Circular No. 152 2015 TT-BTC of the Ministry of Finance guiding the severance tax

Severance tax payable in the period Severance tax payable in the period = Taxable extraction quantity of natural resources x Unit price x Tax rate In case an authority imposes a certai

THE MINISTRY OF FINANCE

Circular No 152/2015/TT-BTC dated October 02, 2015 of the Ministry of Finance guiding the severance tax

Pursuant to the Law on Severance tax No 45/2009/QH12 dated November 25, 2009;

Pursuant to the Law on Mineral No 60/2010/QH12 dated November 17, 2010; Pursuant to the Law on Tax administration No 78/2006/QH11 dated November

29, 2006; the law No 21/2012/QH13 dated November 20, 2012 on the

amendments to the law on tax administration

Pursuant to Resolution No 712/2013/UBTVQH13 dated December 16, 2013 of Standing Committee of the National Assembly on promulgation of severance tax schedule;

Pursuant to the Law No 71/2014/QH13 dated November 26, 2014 on

amendment to tax laws;

Pursuant to the Government's Decree No 83/2013/ND-CP dated July 22, 2013

on guidelines for some Article of the Law on Tax administration and the law on the amendments to the law on tax administration;

Pursuant to the Government's Decree No dated May 14, 2013 on guidelines for some Article of the Law on Severance tax;

Pursuant to the Government's Decree No 12/2015/ND-CP dated February 12,

2015 on guidelines for the Law on amendments to tax laws and tax decrees; Pursuant to the Government's Decree No 215/2013/ND-CP dated December

23, 2013 defining the functions, tasks, entitlements and organizational structure

of the Ministry of Finance;

In consideration of opinions of the Ministry of Natural Resources and

Environment in Dispatch No 2626/BTNMT-TC dated June 29, 2015;

At the request of the Director of the General Department of Taxation;

The Minister of Finance promulgates a Circular to provide guidance on

severance tax:

Chapter I

GENERAL PROVISIONS

Article 1 Scope of adjustment

This Circular provides guidance on taxable items; taxpayers, basis for tax

calculation, exemption and reduction of severance tax, implementation of the Government's Decree No 50/2010/ND-CP dated May 14, 2010 (hereinafter referred to as Decree No 50/2010/ND-CP

Other regulations of the Ministry of Finance shall apply to crude oil, natural gas, and coal gas

Article 2 Taxable items

The items subject to severance tax prescribed in this Circular are natural

resources within the land, islands, internal waters, territorial sea, contiguous zones, exclusive economic zone, and continental shelves under the sovereignty and jurisdiction of Socialist Republic of Vietnam, including:

1 Metallic minerals

2 Non-metallic minerals

3 Products of natural forests, including plants and other products of natural forests other than animals, anise, cinnamon, cardamom planted by taxpayers within the area of natural forests they are given to cultivate and protect

4 Natural aquatic organisms, including marine animals and plants

5 Natural water, including: surface water and groundwater other than natural water used for agriculture, forestry, aquaculture, salt production, and seawater used for cooling machines

Seawater used for cooling machines mentioned in this Clause must comply with regulations on environment, effectiveness of water recirculation, and technical requirements certified by competent authorities The act of causing pollution when using seawater or using seawater without satisfying environmental

standards shall be dealt with in accordance with the Government's Decree No 179/2013/ND-CP dated November 14, 2013, its instructional documents and/or amendments and/or replacements (if any)

6 Natural bird’s nests other than those collected from construction of houses to attract and raise natural swifts to collect their nest

Bird’s nests collected from construction of houses to attract and raise natural swifts to collect their nest must comply with Circular No

35/2013/TT-BNNPTNT dated July 22, 2013 of the Ministry of Agriculture and Rural

Development, its instructional documents and/or amendments and/or

replacements (if any)

7 The Ministry of Finance shall cooperate with relevant Ministries and

agencies in reporting other natural resources to the Government

Article 3 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

Chapter II

BASIS FOR CALCULATION OF SEVERANCE TAX

Article 4 Basis for tax calculation

1 The basis for calculation of severance tax is the taxable extraction quantity of natural resources, unit price, and tax rate

2 Severance tax payable in the period

Severance

tax payable

in the

period

=

Taxable extraction quantity of natural resources

x Unit price x Tax rate

In case an authority imposes a certain amount of severance tax on a unit of natural resources extracted, severance tax is calculated as follows:

Severance tax

payable in the

period

= Taxable extraction quantity x

Severance tax on

a unit of natural resources

extracted

Imposition of severance tax must be based on the database of tax authorities and conform to regulations on tax imposition

Article 5 Taxable extraction quantity

1 If the quantity or weight of natural resources extracted is determinable,

taxable extraction quantity is the actual quantity or weight of natural resources extracted in the tax period

If the natural resource-derived products obtained are of different classes,

quality, and commercial value, taxable extraction quantity is determined

according to the extraction quantity of each resource having the same class, quality, and commercial value, or their quantities will be converted to the

resource having the highest sales in order to determine the taxable extraction quantity of all natural resources in the period

Example 1: Enterprise A extract stones after blasting The stones extracted are

of various sizes They will be sorted by class and quality to determine taxable

extraction quantity of each type In case enterprise A sells part of the stones

and grind the remainders into smaller stones of different sizes, taxable

extraction quantity is calculated by converting the quantities of stones of

different sizes to the one having the highest sales Enterprise A shall declare and pay tax on the quantity of stones extracted according to the selling price.

