VietnameseCircular No. 153/1998/TT-BTC dated November 26, 1998 of the Ministry of Finance providing guidelines for implementation of Decree 68/1998/ND-CP of the Government dated 3 September 1998 making detailed provisions for implementation of the Ordinance on royalties (as amended)
ATTRIBUTE
Circular No. 153/1998/TT-BTC dated November 26, 1998 of the Ministry of Finance providing guidelines for implementation of Decree 68/1998/ND-CP of the Government dated 3 September 1998 making detailed provisions for implementation of the Ordinance on royalties (as amended)
| Issuing body: | Ministry of Finance | Effective date: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Official number: | 153/1998/TT-BTC | Signer: | Pham Van Trong |
| Type: | Circular | Expiry date: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Issuing date: | 26/11/1998 | Effect status: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Fields: | Policy , Tax - Fee - Charge |
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THE MINISTRY OF FINANCE --------- | SOCIALIST REPUBLIC OF VIET NAM Independence Freedom Happiness --------- |
No. 153/1998/TT-BTC | Hanoi, November 26, 1998 |
CIRCULAR
PROVIDING GUIDELINES FOR IMPLEMENTATION OF DECREE 68/1998/ND-CP OF THE GOVERNMENT DATED 3 SEPTEMBER 1998 MAKING DETAILED PROVISIONS FOR IMPLEMENTATION OF THE ORDINANCE ON ROYALTIES (AS AMENDED)
In order to implement the Ordinance on Royalties (as amended) promulgated by the Standing Committee of the National Assembly on 16 April 1998 and Decree 68/1998/ND-CP of the Government dated 3 September 1998 making detailed provisions for implementation of the Ordinance on Royalties (as amended), the Ministry of Finance hereby provides guidelines for the implementation thereof as follows:
I. TAXPAYERS AND TAXABLE RESOURCES
1. All organizations and individuals in all economic sectors, comprising State owned enterprises, shareholding companies, limited liability companies, co- operatives, private enterprises, enterprises with foreign owned capital or foreign parties to business co-operation contracts in accordance with the Law on Foreign Investment in Vietnam, production or business households, and other organizations and individuals, irrespective of their professional field or scope or form of operation, engaging in the exploitation of natural resources in compliance with the laws of Vietnam shall be liable to register, declare and pay royalties in accordance with the provisions in article 1 of the Ordinance on Royalties (as amended), except in the cases provided for in clause 5 of Section I of this Circular.
2. Taxable natural resources existing in the land, islands, internal waters, sea territory, exclusive economic zones and continental shelf under the sovereignty of the Socialist Republic of Vietnam shall be subject to royalties, including:
(a) Metallic mineral resources, including ferrous metallic minerals (iron, manganese, titanium, and so forth) and non-ferrous metallic minerals (gold, rare earth, platinum, tin, wolfram, copper, lead, zinc, aluminium, and so forth);
(b) Non-metallic mineral resources, including soil for production of bricks; exploited soil used for the purpose of levelling and construction and for other purposes; stone, sand, gravel; coal; gemstones; mineral water and natural thermal water as provided for in the Mineral Law;
(c) Oil, meaning crude oil as provided for in clause 2 of article 3 of the Law on Petroleum;
(d) Gas, meaning natural gas as provided for in clause 3 of article 3 of the Law on Petroleum;
(dd) Natural forest products, including timber (including tree branches, tree- tops, firewood, tree bases, roots, and so forth), bamboo of all kinds, pharmaceutical materials of all kinds, and so forth, and all kinds of flora and fauna of natural fo rest products permitted to be exploited;
(e) Natural marine products, meaning flora and fauna of all kinds in natural seas, rivers, canals, lakes, ponds, and so forth;
(g) Natural water, including surface water and underground water, except for mineral water and natural thermal water provided for in group (b) above;
(h) Other natural resources, including natural resources of other kinds not included in the above groups.
3. Cases of intentional exploitation of any kind of natural resources the exploitation of which is prohibited shall be dealt with in accordance with applicable laws. Upon investigation and discovery of breaches, the tax office shall notify, and co-ordinate with, the authorized bodies which shall deal with the breaches within their authority.
In cases where natural resources the exploitation of which is prohibited are seized, confiscated and permitted to be sold, the organization authorized to sell shall calculate royalties in the selling price and pay them into the Budget.
4. Enterprises with foreign owned capital and foreign parties to business co-operation contracts currently paying royalties in accordance with rates stipulated in investment licences issued prior to 1 June 1998 shall continue to pay royalties in accordance with such rates until the expiry of the issued investment licences and shall then implement the guidelines of this Circular upon any extension of the investment licences.
