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The certain principles relating to Taxes contain in the Contract on Sovestny Development and the Equity Section of Production on Azeri's Fields and Chirag of the Deep-water part of the Field of Gyuneshli in the Azerbaijani Sector of the Caspian Sea concluded on September 20, 1994 between the State Oil Company of Azerbaijan Republic and the Contract parties and which came into complete legal force about December 12, 1994 (Contract).

The Cabinet of Ministers of the Azerbaijan Republic published the Order number 50 of March 7, 1995 about creation of the Commission under the leadership of the Deputy Minister of Finance consisting of representatives of the Ministry of Finance, Ministry of taxes, the State Customs Committee of the Azerbaijan Republic and the State Oil Company of Azerbaijan Republic ("Commission") for establishment of the administrative rules necessary for implementation of the Contract provisions connected with taxes approved with the Contract parties.

In connection with the clauses for the taxation applicable to the right, economic stability and arbitration, for the purpose of ensuring sequential and fair control according to provisions of the Government providing specified in Appendix 6 to the Contract, in "Minutes on the Value added tax" for more detailed clearing of the existing interpretation of the Contract changes are entered, and the this Protocol about the Value added tax replaces "The protocol on the Value added tax" of April 24, 1995.

The commission and the Contract parties agreed to conclude the this Protocol of January 1, 2002 about the Value added tax ("Protocol") for establishment of these rules. In connection therewith the this Protocol determines their mutual understanding of the Contract and procedures which will be used in case of determination of the amount and administration of the VAT for goods, the works or services provided in connection with Hydrocarbonic activities in the Azerbaijan Republic.

If goods, works or services will be entered for the purposes of others, than accomplishment of Hydrocarbonic activities, provision of such goods, works, services will be assessed with the VAT according to the legislation of the Azerbaijan Republic.

1. Collection of the Tax

1.1. Each Contract Party, Operating Company and their Subcontractors are free from the Value added tax in connection with Hydrocarbonic activities (on zero tax rate (0%)). It is applied to the following:

1.1.1. the goods, works and services transferred to each of them or provided to one of them;

1.1.2. export of Hydrocarbons;

1.1.3. import and purchase of goods (except tobacco products and alcoholic beverages), works and services.

1.2. In addition each supplier providing to the Contract party, Operating company and its Subcontractors any goods, works or services in connection with Hydrocarbonic activities shall consider such goods, works and services exempted from the VAT (zero interest rate (0%)).

2. Procedure of receipt of the Certificate of the VAT for zero rate (0%)

2.1. Each Operating Company and the Contract parties for receipt of the Certificate on tax exemption meaning provision of powers on deduction of the VAT on zero rate (0%) according to the Contract and the this Protocol files in the Ministry of taxes the written application. For receipt of the certificate on release from the VAT meaning provision of powers on deduction of the VAT on zero rate (0%) according to the Contract and the this Protocol, any Subcontractor which signed the contract with any Operating company, the Contract party or other Subcontractor is allowed to file in the Ministry of taxes petition in the form given in Appendix 3. The application written by the Subcontractor in the Ministry of taxes confirms that the signed the contract with it the Contract party, Operating companies or its Subcontractors signed the contract with this Subcontractor for delivery of goods, works and services according to the Contract and the this Protocol and except it for issue of taxes of the certificate by the Ministry no additional document is required.

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