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The Government of Vietnam has recently issued Decree 132/2024/ND-CP, which provides a regulatory framework for overseas investment in petroleum activities. This new decree, set to take effect on December 5, 2024, replaces Decree 124/2017/ND-CP and introduces several important provisions regarding how Vietnamese investors can engage in petroleum projects abroad.
Key Provisions on Overseas Investment Capital
One of the central aspects of Decree 132 is the clear stipulation of overseas investment capital in petroleum activities. According to the decree, investment capital includes various types of funds and assets, such as:
- Equity capital and loans: Money transferred abroad for petroleum activities.
- Recovery costs and profits: Funds retained from overseas petroleum projects.
- Other legal assets: These include foreign currency held in accounts at licensed credit institutions, machinery, equipment, materials, intellectual property rights, technology, trademarks, and shares or capital contributions both in Vietnam and abroad.
Investors are permitted to use this capital to fund several activities related to overseas petroleum projects, including capital contributions, share purchases, fulfillment of guarantee obligations, and other financial commitments. Importantly, capital transferred abroad and subsequently recovered does not count as new overseas investment capital.
Use of Shares and Capital Contributions for Overseas Petroleum Projects
The decree grants Vietnamese investors the flexibility to use shares, capital contributions, or investment projects within Vietnam to facilitate the acquisition of shares or capital in overseas petroleum ventures. In such cases, the investor must first obtain a certificate of registration for overseas investment before the foreign investor carries out investment procedures in Vietnam.
Establishment of Operating Companies for Project Management
Decree 132 also introduces provisions related to the management of overseas petroleum projects through operating companies. Investors can establish or participate in the establishment of an operating company in Vietnam, the investment-receiving country, or a third country. These companies are tasked with managing and operating one or more overseas petroleum projects on behalf of the investor, allowing for a more centralized approach to project execution.
If the investor decides to form an operating company for this purpose, the company will be listed alongside the investor on the overseas investment registration certificate. The operating company can then use this certificate to facilitate the implementation of petroleum activities. Moreover, the decree mandates that costs associated with each petroleum project must be accounted for separately to ensure transparency.
Transfer of Overseas Petroleum Projects
Another notable provision in Decree 132 pertains to the transfer of overseas petroleum projects. Investors are allowed to transfer part or all of their project holdings in accordance with the petroleum contract, relevant agreements, and the laws of both the investment-receiving country and Vietnam.
In cases where an investor transfers the entire project to a domestic entity, they must follow the procedures outlined in the Investment Law for adjusting the overseas investment registration certificate. If the project is transferred to a foreign investor, the investor is required to terminate the validity of the overseas investment registration certificate.
Additionally, if a transfer generates profits, the investor is obligated to fulfill financial obligations in Vietnam. This includes adhering to Vietnam’s tax laws and any agreements on the avoidance of double taxation and prevention of tax evasion between Vietnam and the countries or territories involved.
Decree 132/2024/ND-CP marks a significant update to Vietnam’s regulatory framework for overseas investment in petroleum activities. By clearly defining the permissible forms of investment capital and providing a structured process for project management and transfers, the decree aims to enhance investor confidence and promote greater engagement in international petroleum ventures.
As the decree takes effect in December 2024, stakeholders in the petroleum sector should closely examine these new regulations to optimize their overseas investment strategies and ensure smooth project implementation.
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