How to determine output of water used for hydropower generation used for severance tax calculation in Vietnam?

How to determine output of water used for hydropower generation used for severance tax calculation in Vietnam?

Based on Article 5 of the Law on severance tax 2009, the provisions are as follows:

Taxable Resource Output

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

2. For resources extracted with undetermined actual quantity, weight, or volume due to containing multiple substances and impurities, the taxable resource output is determined by the quantity, weight, or volume of each substance obtained after screening and classification.

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

4. For natural water used for hydropower generation, the taxable resource output is the electricity output sold by the hydropower production facility to the electricity buyer according to the electricity purchase agreement, or the delivered electricity output in cases where there is no electricity purchase agreement, determined according to the Vietnamese standard measurement system, confirmed by the buyer, seller, or delivery-receipt parties.

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

6. For resources extracted manually, dispersedly, or in a mobile and irregular manner, where the estimated annual extraction output has a value under VND 200,000,000, the resource output is determined on a seasonal or periodic basis for tax calculation. The tax authority cooperates with local related agencies to determine the allocated extracted resource output for tax calculation.

The Government of Vietnam specifies further details on this Article.

Thus, according to the regulations, the output of water used for hydropower generation used for severance tax calculation is determined by the electricity output sold by the hydropower production facility to the electricity buyer according to the electricity purchase agreement, or by the delivered electricity output.

What is the severance tax-liable prices for natural water used for hydropower generation in Vietnam?

Based on Clause 3, Article 6 of the Law on severance tax 2009, the provisions are as follows:

Severance tax-liable prices

1. The severance tax-liable prices of resources is the selling price per unit of the resource product extracted by the organization or individual, excluding value-added tax.

2. In cases where the selling price of the resources cannot be determined, the severance tax-liable prices is determined based on one of the following criteria:

a) The actual selling price in the regional market for the same type of resource product, but not lower than the severance tax-liable prices set by the provincial People's Committee;

b) In cases where the extracted resources contain multiple different substances, the severance tax-liable prices is determined by the selling price per unit of each substance and the percentage of each substance in the extracted resources, but not lower than the severance tax-liable prices set by the provincial People's Committee.

3. The severance tax-liable prices of resources in certain cases is specified as follows:

a) For natural water used for hydropower generation, the severance tax-liable prices is the average commercial electricity selling price;

b) For timber, the severance tax-liable prices is the selling price at the delivery location; if the selling price at the delivery location cannot be determined, the severance tax-liable prices is determined based on the severance tax-liable prices set by the provincial People's Committee;

c) For resources extracted but not consumed domestically and exported, the severance tax-liable prices is the export price;

d) For crude oil, natural gas, and coal gas, the severance tax-liable prices is the sale price at the delivery point. The delivery point is agreed upon in the petroleum contract, where the ownership of crude oil, natural gas, and coal gas is transferred to the parties in the petroleum contract.

4. The provincial People's Committee specifically stipulates the severance tax-liable prices for resources whose unit selling price of the resource product cannot be determined, excluding crude oil, natural gas, coal gas, and natural water used for hydropower generation.

The Government of Vietnam specifies further details on this Article.

Thus, according to the regulations, the severance tax-liable prices for natural water used for hydropower generation is the average commercial electricity selling price.

How to determine output of water used for hydropower generation used for severance tax calculation in Vietnam? (Image from the Internet)

How to calculate the severance tax payable in the period in Vietnam?

Based on Article 4 of Circular 152/2015/TT-BTC as follows:

- Determination of severance tax payable in the period

severance tax payable in the period = Taxable resource output x Unit resource severance tax-liable prices x severance tax rate

- In cases where the severance tax amount is determined by the state authority per unit of extracted resource, the payable severance tax is determined as follows:

severance tax payable in the period = Taxable resource output x Fixed severance tax per unit of extracted resource

The tax determination is based on the Tax Authority's database, in compliance with the regulations on tax determination according to the laws on tax administration.