part Two of this Circular.

3.2.2c. Determining the underpaid (or overpaid) amount from the sale of natural resource tax in natural gas in the tax payment period:

The underpaid The underpaid The amount The natural
(or overpaid) (or overpaid) amount from the sale resource
amount from sale from the sale of of natural resource tax amount
of natural resource = natural resource + tax in natural - temporarily
tax in natural gas tax in natural gas gas to be paid paid in the
in the tax in the previous tax in the tax tax payment
payment period payment period payment period period

In which:

l The underpaid (or overpaid) amount from the sale of natural resource tax in natural gas in the previous tax payment period shall be determined according to the natural resource tax settlement declaration of the previous tax payment period.

l The amount from the sale of natural resource tax in natural gas to be paid in the tax payment period shall be determined as guided at Point 3.2.2b, Section I, Part Two of this Circular.

l The temporarily paid natural resource tax amount shall be determined as guided at Point 3.1, Section I, Part Two of this Circular.

Within the first 40 days of the following quarter, the tax payers shall have to declare and send to the tax offices the natural resource tax settlement of the previous tax payment period (made according to the set form).

Upon the tax settlement, if the temporarily paid tax amount in the tax payment period is larger than the payable tax amount, the overpaid tax amount shall be cleared against the payable tax amount of the next tax payment period; if the temporarily paid tax amount is smaller than the payable tax amount, the tax payers shall have to fully pay the outstanding tax amount into the State Treasuries at the time when the resource tax settlement sheet is submitted. Where tax payers are detected as having falsely declared the natural resource tax settlement, the tax offices shall, within 7 days after receiving the resource tax settlement, notify such tax payers in writing of the official tax amounts that would be paid in the previous tax payment period and the deadline for making the resource tax settlement.

Past the above-said 40 day- time limit, if the tax payers still fail to send to the tax offices the resource tax settlement of the previous tax payment period, the tax offices may fix the tax amounts to be paid for the previous tax payment period, notify the tax payers of the fixed tax amounts, the temporarily paid tax amounts in the tax payment period, the overpaid tax amounts deducted into the payable tax amount of the next tax payment period (if any), or the outstanding tax amount to be paid as well as of the decisions on sanction against the late tax declaration and payment according to the current law provisions and the deadline for payment of the outstanding tax and fines (if any).

Where there is no subsequent tax payment period while the temporarily paid natural resource tax amount is larger than the tax amount payable in the tax payment period, the Finance Ministry shall refund the overpaid tax amounts to the tax payers. The dossiers of requesting the tax reimbursement shall comply with the guidance in Circular No.25/2000/TT-BTC of March 30, 2000 of the Finance Ministry, including:

+ The official dispatch requesting the reimbursement of overpaid tax amount. The official dispatch must clearly state the reasons for such tax reimbursement request; the name, tax code, address, account number of the tax reimbursement requester;

+ The list of the tax amounts paid in the final tax payment period, enclosed with vouchers on money payment into the State Treasuries (the copies certified by the tax reimbursement requester) and the written certification of the State Treasuries of the paid tax amounts (clearly inscribing the tax amounts paid into chapters, categories, items, grades as provided for by the Budget Index);

+ The tax office�s notice on natural resource tax settlement of the final tax payment period, clearly inscribing the overpaid natural resource tax amount to be refunded (copies certified by the tax reimbursement requester).

The dossiers requesting the tax reimbursement shall be addressed to the local tax offices where the tax payers have registered their tax payment. The tax offices shall check the dossiers. If the tax reimbursement- requesting dossiers are complete and valid, the tax offices shall, within 7 days, have to forward the tax reimbursement dossiers to the Finance Ministry (The General Department of Tax) so that the latter shall consider and issue decisions on tax reimbursement. Where the tax reimbursement dossiers are incomplete and invalid, the tax offices shall, within 5 days, notify such in writing to the tax reimbursement requesters.

Within 15 days after receiving the complete and valid dossiers, the Finance Ministry shall issue decisions on tax reimbursement for the tax reimbursement requesters.