5. Pursuant to the provisions in article 3 of the Ordinance on Royalties (as amended) and artic le 3 of Decree 68/1998/ND-CP of the Government dated 3 September 1998, where the Vietnamese party to a joint venture enterprise with a foreign party(ies) operating in accordance with the Law on Foreign Investment in Vietnam makes its capital contribution t o legal capital in the form of natural resources as stated in the investment licence, the joint venture enterprise shall not be liable to pay royalties in respect of the resources contributed by the Vietnamese party as its legal capital contribution. Every three or six months, the Vietnamese party shall declare any natural improvements in the resources contributed as its capital contribution and shall report to the Ministry of Finance to record the capital in the State Budget and to manage the capital in accordance with applicable regulations.
6. In the case of enterprises engaging in the exploitation of resources which are established on the basis of joint venture contracts, business co-operation contracts and product-sharing contracts, the royalties to b e paid by the joint venture enterprise or foreign party(ies) shall be specified in the joint venture contract and included in the share of products distributed to the Vietnamese party. Upon sharing of exploited products, the Vietnamese party shall be liable to pay all amounts of royalties to the State Budget in accordance with the Law on State Budget.
II. BASIS FOR CALCULATION OF ROYALTIES AND ROYALTIES TARIFF
The amount of royalties to be paid in a tax period shall be as follows:
Royalties to be paid in tax period | = | Quantity of commercial resources actually exploited | x | Taxable value of each unit of resource | x | Royalty rate | - | Exempted/Reduced amounts of royalties (if any) |
1. The quantity of commercial resources actually exploited shall be the amount, weight or volume of resources actually exploited in the tax period, irrespective of the present condition and the purposes of exploitation of the resources (for immediate sale, exchange, internal use, reserves for on-going production, and so forth).
- With respect to resources of which the amount, weight or volume actually exploited cannot be precisely determined because they contain different substances or large amounts of extraneous matter, royalties shall be calculated on the basis of the amount, weight or volume of each substance obtained by screening and classification.
For example, in a tax period, a company screens thousands of cubic metres of earth rocks and water (the amount of which cannot be determined) in order to obtain 2 kilograms of gold dust and 100 tons of iron ore; royalties shall be calculated on the basis of the amounts of such gold and iron ore.
- In the case of exploitation carried out manually, in numerous locations, or irregularly, leading to difficulties in management, a fixed amount of resources shall be allotted on a seasonal or periodical basis. The tax office shall co-ordinate with local authorities and line management bodies to define the allotted amount of resources actually exploited.
- In the above case, if the exploited resources are collected at one purchase centre and the purchaser so agrees, the provincial or municipal Taxation Department may decide (in writing) that payment of royalties should be made by the purchasing organization or individual instead of the exploiter.
2. Taxable value: Pursuant to the provisions in article 7 of Decree 68/1998/ND-CP of the Government dated 3 September 1998, the taxable value shall be the selling price of each item or unit of resource at the place of exploitation and determined on the basis of one of the following:
(a) For resources the amount of which can be determined at the exploitation stage and sold immediately after being exploited (such as earth, stone, sand, pebbles, marine products, and s o forth), the taxable value shall be the actual selling price at the place of exploitation minus (-) turnover tax or value added tax (if any). If transportation expenses, stevedorage, and storage expenses from the place of exploitation to the place of consumption arise, such expenses shall be deducted when determining the taxable value. In such cases, if not sold (for example, put into use in the next production process), the taxable value specified by the provincial or municipal peoples committee shall be applied in accordance with the principles stated in article 7 of Decree 68/1998/ND-CP of the Government dated 3 September 1998.
(b) For resources the amount of which can be determined at the exploitation stage but can only be sold after a screening and selection process, the taxable value shall be the selling price of the screened and classified products minus (-) expenses arising from the place of exploitation to the place of consumption and converted according to the content or proportion (of the resources) to determine the taxable value, being the selling price of the actual exploited resources minus (-) turnover tax or excluding value added tax.
For example, the selling price of a ton of clean coal is VND65,000/ton, the expenses for screening and transportation from the place of exploitation to the place of sale are VND10,000/ton; the proportion of clean coal over the actual exploited coal is 80%. Taxable value of a ton of coal at the place of exploitation = (VND65,000 - VND10,000) x 80 - Turnover tax or value added tax 100
(c) For resources the amount of which cannot be determined at the exploitation stage because they contain extraneous or different substances, the taxable value shall be the actual selling price of each substance at the place of exploitation minus (-) turnover tax or excluding value added tax.
For example: dust gold, iron ore, and so forth.
(d) For resources exploited and used as raw materials for production purposes, such as natural water used for production of purified water, mineral water, beer and beverages; soil used as raw material for industrial production or production of handicrafts, the taxable value shall be the selling price of finished products minus (-) expenses of production of such products (including turnover tax or value added tax payable but excluding expenses of exploitation of the resources) provided that the minimum rate shall not be lower than the taxable value stipulated by the provincial or municipal peoples committee.