2 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:

a) 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

Example 2: in case coal extracted from the mine contains impurities, earth, stones, and has to be screened and classified before being sold, the taxable

extraction quantity is the quantity of coal that has been screened and classified.

In case the wastes sold contains coal and other natural resources, severance tax shall be charged upon taxable natural resources in the wastes at actual selling price and corresponding tax rates.

Example 3: After extracted iron ore is screened, they collected 2 kg of gold nuggets and 100 tons of iron ore Severance tax shall be charged on the

quantity of gold nuggets and iron ore obtained Quantities of other natural resources serving the process of mineral extraction, such as water for

screening, will also be determined to calculate tax.

b) 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 4: Enterprise B extracts 1000 tons 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 tons.

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

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

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

3 If extracted natural resources are used for further manufacturing and

processing instead of being sold, taxable extraction quantity is calculated as follows:

If extracted natural resources are used for further manufacturing and processing instead of being sold, taxable extraction quantity is determined according to quantity of products manufactured in the period and amount of natural

resources in a unit of products Amount of natural resources in a unit shall be declared by the taxpayer according to the project approved by a competent authority and applied technologies To be specific:

- If the products sold are natural resource-derived products, the amount of natural resources in a unit of natural resource-derived products product shall apply

- If the products sold are industrial, the amount of natural resources in a unit of industrial products shall apply

Whether products sold after processing are industrial products or not shall be decided by relevant Ministries

Example 5: Enterprise A grinds part of the stones for manufacturing of cement for sale If the quantity of stones used for manufacturing of cement cannot be determined, it will be converted from the production of cement from extracted stones In this case, enterprise A shall determine its own norms and technical process.

Example 6: Enterprise C extracts 10 tons of apatite which consists of 2 tons of apatite 1, 3 tons of apatite 2, and 5 tons of apatite 3 Apatite 1 and apatite 2 are sold, and apatite 3 are used for processing into apatite 1 for sale Taxable

extraction quantity:

- 5 tons of apatite 1 and apatite 2;

- Extraction quantity of apatite 1 obtained from the processing of apatite 3 Example 7: Part of the polymetallic ore extracted by enterprise D is sold as is

in Vietnam The remainder is refined for export Taxable extraction quantity is calculated as follows:

- Taxable extraction quantity of each substance in the ore being sold in

Vietnam is calculated according to on the ratio of each substance in the

polymetallic ore approved by National Reserve Evaluation Council and the analyzed ore sample.

- Export quantity: If refined natural resources for export are identified as

industrial products by a competent authority, taxable extraction quantity of natural resources is determined according to the ratio of each substance in the polymetallic ore approved by National Reserve Evaluation Council, the

analyzed ore sample, and amount of natural resources in a unit of products declared by enterprise D according to its technology process.

4 With regard to natural water used for hydropower generation, taxable

extraction quantity of natural resources is the amount of electricity sold by the generating facility to the buyer under a electricity sale contract (or transmitted electricity if there is not electricity sale contract) according to a measurement system that meet Vietnam’s measurement standards This amount must be confirmed by the buyer and the seller

5 For natural mineral water, natural hot water, bottled/boxed purified natural water, natural water used for production/business, taxable extraction quantity of natural resources shall be expressed as cubic meter (m3) or liter (l) according to the measurement system that meet Vietnam’s quality measurement standards The taxpayer must install meters for monitoring extraction quantity of natural mineral water, natural hot water, and natural water extracted as the basis for tax calculation The installed meters must have certificates of inspection by

Vietnam’s quality measurement standard authorities A notification of installed meters must be enclosed with the next declaration of severance tax

If the meters cannot be installed because of objective reasons and thus taxable manufacture cannot be determined, a flat extraction quantity shall be imposed The tax authority shall cooperate with relevant agencies in determining flat extraction quantity to calculate severance tax in accordance with this Circular

6 Mechanism for cooperation between tax authorities, resources and

environment authorities in management of local resource extraction: According

to taxpayers’ declarations of actual extraction quantity in the year at each mine

in the statement submitted together with the annual declaration of severance tax

at the end of the fiscal year, within 05 working days, the tax authority shall send information about actual extraction quantity in the year at each mine to the resources and environment authority The resources and environment authority shall compare the extraction quantity at each mine declared by taxpayers with its data If they are not consistent or violations are suspected, the resources and

environment authority shall take actions to determine the actual extraction quantity

Within 07 working days from the receipt of information sent by the tax

authority, the resources and environment authority shall send information to the tax authority for processing as prescribed by the Law on Tax administration