II. EXPORT TAX, IMPORT TAX

Organizations and individuals conducting oil and gas prospection, exploration and exploitation activities shall pay export tax and import tax according to the provisions of the current Law on Import Tax and Export Tax. Besides, the Finance Ministry guides a number of specific contents as follows:

1. Crude oil export tax:

The crude oil export tax shall be determined as follows:

The crude The exported The tax The crude
oil export = crude oil x calculation x oil export tax
tax amount volume price percentage

In which:

l The exported crude oil volume is the net crude oil actually exported.

l The tax calculation price is the crude oil selling price under the square transaction contract. Where crude oil is not sold according to the square transaction contract, the export tax calculation price shall be determined as guided at Point 3.1, Section I, Part Two of this Circular.

l The crude oil export tax percentage:

The crude The temporarily The crude oil export tax
oil export tax = 100% - paid resource x rate according to the
percentage tax percentage current Export Tariff

l The taxable income in the tax calculation year shall be determined as guided at Point 2 of this Section IV.

l The enterprise income tax rate is prescribed in Article 33 of the Petroleum Law and specifically inscribed in the investment licenses or the petroleum contracts but approved by the investment licenses.

For petroleum contracts signed in form of production-sharing contract or joint- administration contract: The enterprise income tax amount to be paid by each contractor shall be equal to the payable enterprise income tax amount (determined under the above guidance) multiplying by (x) the divided petroleum profit of each contractor in the petroleum contract.

4. Tax declaration, payment and settlement:

The enterprise income tax shall be temporarily paid on a quarterly basis and settled according to the tax calculation year. The enterprise income tax calculation year shall commence on January 1 and end on December 31. Where a tax payer applies the fiscal year other than the calendar year, which has been approved by the Finance Ministry, the tax calculation year shall be such fiscal year.

The first tax calculation year shall be determined as from the first day of carrying out the oil and gas prospection, exploration and exploitation activities till the last day of such calendar year or the last day of such fiscal year.

The final enterprise income tax calculation year shall be counted from the starting day of the calendar year or the starting day of the fiscal year till the day the petroleum contract terminates.

4.1. Temporary payment of tax:

For petroleum contracts with the percentage of temporarily paid enterprise income tax amounts being determined as guided below, the temporary payment of enterprise income tax shall be made upon each delivery for sale.

4.1.1. Determining the temporarily paid enterprise income tax amount:

The Turnover of oil The
temporarily paid = and gas x temporarily paid
EIT amount delivered for sale EIT percentage

In which:

l The turnover from oil and gas sale is the total value of the net oil and gas output sold under the square transaction contract of each delivery for sale.

l Where oil and gas are not sold under the square transaction contract, the turnover from oil and gas prospection, exploration and exploitation activities shall be determined by way of multiplying the corresponding oil and gas output by the selling price set by the tax office as guided at Point 3.1, Section I, Part Two of this Circular.

The temporarily paid enterprise income tax percentage shall be determined under the following guidance:

The The The
temporarily percentage temporarily The export The
paid EIT = 100% - of expenses - paid natural - tax x EIT
percentage allowed to be resource tax percentage rate
recovered percentage

Annually, on the 25th of the first month of the tax calculation year at the latest, the tax payers shall have to make and send the declaration on enterprise income tax to the tax offices (made according to set form). The bases for making such declaration shall be the production and business results of the tax calculation year and the business capability of the following tax calculation year.

After receiving the declarations, the tax offices shall check them, determine the tax amount temporarily paid for the whole year and divide it for each quarter to notify the tax payers of the temporarily paid tax amount. Where tax payers fail to declare or declare unclearly the bases for determining the tax amount temporarily paid for the whole year, the tax offices may fix the temporarily paid tax amount.

Where there appear big changes in the taxable income in the tax calculation year, the tax offices shall readjust the temporarily paid tax amount. The readjustment shall be made at the request of the tax payers after the latter make the financial reports for the first 6 months of the tax calculation year.

The tax payers shall temporarily pay the enterprise income tax quarterly according to the tax payment notices of the tax offices and on the last day of the quarter at the latest. Upon the end of the tax calculation year or upon the termination of the contract, the settlement shall be made according to reality.

- Where each contractor pays tax separately, the administrators or the joint administration companies shall determine the enterprise income tax amount to be paid by each contractor, make and send to the tax offices the declaration on temporary payment of enterprise income tax (made according to set form) for each contractor and pay tax on behalf of each contractor.

- Before conducting oil and gas exploitation activities, the tax payers shall only have to declare and pay the enterprise income tax for other production and business activities.

