General regulations on surcharge on the volume of oil divided as profit in Vietnam

General regulations on surcharge on the volume of oil divided as profit in Vietnam (Internet image)

General regulations on surcharge on the volume of oil divided as profit in Vietnam are in Article 1 to Article 5 of Circular 22/2010/TT-BTC, specifically as follows:

- Scope of regulation and subjects of application

• This Circular guides the collection of a surcharge on the volume of oil divided as profit to petroleum contractors when the price of crude oil increases.

• Petroleum contractors defined in this Circular are Vietnamese or foreign organizations or individuals conducting petroleum activities in Vietnam under the Petroleum Law (below collectively referred to as contractors).

- Surcharge payers

• For petroleum contracts signed in the form of production-sharing contracts, surcharge payers are administrators who enter into these contracts on behalf of petroleum contractors.

• For petroleum contracts signed in the form of joint-execution contracts, surcharge payers are joint-execution companies that enter into these contracts on behalf of petroleum contractors.

• For petroleum contracts signed in the form of joint-venture contracts, surcharge payers are joint-venture enterprises that enter into these contracts on behalf of petroleum contractors.

• In case the Vietnam Oil and Gas Group or corporations and companies of the Vietnam Oil and Gas Group conduct petroleum activities on its/their own, surcharge payers are the Vietnam Oil and Gas Group or corporations and companies of the Vietnam Oil and Gas Group.

- Currency for surcharge payment

• In case crude oil is sold for US dollar or a freely convertible foreign currency, the currency for surcharge payment is US dollar or such freely convertible foreign currency

• In case crude oil is sold for Vietnam dong, the currency for surcharge payment is Vietnam dong.

• In case crude oil is sold for both US dollar or a freely convertible foreign currency and Vietnam dong. the currency for surcharge payment is Vietnam dong.

• The conversion of US dollar or a freely convertible foreign currency into Vietnam dong for tax payment shall be made at the average inter-bank exchange rate announced by the State Bank of Vietnam at the time of surcharge payment.

- Places for surcharge registration, declaration and payment

Places for surcharge registration, declaration and payment are provincial Tax Departments in localities where surcharge payers' head administration offices are located, except for surcharge registration, declaration and payment made in other places under the Ministry of Finance's specific guidance.

- Objects to be surcharged

The whole oil volume divided as profit on a quarterly basis to a contractor is liable to a surcharge, in which:

• Profit oil is the crude oil volume left after subtraction of royalty oil and oil for cost recovery from the net oil volume under the Petroleum Law. In case a petroleum contract contains no agreement on cost recovery rate which serves as a basis for determining the profit oil volume specified in this Clause, such rate will be 35%, except for oilfields to be further exploited after the petroleum contract expires.

• Profit oil to be divided to a petroleum contractor on a quarterly basis means the profit oil volume specified in Clause 1 of this Article shared to that contractor under a signed petroleum contract.

• In case the Vietnam Oil and Gas Group or corporations and companies of the Vietnam Oil and Gas Group conduct petroleum activities on its/their own. to be liable to a surcharge is the whole profit oil volume generated on a quarterly basis by the Vietnam Oil and Gas Group or corporations and companies of the Vietnam Oil and Gas Group.

More details can be found in Circular 22/2010/TT-BTC, which comes into force from March 29, 2010.

Nguyen Phu

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