Title: Circular No.36/2016/TT-BTC dated February 26, 2016 guiding the implementation of regulations on tax to the organizations and individuals conducting the search, exploration and extraction of oil and gas according to regulation of Petroleum Law

Type: Circular

Issuing Agency: Ministry of Finance

Responsible Agency: Ministry of Finance

Issuing Date: 26-02-2016

Circular No.36/2016/TT-BTC was issued by Ministry of Finance on February 26, 2016 to guide the implementation of regulations on tax to the organizations and individuals conducting the search, exploration and extraction of oil and gas according to regulation of Petroleum Law. It replaces Circular No. 32/2009/TT-BTC dated  February 19, 2009.

Some notable changes are mentioned below:

• Capital assignment profits tax (“CAPT”) will apply to the indirect transfer of an interest in a PSC, except for an internal restructuring. The Circular provides some guidance on how CAPT will be applied in such situations but there are many uncertainties.
• The standard royalty rates have been removed from Circular 36 and reliance will now be placed on separate royalty regulations and the PSC.
• An annual reconciliation of export duties is now required. There is guidance on payment of additional export duties but no mention of how to deal with an overpayment.
• If a party to a PSC incurs their own CIT deductible expenses, these need to be “transferred” to the party declaring tax on their behalf (i.e. the operator) by using a list of expenses (rather than using value added tax invoices as the previous regulations).
• Other income directly related to O&G activities (e.g. interest) is to be offset against recoverable costs. For other income not related to O&G activities will be treated as taxable income subject to the standard CIT rate.
• Guidance is provided in relation to the CIT implications of abandonment fund which is not fully utilised.
• Value added tax ( VAT) incurred during exploration and development phases is fully creditable and will not be clawed even if there is no commercial discovery.

According to the new provisions provided in Clause 3 of this Circular, in principle, the currency used for payment of tax on the search, exploration and extraction of oil and gas activities is the US dollar (USD).

However, tax shall be paid in Vietnamese dong (VND) in the following cases:

- Where the crude oil and natural gas are sold in Vietnamese market, the selling price is determined on USD basis

- Where the crude oil and natural gas are sold and collected in US dollar but the taxpayers make payment of tax in VND as stipulated by the Government

The tax rate of corporate income tax of petroleum activities is from 32% to 50%, the specific tax rate shall be prescribed by the Prime Minister, based on the location and extraction conditions and oilfield reserve (Article 18).

This Circular takes effect from April 12th, 2016 and applies to the tax period from 2016 onwards and applies to the shipments of crude oil or natural gas sold from January 01st, 2016.

 

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