4.2. Settlement of enterprise income tax:

The settlement of enterprise income tax shall be carried out annually according to the provisions in Part Three of this Circular.

5. Tax exemption and reduction:

The tax offices shall base themselves on the stipulations in the investment licenses or the Prime Minister�s decisions on the duration of enterprise income tax exemption or reduction to determine the tax amounts to be exempt or reduced; as well as the payable tax amounts for the tax payers.

The first year with taxable income is the first tax calculation year when arises the taxable income, which shall be determined as guided at Point 2 of this Section IV.

V. TAX ON INCOME FROM THE TRANSFER OF CAPITAL AMOUNTS CONTRIBUTED FOR PARTICIPATION IN PETROLEUM CONTRACTS

1. Vietnamese organizations conducting oil and gas prospection, exploration and exploitation activities, which transfer their capital amounts contributed for participation in the petroleum contracts and have incomes shall have to pay enterprise income tax on the income earned from the transfer of their capital amounts in the petroleum contracts according to the provisions of the legislation on enterprise income tax.

2. Foreign organizations and individuals conducting oil and gas prospection, exploration and exploitation activities, that transfer their capital amounts in the petroleum contracts and have incomes shall have to pay tax on the incomes earned from the transfer of capitals for participation in the petroleum contracts according to the provisions of the Law on Foreign Investment in Vietnam and the guidance in this Circular.

The taxes on the income from the transfer of capital contributed for participation in the petroleum contracts shall include the enterprise income tax and the tax on transfer of profit abroad, specifically:

2.1. The enterprise income tax:

The income earned from the transfer of capital amounts in the petroleum contracts shall be liable to the enterprise income tax as provided for by the Law on Foreign Investment in Vietnam.

The payable The The enterprise income
enterprise = taxable - tax rate for income
income tax income from capital transfer

2.1.1. Taxable income:

The The The initial value The
taxable = transfer - of the transferred - transfer
income value capital amount expenses

In which:

l The transfer value is determined as the total actual value the transferor earns under the transfer contract. Where the transfer contract fails to specify the payment price or the tax office has grounds to determine that the payment price has not been determined at the market price, the tax office may check and fix the payment price of the contract on the basis of reference to the market prices or the price of possible sale to the third party and the similar transfer contracts.

l The initial value of the transferred capital amount is determined on the basis of accounting books and vouchers on expenses allowed to be recovered by the Contractor being a party to the petroleum contract at the time of capital transfer, after subtracting the already recovered expenses (if any), recognized by the foreign Contractors to the petroleum contract and Vietnam Oil and Gas Corporation.

Where the subsequent contractors further transfer the capital amounts for participation in the petroleum contracts, the initial value of the capital amount to be transferred each subsequent time is determined as equal to the transfer value of the preceding transfer contract plus the expenses allowed to be additionally recovered (if any), which is determined according to the principles stated in this clause.

l Transfer expenses are the actual expenses directly related to the transfer, according to the original vouchers recognized by the tax offices. Where the transfer expenses arise overseas, such original vouchers must be affirmed by a notary office or an independent audit of the country where the expenses arise.

The transfer expenses shall include: the expense for carrying out necessary legal procedures for the transfer; charge and fee amounts payable when carrying out the transfer procedures; the expenses for transactions, negotiations and signing of transfer contracts, etc., evidenced by vouchers.

2.1.2. The tax rate:

The rate of enterprise income tax on income from capital transfer shall be 25%.

2.1.3. Tax declaration and payment:

The capital transferor shall be the payers of income tax on the transfer of capital amounts in the petroleum contracts but the capital transferee shall have to deduct the tax amount to be paid by the transferor and remit it into the State budget.

Within 5 working days as from the date the competent body approves the capital transfer, the capital transferee shall have to make the declaration of tax on capital transfer and submit it to the local tax office where the tax declaration and payment is registered (made according to set form) together with the transfer contract (copy certified by the transferee), the competent body�s decision to approve the capital transfer (copy certified by the transferee), the transferor�s certification that the to be- recovered expenses constitute the initial value of the transferred capital amount and original vouchers on the transfer expenses; and at the same time fully pay the payable tax amount into the State Treasuries, then send the copy of the tax payment receipt to the body which has approved the capital transfer.

