Will the severance tax on natural water used for hydropower generation of households in Vietnam be exempted?

Which types of natural water are subject to severance tax in Vietnam?

Firstly, according to Article 2 of the Severance Tax Law 2009 (amended by Clause 1, Article 4 of the Law on Amendments to Tax Laws 2014), taxable objects are specified 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 objects subject to severance tax.

Additionally, according to Article 7 of the severance tax Law 2009, the severance tax rates are stipulated 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 Article 7 of the severance tax Law 2009, 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.

Based on the above frame severance tax tariff, the tax rate for the use of natural water for salt production is not mentioned.

Therefore, natural water subject to severance tax includes:

- Natural mineral water, natural thermal water and refined natural water, bottled or tinned

- Natural water used for hydropower generation

- Natural water used for production and business activities, except water mentioned at Points 1 and 2 of this group

Will the severance tax on natural water used for hydropower generation of households in Vietnam be exempted? (Image from the Internet)

Will the severance tax on natural water used for hydropower generation of households in Vietnam be exempted?

Under Article 9 of the severance tax Law 2009 as amended by Clause 2, Article 4 of the Law Amending Various Tax Laws 2014:

Article 9. Severance tax exemption and reduction

1. Severance tax payers that encounter natural disasters, fires or unexpected accidents, causing losses of natural resources for which severance tax have been declared and paid, may be considered for exemption from or reduction of payable severance tax for the lost volumes of natural resources. The paid severance tax amount will be refunded or cleared against the subsequent period's payable severance tax amount.

2. Severance tax are exempted for natural aquatic resources.

3. Severance tax are exempted for tree branches and tops, firewood and bamboo of all kinds which individuals are permitted to exploit for their daily-life needs.

4. Severance tax are exempted for natural water used for hydropower generation by households and individuals for their daily-life needs.

5. Tax on natural water used by households and individuals for their everyday life is exempt.

6. Severance tax are exempted for soil exploited and used right on allocated and leased land areas; and soil exploited for ground leveling and construction of security and military works and dikes.

7. Others cases eligible for severance tax exemption or reduction as prescribed by the National Assembly Standing Committee.

Therefore, the severance tax on natural water used for hydropower generation of households in Vietnam will be exempted.

What are the cases in which taxpayers determine tax on natural water eligible for exemption in Vietnam?

Under point b, Clause 1, Article 51 of Circular 80/2021/TT-BTC:

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

1. Taxpayers may determine tax eligible for exemption or reduction themselves in the following cases:

a) CIT: the taxpayer is eligible for incentives including preferential tax rates, duration of tax exemption or reduction, and tax-free income according to CIT laws;

b) severance tax: Natural fishing is exempted from severance tax; extraction of branches, tops, firewood, bamboo, rattan, cork, apricot for domestic use is exempted from severance tax; extraction of natural water for hydropower production by households and individuals for domestic use; use of allocated or leased land; extraction of dirt for leveling, construction of military works, dikes;

c) Licensing fees: Cases of licensing fee exemption are prescribed in Article 3 of the Government’s Decree No. 139/2016/ND-CP dated 04/10/2016, Clause 1 Article 1 of the Government’s Decree No. 22/2020/ND-CP dated 24/02/2020 on amendments to Decree No. 139/2016/ND-CP.

d) PIT: Any individual earning income from salary or remuneration and has the tax payable after annual finalization of 50.000 VND or lower;

dd) In other cases, the taxpayer shall determine the amount of tax eligible for exemption or reduction in the tax declaration dossier or application for tax exemption or tax reduction and send it to the supervisory tax authority or the state budget revenue-managing tax authority, except the cases specified in Clause 1 Article 52 of this Circular.

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Therefore, severance tax: severance tax: Natural fishing is exempted from severance tax; extraction of branches, tops, firewood, bamboo, rattan, cork, and apricot for domestic use is exempted from severance tax; extraction of natural water for hydropower production by households and individuals for domestic use; use of allocated or leased land; extraction of dirt for leveling, construction of military works, dikes.