7 If there are local enterprises that extract, export natural resource-derived products, the tax authority shall determine the actual quantity of exported

natural resource-derived products under the mechanism for information

exchange in Decision No QD/BTC dated March 30, 2015 of the Ministry of Finance to calculate the quantity of natural resource-derived products and

compare with the extraction quantity on the annual declarations of severance tax submitted by the enterprises If the taxable extraction quantity declared by the enterprise is inconsistent, the tax authority shall carry out inspection as prescribed by the Law on Tax administration to collect severance tax arrears and impose penalties as prescribed

Undeclared extraction quantity shall incur severance tax at the rate and taxable price applicable at the time of extraction; If the time of extraction cannot be determined, the tax rate and taxable price prescribed by law at the end of the year in which natural resources are extracted shall apply

Article 6 Taxable prices of natural resources

Taxable price of a natural resource is the selling price of a unit of natural

resource-derived products imposed by the extracting entity exclusive of VAT This price must not fall below the taxable price imposed by the People’s

Committee of the province Otherwise, the taxable price imposed by the

People’s Committee of the province shall apply

If the cost of transport of natural resource-derived products and selling price are written on separate invoices, the taxable price is the selling price exclusive of transport cost

1 With regard to natural resources of which unit prices of natural resource-derived products can be determined

Taxable price is the selling price of a unit of natural resource-derived products

of the same class and quality exclusive of VAT and extracted within the month; Selling price of a unit of natural resource equals (=) total revenue (exclusive of VAT) from the sale of the resource divided by (:) total quantity of the same resource sold in the month

If no revenue is earned though the natural resource still extracted in the month, taxable price is the weighted mean of taxable unit price of the latest month in which revenue is earned If the weighted mean of taxable unit price of the latest month in which revenue is earned is lower than the taxable price imposed by the People’s Committee of the province, the taxable price imposed by the

People’s Committee of the province shall apply

In case organizations being legal entities extract natural resources for a

corporation/conglomerate under contracts, or sell natural resources at prices decided by such corporation/conglomerate, the taxable prices shall be decided

by the corporation/conglomerate but not lower than the prices imposed by the People’s Committee of the province where natural resources are extracted

2 With regard to any natural resource of which unit price is not determined because it contains various substances

Taxable price is the selling price of each substance according to the total

revenue from selling the resource in the month (exclusive of VAT), ratio of each substance approved by a competent authority, and sale of resources on the sale invoices corresponding to each substance

Example 8: Enterprise E extracts 1,000 tons of ore, the ratio of each substance

in the analyzed ore sample is: copper: 60%; silver: 0.2%; tin: 0.5%.

Taxable extraction quantity of each substance:

- Copper: 1,000 tons x 60% = 600 tons.

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

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

In the month, enterprise E sells 600 tons of ore for VND 900 million Taxable price of each substance in the ore is determined as follows:

- Revenue from the sale of copper in the month: VND 900 million x 60% = VND 540 million

- Taxable price of copper: VND 540 million/360 tons

- When declaring and paying severance tax, the taxpayer shall pay tax on 600 tons of copper ore at the aforesaid taxable price and corresponding tax rate The taxable prices of silver and tin in 1,000 tons of ore extracted in the month are calculated similarly.

3 With regard to resources that have to be processed before being sold

(whether domestically or exported)

a) When selling natural resource-derived products, taxable price is the unit price

of natural resource-derived products (when sold domestically) according to the sale of natural resources on the sale invoices or customs value of exported natural resource-derived products (when exported) exclusive of export tax on the quantity of export natural resources according to export documents but not lower than the taxable price imposed by the People’s Committee of the

province

Customs values of exported natural resource-derived products shall comply with regulations on customs values of exported goods of the Law on Customs, its instructional documents, and amendments (if any)

b) When selling industrial products, taxable price equals (=) selling price of the industrial products minus (-) processing cost but not lower than the taxable price imposed by the People’s Committee of the province

Processing cost depends on the processing technologies of the enterprise

according to an approved project exclusive of the costs of extraction, screening, enrichment

c) If the taxable price determined by the taxpayer is lower than that imposed by the People’s Committee of the province, the latte shall apply If the product is not on the price list of the People’s Committee of the province, the tax authority shall cooperate with relevant agencies in inspecting and imposing tax according

to regulations of law on tax administration

d) When extracted natural resources are processed into natural resource-derived products, taxable prices shall be applied on a case-by-case basis as prescribed

by this Article

Example 9: During the refinement of ore, they obtain 0.05 tons of copper ore from 01 tons of cast iron The selling price of copper ore is VND

8,500,000/tons, thus taxable price of 0.05 tons of copper ore is VND 8,500,000.

If copper ore is processed into industrial products, taxable price equals (=) the selling price of industrial products minus (-) processing cost at the rate

imposed by the People’s Committee of the province to calculate severance tax

on the quantity of copper ore processed.

4 Taxable prices in some cases:

a) Taxable price of natural water used for hydroelectricity generation is the average selling price of electricity

Average selling price of electricity for hydroelectricity producers to calculate severance tax shall be announced by the Ministry of Finance