In cases where the declaration and calculation of the payable tax amount are found inaccurate, the tax offices shall, within 5 working days after receiving the declarations, have to notify the payable tax amounts to the capital transferor or request the capital transferor to supply necessary documents for the accurate determination of the payable tax amount.

2.2. Tax on transfer of profits abroad:

Foreign organizations and individuals conducting oil and gas prospection, exploration and exploitation activities that have incomes from the capital transfer, after paying tax on income from the capital transfer as guided at Point 2.1 above, when transferring profits abroad or retaining their profits overseas, shall have to pay tax on transfer of profits abroad under the guidance in Section VI below.

VI. TAX ON TRANSFER OF PROFITS ABROAD

1. Taxation objects:

The after-enterprise income tax profits (including income from capital transfer) of foreign organizations and individuals or overseas Vietnamese, that conduct oil and gas prospection, exploration and exploitation activities, if being transferred out of Vietnam or retained outside Vietnam, shall be liable to tax on transfer of profits abroad as provided for in the Law on Foreign Investment in Vietnam.

Where foreign organizations and individuals or overseas Vietnamese that conduct oil and gas prospection, exploration and exploitation activities in Vietnam use the profits earned from oil and gas prospection, exploration and exploitation activities to buy goods in Vietnam and transfer them abroad, or to pay debts for their parent companies, or use their divided profits to cover the expenditures of their parent companies� representative offices in Vietnam, or transfer them from their accounts for unclear purposes, they shall all be considered as having transferred their profits abroad and have to pay tax on transfer of profits abroad.

Where foreign organization or individuals or overseas Vietnamese transfer profits abroad in oil and gas, the profits subject to tax on transfer of profits abroad shall be determined as equal to the oil and gas volume subject to tax on transfer of profits abroad multiplying (x) by the oil and gas selling price under the square transaction contract. Where oil and gas are not sold under the square transaction contract, the oil and gas selling price shall be determined by the tax offices under the guidance at Point 3.1, Section I, Part Two of this Circular.

2. The tax payers:

Foreign organizations and individuals or overseas Vietnamese conducting oil and gas prospection, exploration and exploitation activities and have profits transferred abroad shall be the payers of tax on transfer of profits abroad.

Foreign organizations and individuals or overseas Vietnamese conducting oil and gas prospection, exploration and exploitation activities, that transfer abroad their profits in oil and gas shall, apart from having to pay tax on transfer of profits abroad, also have to pay the oil and gas export tax. The payment of oil and gas export tax shall comply with the guidance in Section II, Part Two of this Circular.

3. Determining payable tax amounts:

The payable amount of tax on transfer of profit abroad is determined as equal to the profit amount transferred abroad or considered to be transferred abroad or the profit amount retained by the investors outside the Vietnamese territory multiplying (x) by the rate of the tax on transfer of profits abroad prescribed in the investment license. Where the granted investment license fails to specify the rate of tax on transfer of profit abroad, such rate shall comply with the provision in Article 50 of Decree No. 24/2000/ND-CP of the Government detailing the implementation of the Law on Foreign Investment in Vietnam.

For cases where the investment licenses issued before July 1, 2000 specify a rate of tax on profit transfer abroad higher than that prescribed in Article 50 of the Government�s Decree No. 24/2000/ND-CP of July 31, 2000, the payers of tax on transfer of profits abroad shall file their applications to the investment-licensing bodies for the adjustment of their investment licenses. Pending the official adjustment, if transferring profits abroad, the tax payers shall file their applications to the local Tax Departments, clearly stating the conditions for enjoying the new tax rate and declare and pay tax at the new rate. The new profit transfer tax rate shall apply to the profit amounts transferred abroad as from July 1, 2000. Where tax payers have already paid the profit transfer tax for the profit amounts transferred abroad as from July 1, 2000 at a tax rate higher than that prescribed in Article 50 of the Government�s Decree No. 24/2000/ND-CP of July 31, 2000, the overpaid tax amount shall be cleared against the payable tax amount of the subsequent profit transfer.

Where foreign organizations and individuals or overseas Vietnamese conducting oil and gas prospection, exploration and exploitation activities earn profits from the transfer of their capital for participation in the petroleum contract before the commercial output is achieved, when transferring their profits abroad, the tax rate therefor must be determined according to the expense amounts actually recovered at the time of transfer in accordance with the provisions in Article 50 of Decree No. 24/2000/ND-CP.

