The mechanism for sharing of increased and reduced revenues under PPP projects in Vietnam

The mechanism for sharing of increased and reduced revenues under PPP projects in Vietnam (Image from the Internet)

According to Article 82 of the Law on Public – Private Partnership Investment 2020 (effective from January 1, 2021) regulating the mechanism for sharing of increased and reduced revenues under PPP projects:

- When the actual revenue is 125% higher than the revenue specified in the financial plan under a PPP project contract, the investor and the PPP project enterprise will share with the State 50% of the difference between the actual revenue and 125% of revenue in the financial plan. The increased revenue may be shared after adjustment in the prices and costs of public products and services or the PPP contract term according to the provisions of Article 50, 51 and 65 of this Law and must be audited by the State Audit.

- When the actual revenue is 75% lower than the revenue specified in the financial plan under a PPP project contract, the State will share with the investor or PPP project enterprise 50% of the difference between 75% of revenue in the financial plan and the actual revenue. Sharing of reduced revenues may occur if the following requirements are satisfied:

+ Projects are developed and executed under BOT, BTO or BOO contracts;

+ Changes in relevant planning, policies and laws result in a reduction in revenue;

+ Measures to adjust prices and charges of public products and services, and PPP contract terms, according to the provisions of Articles 50, 51 and 65 of this Law, have been fully taken, but the minimum revenue requirement of 75% has not been met yet;

+ The reduced revenue has been audited by the State Audit.

- The mechanism for sharing of the reduced revenue specified in Clause 2 of this Article must be determined according to the decision on investment policy. Expenses for dealing with the revenue reduction sharing mechanism shall be covered by the central government’s budget reserve with respect to the projects falling under the authority to grant investment policy decisions of the National Assembly, the Prime Minister, Ministers, heads of central agencies or other bodies, or by the local government’s budget reserve with respect to the projects falling under the authority to grant investment policy decisions of provincial People's Councils.

- On an annual basis, the parties to PPP project contracts shall determine the actual revenue and send the results of such determination to competent financial institutions to carry out the mechanism for sharing of increased and decreased revenues. Accounting for state budget revenues and expenditures arising from sharing of the reduced or increased revenues shall comply with the provisions of law on state budget.

Best regards!