Is natural water used for salt production subject to severance tax in Vietnam?

Is natural water used for salt production subject to severance tax in Vietnam?

The severance tax-liable objects are prescribed in Article 2 of the law on severance tax 2009 (amended by Clause 1, Article 4 of the Law on Amendments to Tax Laws 2014) as follows:

- Metallic minerals.

- Non-metallic minerals.

- Crude oil.

- Natural gas, coal gas.

- Natural forest products, other than animals.

- Natural aquatic products, including marine animals and plants.

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

- Natural swallow's nests.

- Other resources prescribed by the National Assembly Standing Committee.

Natural water is one of the subjects to severance tax.

However, according to Article 7 of the law on severance tax 2009, tax rates are regulated as follows:

- The frame severance tax tariff is specified below:

- Specific severance tax rates for crude oil. natural gas and coal gas shall be determined as partially progressive based on their daily exploited average output.

- Under Clauses 1 and 2 of this Article, the National Assembly Standing Committee shall stipulate specific severance tax rates for each category of natural resource in each period on the following principles:

+ Ensuring conformity with the list of groups and categories of natural resource and within the severance tax rate bracket prescribed by the National Assembly:

+ Contributing to the state management of natural resources; protection, exploitation and rational, economical and effective use of natural resources:

+ Contributing to assuring state budget revenues and market stabilization.

According to the above frame severance tax tariff, among the categories of natural water extraction, the tax rate for natural water used for salt production is not mentioned.

Thus, the natural water for salt production will not be subject to severance tax.

Is natural water used for salt production in Vietnam subject to severance tax? (Image from the Internet)

What are the cases of exemption from severance tax on natural water in Vietnam?

Under Article 9 of the law on severance tax 2009 (guided in Chapter 4 of Circular 152/2015/TT-BTC):

Tax exemption

The cases of exemption from severance tax are specified in Article 9 of the Law on severance tax and Article 6 of Decree No. 50/2010/ND-CP, including:

1. Entities extracting natural marine organisms.

2. Entities extracting branches, firewood, bamboo, rattan, etc. serving everyday life.

3. Entities extracting natural water for hydroelectricity generation serving everyday life of households and individuals.

4. Natural water extracted by households and individuals serving their everyday life.

5. Land areas given/leased out to organizations and individuals and used on the spot; earth used for leveling, construction of security, military works, dykes.

Earth extracted and used on the spot eligible for tax exemption include sand, rock, gravel in the earth without specific substances and is used as is for leveling or construction. If earth is transport elsewhere for use or for sale, severance tax must be paid as prescribed.

6. The Ministry of Finance shall cooperate with relevant Ministries and agencies in proposing other cases of exemption from severance tax to the government, which will be considered and decided by Standing Committee of the National Assembly.

Thus, the severance tax on natural water in Vietnam will be exempt in the case of serving the everyday life of households and individuals.

What is the application form for exemption from severance tax on natural water in Vietnam?

Pursuant to Clause 2 Article 51 of Circular 80/2021/TT-BTC:

​Procedures, documentation and the cases in which taxpayers determine tax eligible for exemption or reduction themselves

...

2. Procedures and documentation for tax exemption and tax reduction:

...

b) Regarding resource royalty mentioned in Point b Clause 1 of this Article:

b.1) Organizations and individuals are not required to prepare monthly resource royalty returns and finalize resource royalty annually.

b.2) Procedures for exemption of resource royalty on extraction of branches, tops, firewood, bamboo, rattan, cork, apricot for domestic use by individuals:

The application form No. 06/MGTH in Appendix I hereof which must be certified by the People’s Committee of the commune where the individual resides. This document shall be sent 01 time before extraction to the sub-department of taxation responsible for the area in which the individual resides.

b.3) Procedures for exemption of resource royalty on natural water used for hydropower production for domestic use by households and individuals:

The application form No. 06/MGTH in Appendix I hereof enclosed with the description of the equipment for hydropower production serving domestic use which must be certified by the People’s Committee of the commune where the individual resides. This document shall be sent 01 time before extraction to the supervisory tax authority of the area where water is used.

...

Thus, the application form for exemption from severance tax on natural water in Vietnam is specified according to Form No. 06/MGTH (Download) in Appendix I issued together with Circular 80/2021/TT-BTC.