4. Tax payment procedures:

The tax on transfer of profits abroad shall be collected upon each transfer of profit abroad. Where the profits are used to pay debts for parent companies, to cover the expenditures of the parent companies� offices in Vietnam, the tax payers shall declare and pay tax on transfer of profits abroad monthly. Where profits are retained outside Vietnam according to each delivery for sale, the tax payers shall declare and pay tax together with the declaration and temporary payment of natural resource tax and/or enterprise income tax.

Before transferring their profits abroad or on the 5th of the following month at the latest, for cases where profits are used for purposes considered as transfer of profits abroad, or retained outside Vietnam, the tax payers shall have to make and submit the tax declaration to the tax offices (made according to set form), and at the same time pay the declared tax amounts into the State treasuries.

Within 5 days after receiving the declaration forms, the tax offices shall check them and, if detecting any errors in the declarations, shall have to issue notices on the payable tax amounts to the tax payers. The tax payers shall have to additionally pay the outstanding tax amounts into the State Treasuries according to the tax offices� notices. Where past the prescribed time limits for submission of the declarations the tax payers still fail to submit the declarations, the tax offices may fix the payable tax amounts, issue tax notices and impose sanction for late declaration and payment of tax.

The State Treasuries shall hand back to each tax payer a copy of the voucher on profit transfer tax payment for carrying out the procedures for the transfer of money abroad.

Annually, within 90 days after the end of the fiscal year, foreign organizations and individuals or overseas Vietnamese conducting oil and gas prospection, exploration and exploitation activities shall have to report to the tax offices on their divided profit amounts, the use of profits and the payment of tax on transfer of profits abroad for the divided profit amounts of the previous years. Where the tax payers have already paid tax on the transfer of profits abroad but in fact do not transfer the profits abroad or do not use them for purposes considered to be the transfer of profits abroad, they shall be entitled to deduct the already paid profit transfer tax amounts into the payable tax amount of the subsequent tax payment or to be refunded the paid tax amounts. The dossiers requesting the reimbursement of paid tax amount shall include:

+ The official dispatch requesting the reimbursement of the paid tax amount. Its contents must clearly state the reasons therefor, the name, address and account number of the subject entitled to the reimbursement of the paid tax amount.

+ The list of the paid tax amounts, enclosed with vouchers on payment of money into the treasuries (copies thereof) and the treasuries� certification of the paid tax amounts (clearly inscribing the tax amounts paid into chapters, categories, items, grades as prescribed by the State budget index).

+ The certification by the bank where the tax reimbursement requester opens account for deposit of the profit amount for which the tax on transfer of profits abroad has been paid that the tax reimbursement requester has not yet transferred abroad the profit amount which has already been declared and taxed.

The dossiers requesting the tax reimbursement shall be sent to the local tax offices where the tax payers have registered the tax payment. The tax offices shall check the dossiers. If the tax reimbursement- requesting dossiers are found complete and valid, the tax offices shall, within 7 days, have to send the tax reimbursement dossiers to the Finance Ministry (The General Department of Tax) for issuing decisions on tax reimbursement. Where the tax reimbursement- requesting dossiers are incomplete and invalid, the tax offices shall, within 5 days, notify the tax reimbursement requesters thereof in writing.

Within 15 days after receiving the complete and valid dossiers, the Finance Ministry shall issue decisions to reimburse tax to the requesters.

VII. OTHER TAXES, CHARGES AND FEES

In the course of production and business activities, organizations and individuals conducting oil and gas prospection, exploration and exploitation shall have to pay taxes, charges and fees such as the license tax, the special consumption tax, the copyright income tax, the land, water or sea surface rent, registration fee� according to the provisions in current legal documents.

Part Three

ANNUAL TAX SETTLEMENT AND INSPECTION OF ANNUAL TAX PAYMENT

I. ANNUAL TAX SETTLEMENT

At the end of every fiscal year, the tax payers shall have to make and send tax settlement reports to the tax offices. The annual tax settlement shall be carried out with the contents guided below:

1. Within 90 days after the end of a fiscal year, the tax payers shall have to submit the reports on production and business situation, the accounting reports already audited by Vietnam Oil and Gas Corporation or an independent audit licensed to operate in Vietnam, the enterprise income tax settlement reports and the reports on settlement of assorted taxes paid in the year, to the local tax offices.

