Is coal gas subject to severance tax in Vietnam? What is the severance tax rate for coal gas?

Is coal gas subject to severance tax in Vietnam?

Based on Clause 4, Article 2 of the 2009 Law on Severance tax, amended by Clause 1, Article 4 of the 2014 Law on Amendments to Laws on Taxes, the taxable objects are specified as follows:

Taxable Objects

1. Metallic minerals.

2. Non-metallic minerals.

3. Crude oil.

4. Natural gas, coal gas.

5. Products of natural forests, excluding animals.

6. Natural aquatic resources, including marine animals and plants.

7. Natural water, including surface and underground water, except natural water used for agriculture, forestry, fisheries, and salt production.

8. Natural bird nests.

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

According to the above regulations, coal gas is subject to severance tax.

Is coal gas subject to severance tax? What is the severance tax rate for coal gas in Vietnam? (Image from the Internet)

What is the severance tax rate for coal gas in Vietnam?

According to the Schedule of severance tax Rates issued with Resolution 1084/2015/UBTVQH13, the severance tax rates are specified as follows:

Accordingly, the severance tax rate for coal gas is determined as follows:

(1) In case of extraction up to 5 million m3/day:

- For encouraged investment projects: severance tax rate is 1%.

- For other projects: severance tax rate is 2%.

(2) In case of extraction over 5 million to 10 million m3/day:

- For encouraged investment projects: severance tax rate is 3%.

- For other projects: severance tax rate is 5%.

(3) In case of extraction over 10 million m3/day:

- For encouraged investment projects: severance tax rate is 6%.

- For other projects: severance tax rate is 10%.

Vietnam: How is the severance tax value for coal gas determined?

According to Clause 3, Article 6 of the 2009 Law on Severance tax, the regulations are as follows:

Taxable Value

1. The taxable value for severance tax is the sale price per unit of resource product by the exploiting organization or individual, excluding value-added tax.

2. In the case where the resource price is undefined, the taxable value is determined based on one of the following:

a) Actual market sale price in the area of similar type of resource product but not lower than the taxable value set by the Provincial People’s Committee;

b) In the case where the extracted resource contains various different substances, the taxable value is determined by the sale price per unit of each substance and the content of each substance in the exploited resource but not lower than the taxable value set by the Provincial People’s Committee.

3. The taxable value for resources in some specific cases is as follows:

a) For natural water used in hydroelectric power production, it is the average commercial electricity sale price;

b) For wood, it is the sale price at the handover site; if the sale price at the handover site is not yet determined, the taxable value is determined based on the taxable value set by the Provincial People’s Committee;

c) For resources extracted not consumed domestically but exported, it is the export price;

d) For crude oil, natural gas, and coal gas, it is the sale price at the delivery point. The delivery point is the point agreed in the oil and gas contract where the crude oil, natural gas, and coal gas are transferred in ownership to the participants in the oil and gas contract.

4. The Provincial People’s Committee specifically determines the taxable value for resources that have not had the unit sale price for the resource product defined, except for crude oil, natural gas, coal gas, and natural water used in hydroelectric power production.

The government of Vietnam provides detailed regulations for this Article.

Thus, the severance tax value for coal gas is the sale price at the delivery point. The delivery point is the point agreed in the oil and gas contract where natural gas and coal gas ownership transfer to participants in the oil and gas contract.

In What Cases are Enterprises Exempted or Reduced from severance tax on Coal Gas?

According to Article 9 of the 2009 Law on Severance tax, amended by Clause 2, Article 4 of the 2014 Law on Amendments to Laws on Taxes, the cases in which enterprises are exempted or reduced from severance tax on coal gas are specified as follows:

Exemption, Reduction of Tax

1. Taxpayers who encounter natural disasters, fires, or unexpected accidents causing losses to the resources already declared and taxed may be considered for tax exemption or reduction for the lost resource amount; if the tax has been paid, it will be refunded or deducted from the subsequent period's severance tax payable.

2. Tax exemption for natural aquatic resources.

3. Tax exemption for branches, tops, firewood, bamboo, reeds, palm leaves, and cane exploited by individuals for personal use.

4. Tax exemption for natural water used for hydroelectric power production by households or individuals self-producing for personal use.

...

Accordingly, enterprises are exempted or reduced from severance tax on coal gas when they encounter natural disasters, fires, or unexpected accidents causing losses to the resources already declared and taxed; they are considered for tax exemption or reduction for the lost resource amount. If the tax has already been paid, the amount will be refunded or deducted from the next period's severance tax payable.