Is the severance tax a direct or indirect tax in Vietnam? What are subjects to the severance tax in Vietnam?

Is the severance tax a direct or indirect tax in Vietnam?

Currently, the law does not specifically define the concepts of indirect tax, direct tax, or severance tax, etc. However, these concepts can be understood through the following definitions:

(1) Indirect Tax:

Indirect tax is a type of tax where the taxpayer is not the person bearing the tax. In other words, the taxpayer acts as an intermediary collecting the tax for the person bearing the tax. Indirect tax is often levied on goods and services to consumers. Indirect taxes include types such as Value-Added Tax, Special Consumption Tax, etc.

(2) Direct Tax:

Direct tax is a type of tax where the taxpayer is also the person bearing the tax. In reality, direct tax is often levied on the income, assets, or profits of individuals or organizations. Direct taxes include types such as Personal Income Tax, Corporate Income Tax, etc.

(3) severance tax

severance tax is the amount that organizations and individuals must pay to the State when engaging in activities of exploiting natural resources. severance tax aims to regulate the income of organizations from the activities of exploiting and using the nation's resources.

Through these definitions, the severance tax is classified as an indirect tax.

The taxable subject is the value of the natural resource goods being exploited. The taxpayers of the severance tax are organizations and individuals involved in the exploitation of natural resources. The persons bearing the severance tax are the consumers of the natural resources.

Note: Information is for reference only!

Is the severance tax a direct or indirect tax in Vietnam? (Image from the Internet)

What are subjects to the severance tax in Vietnam?

According to Article 3 of the Law on severance tax 2009 (amended by Clause 1, Article 4 of the Law on Amendments to Tax Laws 2014), the subjects to the severance tax include:

(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 products, including marine animals and plants.

(7) Natural water, including surface and underground water, excluding natural water used for agriculture, forestry, aquaculture, salt-making.

(8) Natural bird's nests.

(9) Other resources as regulated by the Standing Committee of the National Assembly.

Who must pay the severance tax?

Based on Article 3 of the Law on severance tax 2009 (amended by Clause 2, Article 67 of the Petroleum Law 2022), the taxpayers of the severance tax are organizations and individuals exploiting resources subject to the severance tax, except for the case of exploiting resources from the mines, clusters of mines, oil blocks, or petroleum recovery according to the law on petroleum.

In some specific cases, severance taxpayers are determined as follows:

- A resource-exploiting enterprise established on the basis of a joint venture is the taxpayer if it is a joint venture.

- For Vietnamese and foreign parties participating in a business cooperation contract for resource exploitation, the tax responsibility of the parties must be clearly defined in the business cooperation contract.

- Organizations and individuals exploiting small-scale resources sold to wholesale organizations or individuals, where such wholesalers undertake in writing to declare and pay tax on behalf of the small-scale resource exploiters, shall be considered as the taxpayers.

What are regulations on resource output for calculating severance tax in Vietnam?

According to Article 5 of the Law on severance tax 2009, the resource output for calculating the severance tax is regulated as follows:

(1) For resources with determined quantity, weight, or volume, the resource output for tax calculation is the actual quantity, weight, or volume of resources exploited during the tax period.

(2) For resources not yet determined by quantity, weight, or volume due to various mixed contents, the resource output for tax calculation is determined based on the quantity, weight, or volume of each substance obtained after screening and classification.

(3) For resources not sold but used for producing other products, if the quantity, weight, or volume of resources cannot be directly determined, the resource output for tax calculation is based on the product output produced during the tax period and the resource usage norms per product unit.

(4) For natural water used for hydropower production, the resource output for tax calculation is the electricity output sold by the hydropower production facility according to the electricity purchase contract, or the transferred electricity output if there is no contract, determined by a measurement system meeting Vietnam's quality measurement standards, confirmed by the selling or transferring parties.

(5) For natural mineral water, natural hot water, and natural water used for industrial purposes, the resource output for tax calculation is determined in cubic meters (m³) or liters (l) according to a measurement system complying with Vietnam's quality measurement standards.

(6) For resources exploited manually, dispersedly, or on a mobile and irregular basis, where the annual estimated value is less than 200,000,000 VND, the resource output for tax calculation is fixed based on seasons or periodical terms.

Tax authorities cooperate with relevant local agencies to determine the fixed resource output for tax calculation.