For mineral extraction, which entities are severance tax payers in Vietnam?

What is the guidance for determining the quantity or weight of natural resources containing various substances or impurities in Vietnam?

Under Clause 2, Article 5 of Circular 152/2015/TT-BTC, if the quantity or weight of natural resources is not determinable because they contain various substances or impurities, and natural resources are sold after screening and classification, taxable extraction quantity is calculated as follows:

+ If the substances can be separated, the taxable extraction quantity is determined according to the quantity, weight of the natural resources or each substance obtained after screening and classification.

In case earth, stones, wastes, dregs collected after screening are sold, severance tax on the quantity of natural resources in the wastes, dregs sold shall be paid at corresponding severance tax rates.

Example 1: in case coal extracted from the mine contains impurities, earth, stones, and has to be screened and classified before being sold, the taxable extraction quantity is the quantity of coal that has been screened and classified. In case the wastes sold contains coal and other natural resources, severance tax shall be charged upon taxable natural resources in the wastes at actual selling price and corresponding tax rates.

Example 2: After extracted iron ore is screened, they collected 2 kg of gold nuggets and 100 tonnes of iron ore. Severance tax shall be charged on the quantity of gold nuggets and iron ore obtained. Quantities of other natural resources serving the process of mineral extraction, such as water for screening, will also be determined to calculate tax.

+ If the ore extracted contain various substances (polymetallic ore) and the quantity of each substance cannot be determined after screening and classification, the taxable extraction quantity of each substance depends on the actual quantity of extracted ore and ratio of each substance in the ore. The ratio of each substance in the ore is determined according to the ore sample inspected and approved by competent authorities. In case the ratio of each substance in the ore is different than the ore sample, the taxable extraction quantity will depend on the analysis result given by a competent authority.

Example 3: Enterprise B extracts 1000 tonnes of ore in the month which contains various substances. According to the mining license and substance ratio in the ore sample approved by National Reserve Evaluation Council: copper ore: 60%; silver ore: 0.2%; tin ore: 0.5%.

Taxable quantity of each substance:

- Copper ore: 1,000 tones x 60% = 600 tonnes.

- Silver ore: 1,000 tones x 0.2% = 2 tonnes.

- Tin ore: 1,000 tones x 0.5% = 5 tonnes.

Severance tax shall be calculated according to the unit price and quantity of each substance in the ore.

Thus, depending on the specific type of resource, the quantity and weight of extracted resources containing various substances and impurities can be determined accordingly.

For mineral extraction, which entities are severance tax payers in Vietnam? (Image from the Internet)

What are the 3 severance tax bases by quantity in Vietnam?

Pursuant to Article 4 of the 2009 Resource Tax Law, the severance tax bases in Vietnam include::

[1] natural resource output used for severance tax calculation

[2] severance tax-liable price

[3] severance tax rate

For mineral extraction, which entities are severance tax payers in Vietnam?

According to Article 3 of Circular 152/2015/TT-BTC, the regulation on resource tax payers in mineral exploitation activities is as follows:

Taxpayers

Payers of severance tax (hereinafter referred to as taxpayers) are organizations and individuals (hereinafter referred to as entities) that extract natural resources subject to severance tax mentioned in Article 2 of this Circular. Taxpayers in some particular cases:

1. For mineral extraction, taxpayers are the organizations and business households granted the License for mineral extraction by competent authorities.

In case an organization is granted the license for mineral extraction and permitted to cooperate with other organizations and individuals extracting natural resources, and there are separate regulations on taxpayers, the taxpayers shall be identified according to such regulations.

In case an organization is granted the license for mineral extraction and then delegates its affiliates to carry out mineral extraction, each affiliate is a taxpayer.

2. If a joint venture is established among resource-extracting enterprises, the joint venture is the taxpayer;

In case a Vietnamese party and a foreign party participate in the same contract for cooperation in resource extraction, the obligation to pay tax of each party must be specified in the contract. Otherwise, all parties must declare and pay severance tax or appoint a representative to pay severance tax.

3. In case an entity is awarded a construction contract and extracts a certain amount of natural resources that is permitted by the authorities, or the extraction/use of such natural resources is not contrary to regulations of law on resource extraction, such entity must declare and pay severance tax to the local tax authority in the area where natural resources are extracted.

4. Every entity using water from irrigation works for power generation is taxpayer, regardless of sources of capital for the irrigation works.

In case the organization managing the irrigation work supplies water for other entities to produce clean water or water for other purposes (other than power generation), the organization managing the irrigation work supplies water is the taxpayer.

5. In case natural resources that are banned from extraction or illegally extracted are confiscated, subject to severance tax, and permitted to be sold, the organization assigned to sell such natural resources shall pay severance tax whenever it is incurred to its supervisory tax authority before retaining the cost of arrest, auction, reward.

Thus, according to the above provisions, for mineral extraction, taxpayers are the organizations and business households granted the License for mineral extraction by competent authorities.