The Petroleum Law (amended) was ratified by the National Assembly of Vietnam on November 14 by 472/475 votes in favor, with a number of new policies being considered with groundbreaking significance. The Petroleum Law including 11 chapters and 69 articles will take effect from July 1, 2023.

The amended Petroleum Law now includes regulation on the Prime Minister to decide on the operating mechanism for Petroleum fields, clusters, and lots. This is a new policy of the amended Petroleum Law with numerous groundbreaking provisions, which is a fundamental legal basis for more effective Petroleum resource exploitation, leading to increased state budget revenue.

The amended Petroleum law allowing "individuals" to participate in fundamental Petroleum investigation operations is compatible with the aim of fostering and attracting investment in this industry. When conducting basic investigations on Petroleum activities, the independence, sovereignty, territorial integrity, sovereign rights, jurisdiction, and ensuring Vietnam's national interests and security must be respected, as must comply with Vietnamese laws and treaties to which the Socialist Republic of Vietnam is a signatory.

The Law has been amended to stipulate two separate clauses on the responsibilities of relevant entities for deciding the time to suspend the performance of some rights and obligations in the petroleum contract in two cases: force majeure and for reasons of national defense and security.

In particular, if the parties to the Petroleum contract agree on a way to suspend the exercise of some obligations and rights under the Petroleum contract due to force majeure, the Vietnam National Petroleum Group shall report to the Ministry of Industry and Trade for the decision. The term of suspension of the exercise of various obligations and rights in the Petroleum contract must be set by the Prime Minister at the request of a competent authority in the case of defense and security concerns.

In line with the Prime Minister's approval principle for petroleum contracts, which is comparable to approving investment plans for investment projects, and consolidating the Prime Minister's power over Petroleum projects. Other situations where the project demands modifying the aim of using national forest land, nature reserve, etc. are described in the amended petroleum Law.

The proposed regulations on Petroleum contracts for Petroleum blocks and fields eligible for investment incentives are subject to corporate income tax rates of 32%, the crude oil export tax rate of 10%, and the maximum cost recovery rate of 70% of the Petroleum output exploited in the year.

The corporate income tax rate is 25%, the crude oil export tax rate is 5%, and the maximum cost recovery rate is 80% of the Petroleum output exploited throughout the year. These taxes apply to Petroleum contracts for Petroleum lots and fields enjoying special investment incentives.

Originally published November 15, 2022

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