Within 10 days as from the above-prescribed date of submitting the tax settlement reports, the tax payers shall have to pay the outstanding tax amounts according to the settlement report into the State budget. If failing to make such payment after those 10 days, apart from the full payment of the outstanding tax amount, the tax payers shall also have to pay a fine for the late payment thereof as prescribed. In case of overpayment, they may deduct the overpaid amount from the tax amount to be paid subsequently.

Tax payers are not allowed to clear the overpaid amount of one tax against the underpaid amount of another tax when making the annual tax settlement.

2. Basing themselves on the production and business reports as well as the financial settlement reports of the tax payers, the Tax Departments of the provinces and centrally-run cities shall recalculate each kind of tax to be paid by the tax payers in the fiscal year, and at the same time compare them with the periodical tax declarations in the year, the temporarily paid tax amounts in order to determine the accuracy of the tax declarations as well as tax settlement reports. Where tax reports are made inaccurately, the tax offices shall organize the inspection of the tax payment by each tax payer.

II. INSPECTION OF THE ANNUAL TAX PAYMENT SITUATION

In the course of tax management over petroleum contracts, the provincial/municipal Tax Departments shall have to organize tax inspections regularly or irregularly when necessary. Before conducting the inspections, the tax offices shall have to issue inspection decisions, clearly stating the inspection contents and time limits. The inspection decisions shall be addressed to tax payers 3 days before the inspections start. In cases where contents other than those inscribed in the inspection decisions need to be inspected or the inspection duration needs to be prolonged, the tax offices shall have to make additional inspection decisions.

The inspection results must be recorded in writing with the signatures of competent representatives of tax payers or organizations authorized to pay tax for them and representatives of the tax offices which conduct the inspection. These inspection records must be sent by the tax offices to the Finance Ministry (the General Department of Tax) together with the financial reports as well as the reports on the situation of tax payment by tax payers (copies thereof).

Where tax payers disagree with the tax offices� conclusions in the inspection records, they may lodge their complaints to the General Department of Tax and the Finance Ministry. Pending the settlement of their complaints, the tax payers shall still have to abide by the conclusions made by the tax offices.

Annually, the provincial/municipal Tax Departments may coordinate with Vietnam Oil and Gas Corporation in conducting periodical inspection through auditing campaigns of the tax payment by tax payers. In the course of regular inspection of tax payment, if the tax offices deem it necessary to conduct separate inspections according to the regulations on inspection over the tax payers, they may proceed with the inspection steps as guided above.

The contents of regular inspection of the tax payment by tax payers shall include:

+ The inspection of tax payment by tax payers in the tax declaration forms and the tax settlement reports. In case of detecting that the tax payment declaration is inaccurate or the payable tax amount is not fully declared, they shall request the concerned tax payer to produce accounting books and relevant vouchers in order to determine accurately the payable tax amount and issue a notice requesting the tax payer to fully pay the outstanding tax amount within 5 days, to be deducted from the subsequent tax payment or guide the tax payer to carry out procedures for tax reimbursement (if any).

+ Inspection of the expenses allowed to be recovered: accrual of the amount of expenses allowed to be recovered; expenses already recovered; accrual of expenses not yet recovered.

Within 30 days after ending the regular inspection of the situation of tax payment by tax payers according to each petroleum contract, the provincial/municipal Tax Departments shall have to make sum-up reports to the Finance Ministry (the General Department of Tax) on the results of the inspection of the above contents together with the copy of the auditing record of each petroleum contract.

III. MAKING TAX SETTLEMENT WHEN PETROLEUM CONTRACTS EXPIRE OR TERMINATE AHEAD OF TIME BY DECISIONS OF THE LICENSING BODIES

Within 45 days after the investment-licensing body issues decision on the expiry or ahead-of- time termination of a petroleum contract, the tax office should promptly proceed with the following tasks:

+ Conducting the inspection of the tax settlement report: determining the arising tax amount, the tax amount already paid, the tax amount to be further paid, the overpaid tax amount (if any) in order to notify the tax payers to pay them into the State budget or guide them to carry out procedures for tax reimbursement request.

+ Giving certification to tax payers being foreign organizations and individuals (if so requested) of the enterprise income tax amounts, the tax amount on transfer of profits abroad, tax on income from the transfer of capital in the petroleum contracts, the personal income tax amount already paid in Vietnam;

+ Summing up the expenses allowed to be recovered; expenses already recovered; accrual of expenses not yet recovered.

