What is the formula for determining the severance tax payable during the tax period in Vietnam?

What is the method for determining the taxable extraction quantity for polymetallic ore when the actual quantity cannot be determined in Vietnam?

Under Point b, Clause 2, Article 5 of Circular 152/2015/TT-BTC, the method for determining the taxable extraction quantity for polymetallic ore when the actual quantity cannot be determined is guided as follows:

- If the quantity or weight of natural resources is not determinable because they contain various substances or impurities, and natural resources are sold after screening and classification, taxable extraction quantity is calculated as follows:

+ If the substances can be separated, the taxable extraction quantity is determined according to the quantity, weight of the natural resources or each substance obtained after screening and classification.

In case earth, stones, wastes, dregs collected after screening are sold, severance tax on the quantity of natural resources in the wastes, dregs sold shall be paid at corresponding severance tax rates.

+ If the ore extracted contain various substances (polymetallic ore) and the quantity of each substance cannot be determined after screening and classification, the taxable extraction quantity of each substance depends on the actual quantity of extracted ore and ratio of each substance in the ore. The ratio of each substance in the ore is determined according to the ore sample inspected and approved by competent authorities. In case the ratio of each substance in the ore is different than the ore sample, the taxable extraction quantity will depend on the analysis result given by a competent authority.

Example: Enterprise B extracts 1000 tonnes of ore in the month which contains various substances. According to the mining license and substance ratio in the ore sample approved by National Reserve Evaluation Council: copper ore: 60%; silver ore: 0.2%; tin ore: 0.5%.

Taxable quantity of each substance:

- Copper ore: 1,000 tones x 60% = 600 tonnes.

- Silver ore: 1,000 tones x 0.2% = 2 tonnes.

- Tin ore: 1,000 tones x 0.5% = 5 tonnes.

Severance tax shall be calculated according to the unit price and quantity of each substance in the ore.

What is the formula for determining the severance tax payable during the tax period in Vietnam? (Image from the Internet)

What is the formula for determining the severance tax payable during the tax period in Vietnam?

Under the provisions of Article 4 of Circular 152/2015/TT-BTC, the formula for determining the severance tax payable during the tax  period is as follows:

- The basis for calculating the severance tax is the the taxable extraction quantity, taxable price, and severance tax rate.

- Determining the severance tax payable during the tax period

If a joint venture is established among resource-extracting enterprises in Vietnam, which entity is the severance taxpayer?

Under Article 3 of the Severance Tax Law 2009 (amended by Clause 2 Article 67 of the Petroleum Law 2022), the provisions regarding the taxpayer are as follows:

Severance tax payers

1. Payers of severance tax are resource-extracting organizations and individuals subject to severance tax, 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.

Furthermore, taxpayers are detailed in Article 3 of Circular 152/2015/TT-BTC as follows:

Taxpayers

Payers of severance tax (hereinafter referred to as taxpayers) are organizations and individuals (hereinafter referred to as entities) that extract natural resources subject to severance tax mentioned in Article 2 of this Circular. Taxpayers in some particular cases:

1. For mineral extraction, taxpayers are the organizations and business households granted the License for mineral extraction by competent authorities.

In case an organization is granted the license for mineral extraction and permitted to cooperate with other organizations and individuals extracting natural resources, and there are separate regulations on taxpayers, the taxpayers shall be identified according to such regulations.

In case an organization is granted the license for mineral extraction and then delegates its affiliates to carry out mineral extraction, each affiliate is a taxpayer.

2. If a joint venture is established among resource-extracting enterprises, the joint venture is the taxpayer;

In case a Vietnamese party and a foreign party participate in the same contract for cooperation in resource extraction, the obligation to pay tax of each party must be specified in the contract. Otherwise, all parties must declare and pay severance tax or appoint a representative to pay severance tax.

3. In case an entity is awarded a construction contract and extracts a certain amount of natural resources that is permitted by the authorities, or the extraction/use of such natural resources is not contrary to regulations of law on resource extraction, such entity must declare and pay severance tax to the local tax authority in the area where natural resources are extracted.

4. Every entity using water from irrigation works for power generation is taxpayer, regardless of sources of capital for the irrigation works.

In case the organization managing the irrigation work supplies water for other entities to produce clean water or water for other purposes (other than power generation), the organization managing the irrigation work supplies water is the taxpayer.

5. In case natural resources that are banned from extraction or illegally extracted are confiscated, subject to severance tax, and permitted to be sold, the organization assigned to sell such natural resources shall pay severance tax whenever it is incurred to its supervisory tax authority before retaining the cost of arrest, auction, reward.

Thus, according to the above regulations, if a joint venture is established among resource-extracting enterprises, the joint venture is the taxpayer.