Organizations or individuals exploiting resources shall comply fully with the system of books of accounts and accounting documents as stipulated and shall calculate and determine the taxable value as instructed in sub-clauses (a), (b), (c) or (d). In other cases, and in cases of exploiting resources for use for other purposes not covered in sub- clauses (a), (b), (c) or (d), the taxable value stipulated by the provincial or municipal peoples committee shall be applied in accordance with the principles stated in article 7 of Decree 68/1998/ND-CP of the Government dated 3 September 1998.
Provincial and municipal Taxation Departments shall consult with the Department of Finance and Pricing and local line management bodies in order to determine the taxable value to submit to provincia l or municipal peoples committees for decision and to report to the General Department of Taxation.
(dd) The taxable value of natural water in hydro -electricity production shall be the selling price of commercial electricity; the taxable value of timber shall be the selling price of timber at the timber sale yard.
With respect to oil and gas, the taxable value shall be as provided for in the Law on Petroleum and article 47 of Decree 84-CP of the Government dated 17 December 1996 making detailed provisions for implementation of the Law on Petroleum.
3. The royalties tariff shall be implemented in accordance with the royalties tariff issued with Decree 68/1998/ND-CP of the Government dated 3 September 1998 (attached to this Circular).
Based on the value of each type of resource, conditions of exploitation and requirements for management of each type of resource from time to time, relevant ministries or branches shall collect data and documents with respect to the types of exploited resources and report to the Ministry of Finance for consideration and adjustment of royalties rates consistent with the tariff stipulated in article 6 of the Ordinance on Royalties. The adjustment of royalties rates shall only be made where necessary and in accordance with each specific type of resource; the adjustment shall not be made for particular cases.
III. DECLARATION, REGISTRATION AND PAYMENT OF ROYALTIES
1. Pursuant to article 9 of Decree 68/1998/ND-CP of the Government dated 3 September 1998, organizations and individuals engaging in the exploitation of resources shall be responsible for:
- Registering activities of exploitation of resources at the tax office no later than ten (10) days after the date on which such activities are permitted, or no later than five days prior to any merger, consolidation, division, demerger, dissolution, bankruptcy or change of activities of exploitation of resources. The declaration form shall be made in two copies, one forwarded to the tax office directly responsible for the management of collection of royalties and one filed at the establishment engaging in exploitation of resources (Form 1 attached).
- Strictly complying with the regulations on preparation of sale and purchase vouchers, collection of money, and books of account in accordance with applicable regulations.
- Preparing declaration forms of royalties payable, including of no royalties payable, for the previous month and submitting them on a monthly basis to the tax office within the first ten (10) days of the following month (Form 2 attached). The declaration form shall be made in two copies certified by the officer directly responsible for management of collection of royalties, one forwarded to the tax office and one filed at the establishment. Where a monthly declaration cannot be made in respect of the exploitation of resources, the time -limit for the declaration may be extended as appropriate to the activities of exploitation as instructed in writing by the provincial or municipal Taxation Department.
- Paying royalties in accordance with the time -limits stated in the tax notice issued by the tax office, but no later than the twenty fifth day of the month following the month in which royalties are incurred.
- Within thirty (30) days of termination of an operating year or a contract, organizations and individuals engaging in the exploitation of resources shall finalize the payment of royalties with the tax office. Within ten (10) days of examination and issuance of a tax notice by the tax office, organizations and individuals engaging in the exploitation of resources shall pay outstanding royalties (if any) in full to the State Budget; royalties paid in excess shall be refunded within the stipulated time-limit or carried forward against royalties to be paid in the following month.
- In the case of organizations and individuals engaging in the exploitation of resources and carrying out exploitation manually, in numerous locations or irregularly, where the tax office approves their payment of royalties in the form of allotment of amounts of royalties as stipulated in clause 1 of Section II of this Circular, the tax office shall accurately determine the amounts of resources actually exploited and the royalties to be paid on the basis of the declaration forms of establishments engaging in exploitation of resources and the documentation of investigation of the actual sources of resources, capital, labour, means of exploitation, and prices of resources. The process of determination of amounts of royalties shall be open and democratic and shall be consistent with the capacity to exploit resources.
The allottment of royalties may be calculated in a way that best suits the collection of other types of taxes.
