What are amendments to the severance tax framework in tax reform strategy in Vietnam?

Vietnam: What is severance tax?

According to the Law on severance tax 2009 and the respective guiding documents, there are no specific provisions defining severance tax. However, severance tax can be understood as an indirect tax which individuals and organizations must pay to the state when exploiting natural resources.

According to Article 2 of the Law on severance tax 2009 (amended by Clause 1, Article 4 of the Law Amending the Laws on Taxation 2014), the following entities are subject to tax:

- Metallic minerals.

- Non-metallic minerals.

- Crude oil.

- Natural gas, coal gas.

- Products of natural forests, except animals.

- Natural seafood, including marine animals and plants.

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

- Natural swallow nests.

- Other resources as prescribed by the Standing Committee of the National Assembly.

What are amendments to the severance tax framework in tax reform strategy in Vietnam? (Image from the Internet)

What are amendments to the severance tax framework in tax reform strategy in Vietnam?

According to Point e, Clause 1, Section 3, Article 1 of Decision 508/QD-TTg 2022:

III.IMPLEMENTATION SOLUTIONS

1. Regarding tax policy reform

...

e) For severance tax: researching amendments to regulations, tax calculation price for resources, taxable resource output; amending the tax framework, tax rates, and tax exemption and reduction towards transparency and clarity, ensuring that severance tax policy continues to be an effective tool in managing and protecting resources, promoting efficient and economical use of resources, encouraging deep processing and increasing the value of resources;

g) For taxes related to assets (including agricultural land use tax and non-agricultural land use tax): continuing to exempt agricultural land use tax until the end of 2025 to contribute to implementing the policy and viewpoint of the Communist Party and the State on agricultural and rural development. Summarizing and comprehensively evaluating the implementation of non-agricultural land use tax policy. Based on that, researching to complete the policy towards increasing the regulatory level for land and supplementing tax collection for houses to encourage efficient use of houses and land, contributing to limiting speculation in houses and land, ensuring reasonable and stable revenue sources for the state budget, suitable to Vietnam’s socio-economic conditions and international practices. At the same time, building a tax policy in a simple, easy-to-understand manner, clearly identifying taxable assets, payable tax amounts, synchronized with land law and related legal provisions;

...

Therefore, the solution to implementing the severance tax policy reform strategy under the tax system reform strategy until 2030 is as follows:

- Researching amendments to regulations, tax calculation price for resources, and taxable resource output;

- Amending the tax framework, tax rates, and tax exemption and reduction towards transparency and clarity, ensuring that severance tax policy continues to be an effective tool in managing and protecting resources, promoting efficient and economical use of resources, encouraging deep processing and increasing the value of resources.

Thus, the implementation of the severance tax policy reform strategy under the tax system reform strategy until 2030 will amend the tax framework towards transparency and clarity, ensuring that the severance tax policy continues to be an effective tool in managing and protecting resources, promoting efficient and economical use of resources, encouraging deep processing and increasing the value of resources.

How to calculate severance tax based on resource output?

According to Article 5 of the Law on severance tax 2009, the calculation of severance tax based on resource output is as follows:

- For resources that are extracted with determined quantity, weight, or volume, the taxable resource output is the actual quantity, weight, or volume of resources extracted during the tax calculation period.

- For resources that are extracted but cannot determine the actual quantity, weight, or volume due to containing various substances or impurities, the taxable resource output is determined by the quantity, weight, or volume of each substance obtained after screening and classification.

- For resources that are extracted but not sold and used for producing other products, if the actual quantity, weight, or volume cannot be directly determined, the taxable resource output is determined based on the output of products produced during the tax calculation period and the resource usage norm per product unit.

- For natural water used for hydroelectric production, the taxable resource output is the electricity output of the hydroelectric facility sold to the buyer under the electricity purchase contract or the electricity output delivered in case there is no electricity purchase contract, determined according to the measurement system that meets Vietnam's quality measurement standards, confirmed by the buyer, seller, or deliverer, and receiver.

- For natural mineral water, natural hot water, natural water used for industrial purposes, the taxable resource output is determined in cubic meters (m³) or liters (l) according to the measurement system that meets Vietnam's quality measurement standards.

- For resources extracted manually, dispersedly or extracted intermittently, with the expected annual extraction output valued below 200,000,000 VND, resource output for tax calculation is done by assigning quotas on a seasonal or periodic basis. The tax authority cooperates with relevant local authorities to determine the assigned extraction output for tax calculation.