Are agarwood products subject to severance tax in Vietnam?

What percentage of severance tax is applied when extracting agarwood products from natural forests in Vietnam?

Based on Article 7 of the Law on severance tax 2009, the tax rates are as follows:

- The natural severance tax rate framework is stipulated as follows:

- The specific tax rate for crude oil, natural gas, and coal gas is determined progressively according to the average daily extraction quantity of crude oil, natural gas, and coal gas.

- Based on the provisions of clauses 1 and 2 of this Article, the Standing Committee of the National Assembly shall stipulate specific tax rates for each type of resource in each period to ensure the following principles:

+ Suitable for the lists, types of resources, and within the tax rate framework stipulated by the National Assembly;

+ Contributing to the state management of resources; protecting, exploiting, using rationally, economically, and efficiently the resource sources;

+ Contributing to ensuring state budget revenue and stabilizing the market.

Therefore, a tax rate of 25-30% is applied for harvesting agarwood from natural forests.

What is the legal basis for the severance tax on harvesting agarwood from natural forests in Vietnam?

According to Article 2 of the Law on severance tax 2009 (amended by Clause 1 of Article 4 of the Law on Amendments to Tax Laws 2014), the taxable objects are defined as follows:

- Metallic minerals.

- Non-metallic minerals.

- Crude oil.

- Natural gas, coal gas.

- Products from natural forests, excluding animals.

- Natural seafood, including marine animals and plants.

- Natural water, including surface water and groundwater, excluding natural water used for agriculture, forestry, fishery, or salt production.

- Natural bird's nest.

- Other resources as stipulated by the Standing Committee of the National Assembly.

Thus, according to the regulations, products from natural forests (including agarwood) are subject to severance tax.

Are agarwood products subject to severance tax in Vietnam? (Image from the Internet)

How to determine the quantity of harvested agarwood from natural forests in Vietnam?

Based on Article 5 of the Law on severance tax 2009:

Taxable resource output

1. For resources extracted with determined quantity, weight, or volume, the taxable resource output is the quantity, weight, or volume of the resources actually extracted during the tax period.

2. For resources extracted with undetermined actual extraction quantity, weight, or volume due to a mixture of different substances and impurities, the taxable resource output is determined based on the quantity, weight, or volume of each substance obtained after sorting and classifying.

3. For resources extracted and not sold but used for the production of other products, if the actual extraction quantity, weight, or volume cannot be directly determined, the taxable resource output is determined based on the output of the produced products during the tax period and the consumption rate of the resources per unit product.

4. For natural water used for hydropower production, the taxable resource output is the electricity output sold by the hydroelectric power plant to the buyer under the electricity purchase contract or the electricity output delivered in case there is no electricity purchasing contract, as determined by the Vietnamese quality measurement standard metering system, confirmed by both the buyer and the seller or deliverer and receiver.

5. For natural mineral water, hot water, and natural water used for industrial purposes, the taxable resource output is determined in cubic meters (m³) or liters (l) according to the Vietnamese quality measurement standard metering system.

6. For resources extracted manually, dispersedly, or moved and not frequently extracted, if the estimated annual extraction output is valued under 200,000,000 VND, the taxable resource output is determined based on the estimated extraction output for the season or periodic basis for tax calculation. The tax authorities cooperate with the relevant local authorities to determine the estimated taxable resource output.

The Government of Vietnam stipulates the details of this Article.

Thus, the determination of the quantity of harvested agarwood from natural forests, where it is typically very rare, requires the tax authorities to collaborate with the relevant local authorities to determine the estimated taxable resource output for tax calculation.