Vietnam: What is a severance tax? What are the severance tax-liable objects? What is the basis for determining the severance tax?
What is a severance tax in Vietnam?
Currently, there is no legal document regulating the severance tax. Normally, people often understand that severance tax is an indirect tax that individuals and organizations must pay to the state when exploiting natural resources.
What are the severance tax-liable objects in Vietnam?
As for regulations on severance tax-liable objects, Article 2 of the Law on Severance tax 2009 specifically provides as follows:
Severance tax-liable objects
1. Metallic minerals.
2. Non-metallic minerals.
3. Crude oil.
4. Natural gas, coal gas.
5. Natural forest products, other than animals.
6. Natural aquatic products, including marine animals and plants.
7. Natural water, including surface water and groundwater.
8. Natural swallow's nests.
9. Other resources prescribed by the National Assembly Standing Committee.
Accordingly, 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 groundwater.
+ Natural swallow's nests.
+ Other resources prescribed by the National Assembly Standing Committee.
Vietnam: What is a severance tax? What are the severance tax-liable objects? What is the basis for determining the severance tax? (Image from the Internet)
What are the regulations on severance tax payers in Vietnam?
As for regulations on severance tax payers, Article 3 of the Law on Severance tax 2009 specifically provides as follows:
Severance tax payers
1. Severance tax payers include organizations and individuals that exploit severance tax-liable natural resources.
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.
What is the basis for determining the severance tax rate in Vietnam?
Natural resource output used for severance tax calculation
Article 5 of the Law on Severance tax 2009 provides for specific natural resource output used for severance tax calculation as follows:
- 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 offices shall coordinate with local concerned agencies in determining the fixed output of exploited natural resources for severance tax calculation.
Severance tax-liable prices
Article 6 of the Law on Severance tax 2009 stipulates the severance tax-liable prices as follows:
- The severance tax-liable price is the exploiter's selling price of a unit of natural resource product, exclusive of value-added tax.
- In case the natural resource's selling price cannot be determined yet. the severance tax-liable price shall be determined based on either of the following grounds:
+ The regional market's actual selling price of a unit of natural resource product of the same grade, which must not be lower than the royally-liable price set by the People's Committee of a province or centrally run city (below collectively referred to as provincial-level People's Committee);
+ In case the exploited natural resource contains different substances, the severance tax-liable price shall be determined based on the unit selling price and content of each substance, which must not be lower than the severance tax-liable price set by the provincial-level People's Committee.
- In some cases, the severance tax-liable price shall be determined as follows:
+ For natural water used for hydropower generation, it is the average selling price of commodity electricity:
+ For timber, it is the selling price at the place of delivery; if the selling price at the place of delivery cannot be determined, the severance tax-liable price shall be determined based on the severance tax-liable price set by the provincial-level People’s Committee;
+ For exploited natural resources which are not domestically sold but exported, it is the export price;
+ For crude oil. Natural gas and coal gas. It is the selling price at the place of delivery. The place of delivery is a place agreed upon in the oil and gas contract under which the ownership over crude oil. Natural gas and coal gas is transferred to the contractual parties.
- Provincial-level People’s Committees shall set specific severance tax-liable prices of natural resources for which unit selling prices of natural resource products cannot be determined, except crude oil. Natural gas. Coal gas. And natural water used for hydropower generation.
Severance tax rates
The specific tax rates for crude oil, natural gas, and coal gas are determined incrementally according to the average daily output of crude oil, natural gas and coal gas.
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