Vietnam has introduced a new model of production sharing contract (PSC) for oil and gas, in an attempt to provide more clarity for foreign companies looking to partner with PetroVietnam (PVN). The new model applies to all contracts signed after 8 June 2013, unless the Vietnamese prime minister approves different technical and commercial terms, and essentially requires foreign oil and gas companies to contribute to local economic development. It replaces a model introduced in November 2005.
The new model includes export and corporate income taxes (not specified until then), environmental protection fees and surcharges on oil and gas profits, signing bonuses, incremental production bonuses, a fee to fund the research and development of oil and gas technology, and the requirement that foreign contractors set up training programmes for local workers. It introduces a new 1% tax for gas projects (up to 5 mcm/d) in areas where the government is looking to boost foreign investment, and a 2% tax for all other gas PSCs. Moreover, the tax on crude output of up to 20,000 bbl/d will increase from 6% to 10%, while the tax for oil projects under special government promotion will rise from 4% to 7%.
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