Công văn 6498/BTC-TCHQ

In response to the Official Dispatch No. 1195/TM dated March 20, 2014 of Russia-Vietnam Joint Venture – Vietsovpetro (“VSP”) requesting for guidelines on grant of duty exemption to imports serving petroleum activities, the Ministry of Finance hereby provides guidelines as follows:

1. With regard to the duty imposed on imports serving the transport of gas from Thien Ung field and Dai Hung field of block 04.3 through Bach Ho field of block 09.1 to the shore:

- Pursuant to Article 7 of the Agreement signed between S.R. Vietnam’s Government and Russian Federation’s Government on continuous co-operation in geological survey and petroleum exploration and production on the continental shelf of S.R. Vietnam within the framework of Russia-Vietnam Joint Venture – Vietsovpetro (hereinafter referred to as “Agreement”), “VSP is granted exemption from customs duties within the territory of S.R. Vietnam during the transport of materials, equipment and goods to and/or from Vietnam to serve the main activities of VSP”.

- Pursuant to Clause 7 Article 16 of the Law No. 45/2005/QH11 dated June 14, 2005 on export and import duties, imports serving petroleum activities exempt from import duty include: Equipment, machinery, spare parts, means of transport necessary for petroleum activities; supplies necessary for petroleum activities that cannot be domestically produced.

In case materials, equipment and goods imported by VSP or any contractors are not used to directly serve block 09.1 but used to serve the transport of gas from other fields outside block 09.1 to the shore, they shall be exempted from import duty as regulated in Clause 7 Article 16 of the Law on export and import duties (they are not exempted from duty as regulated in Article 7 of the Agreement).

2. With regard to materials and supplies imported by contractors to serve the building or repair of drilling platforms, ships, floating vehicles, etc. which then shall be transferred to VSP to serve block 09.1:

Pursuant to Article 7 of the Agreement, Article 21 of the Decree No. 83/2013/ND-CP dated July 22, 2013, the Official Dispatch No. 12091/BCT-TCNL dated December 30, 2013 of the Ministry of Industry and Trade on determination of imports exempted from duties under the Agreement, materials and supplies, etc. imported by contractors for building or repair of drilling platforms, ships and floating vehicles, etc. which are then transferred to VSP to serve block 09.1 are eligible for duty exemption.

Documents, procedures and authority competent to consider granting duty exemption shall comply with Article 12, Article 105, Article 106 and Article 107 of the Circular No. 128/2013/TT-BTC, and the following provisions:

- The declaration of imports must indicate that the goods are imported to serve block 09.1, and be enclosed with the written certification of VSP given to each shipment.

- The goods supply contract signed between VSP and the contractor must specify the prices for goods supply exclusive of import duty.

- VSP shall cooperate with the relevant contractor in estimating the consumption rate of materials, supplies and components, etc. necessary for manufacturing or assembly of goods serving block 09.1, and then determining practical amounts of materials, supplies and components, etc. necessary for manufacturing or assembly of goods serving block 09.1 which shall be used the basis for grant of duty exemption by customs authority.

- The customs authority shall examine information declared by the enterprise, and determine amount of materials, supplies and components, etc. necessary for manufacturing or assembly of goods serving block 09.1 for considering granting duty exemption according to Article 105 and Article 106 of the Circular No. 128/2013/TT-BTC.

VSP shall manage imports serving block 09.1 as declared by the contractor.

3. With regard to deduction of quantity of duty-free imports:

Pursuant to Point b1 Clause 2 Article 100 of the Circular No. 128/2013/TT-BTC and VNACCS (Vietnam Automated Cargo and Port Consolidated System), imports exempted from duty are monitored and deducted according to their quantity not their value as requested by VSP.

In case duty-free goods are on the registered list of duty-free goods of a compound or machinery line which must be divided into multiple shipments in order to be assembled into a complete compound or machinery line, the customs authority must make logbook of imported goods separately for each compound or machinery line, and grant duty exemption to import shipments as regulated but shall not deduct quantity of imports on the monitoring sheet and VNACCS when the enterprise follows import procedures; the deduction shall be carried out after the final shipment of the compound or machinery line is completely imported and all of the following requirements are satisfied:

- The enterprise shall import the shipments at 01 Sub-department of Customs and estimate the time of completion of the import.

- At the time of import, the enterprise must declare the specific quantity, names of goods to be imported, and specify which articles are on the registered list of duty-free goods.

- Within 15 days from the import of the last shipment of each compound or machinery line or from the estimated date of completion of the import, the enterprise shall aggregate the import declarations and submit technical designs (if requested by the customs authority) in order for the customs authority to monitor and deduct the quantity of goods on the monitoring sheet.

4. The customs authority shall carry out post-clearance inspection to determine whether the duty-free goods declared by the enterprise are properly used for petroleum purposes mentioned in the abovementioned Point 1, Point 2 and Point 3, and impose penalties for violations, if any.

5. With regard to value-added tax (VAT):

- VAT on imports serving block 09.1 shall be paid according to guidelines given in the Official Dispatch No. 4741/BTC-TCHQ dated April 14, 2014 of the Ministry of Finance.

- VAT on imports serving other petroleum activities (outside block 09.1) shall be paid according to Clause 17 Article 5 of the Law on value-added tax No. 13/2008/QH12 as amended in Clause 1 Article 1 of the Law No. 31/2013/QH13 on amendments to the Law on value-added tax.

These are some guidelines given by the Ministry of Finance to Russia-Vietnam Joint Venture – Vietsovpetro and the Customs Department of Ba Ria – Vung Tau Province for knowing and implementing./.