PETROVIETNAM UNIVERSITY

PVU
PETROLEUM ECONOMICS

Chapter 6
Tax & Law in O&G Production
Instructor: Hoang Hung, Ph.D.
Email: hungh@pvu.edu.vn
Mobile: 091 873 8 873

Content

Taxes in O&G
production activities
Petroleum Law and
revised PL
Hoang Hung, PhD

Petroleum Economics

1. Taxes in O&G production activities

Law on Natural Resource Tax

(45/2009/QH12, dated 25/11/2009)

Decree 50/2010/N-CP, dated 14/5/2010

on detailed instruction of Law on Natural
Resource Tax
Circular No. 105/2010/TT-BTC, dated
23/7/2010 on Instruction of Decree
50/2010/N-CP
Hoang Hung, PhD

Petroleum Economics

1. Taxes in O&G production activities

(cont.)

Subjects to Tax:
NR on
Land,
Island,
In Internal Waters,
Territorial Waters,
EEZ,
Continental Shelf under
control of SRV
Hoang Hung, PhD

Petroleum Economics

Crude Oil
NG
CG

Defined Locations of Subjects to Tax

International Water
Intercontinental
shelf

EEZ

Territorial
Water
Internal Water
Land

Hoang Hung, PhD

Base
line

Petroleum Economics

1. Taxes in O&G production activities

(cont.)

Tax Payers:
Persons/Legal
persons of

Hoang Hung, PhD

SOEs,
Cos Ltd.,
JSCs,
Cos Pte.,
JVs,
BCCs,
JOC,
HHs
Others

Petroleum Economics

1. Taxes in O&G production activities

(cont.)

Partial Accumulated
Tax
Earning Taxation
Rates 4% - 25% of Crude Oil
exploited*;
to O&G
0% - 10% of Gas
exploited*

Hoang Hung, PhD

Petroleum Economics

1. Taxes in O&G production activities

(cont.)

NR Tax Rates to Crude Oil

(Decree by 928/2010/UBTVQH12, dated 19/4/2010 by NA SC)

Yield (bbl/d)

1
2
3
4
5
6

Tax Rate(%)
Incentive
Other
Projects
Projects

Up to 20.000
20.000 up to 50.000
50.000 up to 75.000
75.000 up to 100.000
100.000 up to 150.000
150.000 up

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Petroleum Economics

7
9
11
13
18
23

10
12
14
19
24
29
8

1. Taxes in O&G production activities

(cont.)

NR Tax Rates to NG and CG

(Decree by 928/2010/UBTVQH12, dated 19/4/2010 by NA SC)

Yield (m3/day)

1
2
3

Tax Rate(%)
Incentive
Other
Projects Projects

Up to 5 m
5 m to 10 m
10 m up

Hoang Hung, PhD

1
3
6
Petroleum Economics

2
5
10
9

1. Taxes in O&G production activities

(cont.)

Tax Calculation Price

For Crude Oil:
TCP is the weighted average of oil price sold in
Square Transaction Contracts* during the
tax payment period.
For NG:
TCP if selling price in Square Transaction
Contracts* during the tax payment period.
If Oil&Gas is sold out of STC:
MoF determines the TCP
Hoang Hung, PhD

Petroleum Economics

10

1. Taxes in O&G production activities

(cont.)

Payable Natural Resource Tax:

NRT

Hoang Hung, PhD

Average
Yield/day

NRT
Rate

Petroleum Economics

Production
Days in tax
x
payment
period

11

1. Taxes in O&G production activities

(cont.)

Tax Payment Methods:

Determined by Tax Authority

Crude Oil
Gas
Currency
Both
Hoang Hung, PhD

Petroleum Economics

12

Currency of
Payable Tax

1. Taxes in O&G production activities

(cont.)

Hoang Hung, PhD

If sold in VND:
Payable Currency is VND

If sold in USD or CFC:

Payable Currency is USD or
CFC
If sold in both USD, CFC &
VND:
Payable Currency is VND

Petroleum Economics

13

2. PETROLEUM LAW AND REVISED PL

9 Chapters, 51 Articles
Promulgated on 6/7/1993
1993
by NA9
Petroleum
Effective from 01/9/1993
Law of
Setting regulations of
SRV
Petroleum E&P within
territory of SRV

Hoang Hung, PhD

Petroleum Economics

14

2. PETROLEUM LAW AND REVISED PL

(Cont.)
Petrol
eum
Servi
ce

Petrol
eum

TERMS TO
LEARN:
Petrol
eum
Contr
act

Hoang Hung, PhD

Crude Oil

Subcontra
ctor

Block

Petroleum activities
Contr
actor

Petroleum Economics

15

Hoang Hung, PhD

Petroleum Economics

16

Hoang Hung, PhD

Petroleum Economics

17

2. PETROLEUM LAW AND REVISED PL

(Cont.)

Petroleum Contract
c
Chn
g 3
Lut
Du
kh
1993

- PSC
- JVC
- Others*
Must be in
compliance with
sample contract
set by GOV

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Petroleum Economics

18

2. PETROLEUM LAW AND REVISED PL

(Cont.)
Petroleum Contract: Main contents
1. Legal position of partners
2. Objectives
3. Block and deadline of block return
4. Term of contract
5. Conditions of break/extension
6. Liabilities and rights
7. Financial arrangements*
8. Transfer of liability and right
9. Training & domestic labor/service commitment
10. HSE
11. Dispute Arrangements
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Petroleum Economics

19

2. PETROLEUM LAW AND REVISED PL

(Cont.)

Terms of Petroleum Contracts

- Max. 25 years for shallow water projects
with max. 5 years for Exploration Period;
- Max. 30 years for deep water projects with
max. 7 years for Exploration Period;
- Terms of contracts could be extended but
not exceeded 5 years with max. 1 year
extended to Exploration Period.
- Extension is based on Contractors
proposal which must be approved by GOV
Hoang Hung, PhD

Petroleum Economics

20

Shallow Water VS Deep Water

Hoang Hung, PhD

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21

Shallow Water VS Deep Water (cont.)

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Petroleum Economics

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2. PETROLEUM LAW AND REVISED PL

(Cont.)

Issues to learn

- Rights & Liabilities of contractors;

- Taxes and fees;
- State management on O&G
activities.

Hoang Hung, PhD

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Hoang Hung, PhD

Petroleum Economics

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Hoang Hung, PhD

Petroleum Economics

25

Hoang Hung, PhD

Petroleum Economics

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2. PETROLEUM LAW AND REVISED PL

(Cont.)

Revised Petroleum Law in 2000

- Law on adjustment & complement of

Petroleum Law was promulgated on
09/6/2000 and effective from 01/7/2000
- With 17 articles adjusted or
complemented

Hoang Hung, PhD

Petroleum Economics

27

2. PETROLEUM LAW AND REVISED PL

(Cont.)

Revised Petroleum Law in 2000:

Important adjustments/complements
Complements:
- Terms of contracts (explored
commercial gas reserve could
be retained for 5-7 years);
- Temporary shut down a contract
for max. 3 years in case of
force majeure
Hoang Hung, PhD

Petroleum Economics

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2. PETROLEUM LAW AND REVISED PL

(Cont.)

Revised Petroleum Law in 2000:

Important adjustments/complements
Adjustments:
- Earning Tax Rate: 50% (For
incentive projects: 32%);
- Earning tax exemption for max. 2
years and 50% reduction for
following 2 years
Hoang Hung, PhD

Petroleum Economics

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End of Chapter 6

Thanks for attention.

And Now:
Homework Assignments!

Hoang Hung, PhD

Petroleum Economics

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