Part Four

TAX PAYMENT CURRENCIES AND OTHER GUIDANCES

I. TAX PAYMENT CURRENCIES

Where oil and gas are sold in US dollars or freely convertible foreign currencies, the currencies for payment of taxes related to petroleum activities, including natural resource tax, export tax, enterprise income tax, shall be the US dollars or freely convertible foreign currencies actually collected.

Where oil and gas are sold in Vietnam dong, the currency for payment of taxes related to petroleum activities shall be the Vietnamese currency.

The conversion from foreign currencies into Vietnam dong or vice versa shall be made at the average transaction exchange rates on the inter-bank foreign currency market announced daily on Nhan Dan (People) paper. In cases where Nhan Dan paper is not published or does not announce the exchange rates, the applicable conversion exchange rates shall be those of the preceding day.

The budget revenues from oil and gas prospection, exploration and exploitation activities shall be accounted into the Budget Index according to the current regulations.

II. PLACES FOR TAX DECLARATION AND PAYMENT

1. Granting of tax codes:

The tax payers shall make tax declaration and registration so as to be granted the tax code for each petroleum contract (including tax-free contracts) under the guidance in Circular No. 79/1998/TT-BTC of June 12, 1998 of the Finance Ministry.

For petroleum contracts signed in forms of product contract or joint-administration contract, the administrators or the joint-administration companies shall have to fully declare the contractors participating in the petroleum contracts into the list of attached units and declare the subcontractors into the list of contractors, enclosed with the tax declaration forms. The contractors shall make tax declaration and registration according form 02-DK-TCT issued together with Circular No. 79/1998/TT-BTC. The tax offices where the administrators or the joint administration companies make the tax registration shall grant tax codes applicable to the tax payers being enterprises to contractors being the administrators or the joint administration companies and grant tax codes applicable to the tax payers being units attached to enterprises to each contractor, including contractors being Vietnamese enterprises participating in the petroleum contracts in their capacity as contractors. Where a contractor participates in many petroleum contracts, the contractor shall be given tax code for each petroleum contract.

The tax offices where tax payers make tax registration shall have to grant tax codes within 15 days as from the date of receiving the tax registration papers, which have been fully and accurately declared according to regulations.

When petroleum contracts expire or terminate ahead of time, the tax payers shall notify the tax offices where they make tax registration of the decisions of the Ministry of Planning and Investment on the contract termination. The provincial/municipal Tax Departments shall have to notify the cancellation of tax codes for the terminated petroleum contracts. The tax codes already granted to such petroleum must not be used and granted to other tax payers. Where a contractor transfer the entire rights and obligations in the petroleum contract to another subject, such subject shall have to make registration with the tax office so as to be allowed to use the tax code granted to the previous contractor. If the contractor transfer part of the contractual rights and obligations to another subject, the new subject participating in the petroleum contract shall make registration with the tax office so as to be granted the tax code.

2. Tax declaration and payment locations:

2.1. The places for tax payment registration shall be the Tax Departments of the localities where the tax payers locate their head offices.

2.2. For petroleum contracts signed before the promulgation of this Circular, the places for tax payment declaration shall comply with the current guidance.

III. RESPONSIBILITIES OF ORGANIZATIONS AND INDIVIDUALS CONDUCTING OIL AND GAS PROSPECTION, EXPLORATION AND EXPLOITATION ACTIVITIES

1. To strictly comply with the procedures for registration of tax code granting, tax registration with the tax offices under the guidance in this Circular. Within 5 days at most as from the time they relocate their executive offices, to carry out procedures for tax registration with the provincial/municipal tax offices (according to set form).

2. In the course of production and business activities, to strictly abide by the regulations on tax declaration and tax settlement.

3. Annually, to report on the petroleum production plans, the production and business situation, the expenses allowed to be recovered, the expenses already recovered, the accrual of expenses not yet recovered, to the tax offices.

4. To fully produce accounting books, vouchers and necessary documents related to tax calculation and tax settlement when so requested by the tax offices.

5. To pay tax fully and on time as prescribed.

6. Upon the decisions on the expiry of the oil and gas prospection, exploration and exploitation operation or the ahead-of-time termination of the petroleum contracts, to notify such to the tax offices and submit the tax settlement reports on time.

