What is severance tax? Which mining enterprises are required to pay severance tax in Vietnam?

What is severance tax in Vietnam?

Currently, the law does not provide a specific definition of severance tax. However, severance tax can be understood as a type of tax that individuals and organizations must pay to the state when exploiting natural resources.

Alternatively, severance tax can be understood as the amount of money that organizations and individuals must pay to the State when engaging in the exploitation of natural resources. severance tax is a type of tax aimed at regulating the income of organizations derived from the exploitation and use of the country's resources.

According to Article 2 of the Law on severance tax 2009 (amended by Clause 1, Article 4 of the Law on Amendments to Various Tax Laws 2014), the severance tax-liable objects include

- 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.

What is severance tax? Which mining enterprises are required to pay severance tax in Vietnam? (Image from Internet)

Which mining enterprises are required to pay severance tax in Vietnam?

According to Article 3 of the Law on severance tax 2009 (amended by Clause 2, Article 67 of the 2022 Petroleum Law), the taxpayers are stipulated as follows:

Taxpayers

1. Payers of severance tax are resource-extracting organizations and individuals subject to severance taxation, except for exploitation of oil and gas fields, groups of oil fields and blocks according to the regulations of law on petroleum.

2. In some cases, severance tax payers shall be defined as follows:

a) For a mining enterprise established on the basis of joint venture, the joint-venture enterprise shall pay severance tax:

b) For Vietnamese and foreign parties to a business cooperation contract to exploit natural resources, the parties' liability to pay severance tax must be specified in such contract:

c) In case an exploiter conducts small-scale exploitation of natural resources and sells them to a principal purchaser that has a written commitment or an approval to declare and pay severance tax on the exploiter's behalf, the principal purchaser shall pay severance tax.

Thus, payers of severance tax are resource-extracting organizations and individuals subject to severance taxation, except for exploitation of oil and gas fields, groups of oil fields and blocks according to the regulations of law on petroleum.

What are the regulations on natural resource output used for severance tax calculation in Vietnam?

Under Article 5 of the Law on severance tax 2009, the calculation of severance tax is stipulated as follows:

Natural resource output used for severance tax calculation

- For an exploited natural resource the quantity, weight or volume of which can be determined, the natural resource output used for royally calculation is the quantity, weight or volume of natural resource actually exploited in a severance tax period.

- For an exploited natural resource the quantity, weight or volume of which cannot be determined because this natural resource contains different substances and impurities, the natural resource output used for severance tax calculation shall be determined based on the quantity, weight or volume of each substance obtained from sorting and classification.

- For natural resources which are not sold but used for turning out other products, if their actually exploited quantity, weight or volume cannot be directly determined, the natural resource output used for severance tax calculation shall be determined based on the output of products turned out in a severance tax period and the use norm of natural resource per unit of product.

- For natural water used for hydropower generation, the natural resource output used for severance tax calculation is the output of electricity sold by a hydropower generation establishment to an electricity buyer under an electricity purchase and sale contract or the output of delivered electricity, in case such contract is unavailable, which is determined according to the metering system up to Vietnam's measurement and quality standards, certified by the purchaser and seller or the deliverer and recipient.

- For natural mineral water, natural thermal water and natural water used for industrial purposes, the natural resource output used for severance tax calculation shall be determined in cubic meter On1) or liter (I) according to the metering system up to Vietnam's measurement and quality standards.

- For natural resources exploited on a manual, scattered or mobile, irregular basis, if the planned output of exploited natural resources in a year is valued at under VNI) 200 million, a fixed output of exploited natural resources may be determined on a regular or seasonal basis for severance tax calculation.

Tax authorities shall coordinate with local concerned agencies in determining the fixed output of exploited natural resources for severance tax calculation.