IV. RESPONSIBILITIES AND POWERS OF TAX OFFICES

1. To guide the tax payers to make tax registration and declaration strictly according to the prescribed regime, notify the tax payers of the accounts, budget index for payment of assorted taxes.

2. To check the tax declaration forms, examine accounting books, vouchers and necessary documents for tax calculation, to request tax payers to answer unclear matters related to the tax calculation.

3. To calculate and notify payable tax amounts to tax payers. To fix payable tax amounts in cases where the tax payers fail to voluntarily make registration within the prescribed time limits or make inadequate and inaccurate declaration or fail to supply fully, accurately information related to the tax calculation or where the revenues are affected by the financial and trade relations not under the square transaction contracts.

4. To inspect the annual tax payment situation as provided for in Section I1, Part Three of this Circular.

5. To make written records of and handle tax-related violations within their competence prescribed by law.

6. To strictly observe the tax legislation, ensuring the truthfulness, accuracy and objectiveness.

7. To inspect the registration of accounting regimes to be applied by the tax payers and inspect the implementation of the registered accounting regimes.

8. To certify tax amounts already paid by foreign organizations and individuals conducting oil and gas prospection, exploration and exploitation, if so requested by these subjects.

V. HANDLING VIOLATIONS AND SETTLING COMPLAINTS

1. The violations of tax legislation shall be sanctioned as follows:

- Failure to strictly comply with the provisions on tax registration as provided for at Point 1, Section II, Part Four of this Circular shall be subject to sanctions as prescribed in the Government�s Decree No. 22/CP of April 17, 1996 on sanctioning administrative violations in the field of tax and the current guiding documents.

- Failure to strictly comply with the provisions on tax payment declaration shall be subject to fines as prescribed in the Ordinance on Handling of Administrative Violations, Decree No. 22/CP of the Government and the current guiding documents.

- False declaration of tax money shall be fined up to 5 times the falsely declared tax amount.

- Late payment of tax shall be subject to a fine equal to 0.1% (one thousandth) of the late paid tax amount for each day of late payment.

2. Competence to handle violations and complaints

- The competence to handle tax-related violations shall fall under the Tax Departments of provinces and centrally-run cities which directly manage the tax collection.

- Tax payers� complaints about tax shall be considered and settled by the tax offices which directly collect tax. If the involved parties disagree with the settlement by the tax offices they may lodge their complaints to the superior tax offices and the Finance Ministry or initiate lawsuits according to law provisions.

Pending the settlement of the complaints, the complainants must strictly abide by the decisions of the tax offices.

VI. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its signing, replaces the Finance Ministry�s Circular No. 35/1998/TT-BTC of March 21, 1998 guiding the procedures for import tax exemption for organizations and individuals conducting petroleum activities under the Petroleum Law, replaces the previous guidances contrary to the guidances in this Circular and applies to the settlement of natural resource tax, export tax and enterprise income tax of the 2000 fiscal year.

Where petroleum contracts signed and granted the investment licenses before the Petroleum Law takes effect otherwise provide for the tax rates, the exemption and reduction of enterprise income tax, the agreements in such petroleum contracts shall apply, other taxes and fees shall comply with the guidance in this Circular. Particularly the petroleum contract for block 05.1 (Big Bear field) shall be exempt from export tax for four years as from 1999 and pay natural resource tax at the tax rate under the direction of the Prime Minister in Official Dispatch No. 1295/VPCP of March 29, 1999.

The payment of tax on transfer of profits abroad by the Russian party to the Vietsovpetro joint venture shall continue to comply with the guidance in Official Dispatch No. 2270/TC-TCT of May 13, 1999 of the Finance Ministry.

The provincial/municipal Tax Departments shall have to organize the implementation of, disseminate and guide tax payers to implement, the provisions of this Circular.

The Tax Departments shall have to arrange officials to work on full-time basis for the management of the collection of various taxes from organizations and individuals conducting oil and gas prospection, exploration and exploitation activities under the Petroleum Law. This management body shall have to monthly, quarterly and annually report to the Finance Ministry (the General Department of Tax) on the tax collection and make other reports in service of the general requirement of managing the organizations and individuals conducting oil and gas prospection, exploration and exploitation activities assigned to them for management.

For the Minister of Finance
Vice Minister
VU VAN NINH