2. The tax office directly managing the collection of royalties shall have the following duties, powers and obligations:
- To guide and encourage establishments engaged in the exploitation of resources to register, declare and pay royalties;
- To examine the registration, declaration and payment of royalties and the tax finalization by establishments engaging in exploitation of resources;
- To calculate royalties, conduct examinations and inspections, and fix allotted amounts of royalties; to prepare and review tax registers; to notify in a timely manner the royalties to be paid and the time-limit for payment in compliance with regulations; and to provide establishments engaging in exploitation of resources with lawful source documents evidencing collection of royalties;
- To examine and inspect the activities of exploitation of resources; to examine periodically and regularly documents and books of account in order to discover in a timely manner breaches for the purpose of correcting or dealing with such breaches;
- To request taxpayers to provide books of account, source documents and other relevant documents relating to calculation and payment of royalties; to request credit institutions, banks and other organizations and individuals concerned to provide documents relating to calculation and payment of royalties;
- To deal with administrative offences in relation to taxation and to resolve complaints relating to royalties;
- To retain and to use data and documents provided by establishments engaging in exploitation of resources and any other sources in accordance with applicable regulations;
- The tax office shall have the right to determine and fix the level of royalties to be paid by taxpayers in accordance with the provisions in article 9 of the Ordinance on Royalties (as amended).
3. When transporting natural resources, all organizations and individuals shall obtain sale invoices and source documents evidencing the implementation of policies on royalties.
4. Royalties are the proceeds of the State Budget which shall be paid to the State Treasury in the locality where resources are exploited. Where establishments exploit resources on a small scale and in an irregular manner, or where royalties are small and the establishments are located far away from the State Treasury, the tax office may directly collect royalties for the purpose of transfer to the Treasury. Based on the actual situation, the tax office shall stipulate the specific time for payment of royalties in accordance with the number of days and amounts of royalties to collect.
IV. EXEMPTIONS FROM AND REDUCTIONS OF ROYALTIES
1. Pursuant to the provisions in article 10 of the Ordinance on Royalties (as amended) and article 12 of Decree 68/1998/ND-CP of the Government dated 3 September 1998 making detailed provisions for implementation of the Ordinance on Royalties (as amended), exemptions from and reductions of royalties shall be implemented as follows:
- Projects being entitled to investment incentives as provided for in the Law on Promotion of Domestic Investment and other legal instruments of the Government making detailed provisions for implementation of the Law on Promotion of Domestic Investment and engaging in exploitation of resources (except for oil and gas) shall be granted no more than fifty (50) per cent reduction of royalties for the first three years from the commencement of exploitation; in cases where the above projects are already being implemented, the reduction of royalties shall apply for the remaining duration from the date on which the Ordinance on Royalties (as amended) became effective.
- The tax office directly responsible for management shall, based on the establishment licence, the certificate of investment incentives and the provisions of legal instruments providing guidelines on the Law on Promotion of Domestic Investment, make a decision on reduction of royalties in this case.
2. Organizations or individuals exploiting resources which, as a result of unforeseen natural disasters, epidemics or accidents, suffer a loss of exploited resources included in the declaration of royalties payment shall be exempted from royalties in respect of the lost resources. Any amount of royalties already paid shall be refunded, or credited against the amount of royalties payable for the next period where the payer so agrees. The level of damage shall be determined as follows:
- With respect to types of resources damaged in specific amounts, the level of damage shall be determined in accordance with specific amounts.
- With respect to types of resources damaged in respect of grade (quality), the proportion of resources, taxable value and royalties rates shall be re - assessed and re -determined. The amount of royalties exempted shall be equal to the difference between the amount of royalties previously calculated and declared and the amount of payable royalties calculated after the damage.
For example, the proportion of clean coal is 80% of the crude coal, but the proportion of clean coal decreases to 50% after diluvial rains; therefore, the taxable value shall be re -calculated and an amount of royalties shall be exempted.
The procedures for proposing a reduction of royalties shall include:
- Proposal letter clearly stating the reason, the level of damage and the amount of royalties proposed for reduction;
- Inspection minutes made by the tax office directly responsible for management attached to the proposal letter for a reduction of royalties. The head of the department of taxation shall make a decision on reduction of royalties to organizations or individuals exploiting resources and suffering a loss.
3. Organizations or individuals engaged in deep-sea exploitation of marine products by high-capacity means of navigation shall be exempted from royalties for the first five years from the issuance the exploitation licence and shall be granted a fifty (50) per cent reduction for five subsequent years.
High-capacity means of navigation are all kinds of ships and boats used for exploiting marine products with main engine capacity of 90 CV or more.
Based on the proposal letter and the licence for deep-sea exploitation of marine products presented by organizations or individuals exploiting marine products, the head of the tax office directly responsible for management shall make a decision on exemption from or reduction of royalties on an annual basis.
In cases where deep-sea exploitation of marine products has been carried out prior to 1 June 1998, the consideration for exemption from or reduction of royalties shall commence from 1 June 1998 with full duration as stipulated.
For example:
Establishment A was issued a licence for deep-sea exploitation of marine products in December 1997, so establishment A shall be exempted from royalties for five years and shall be granted a fifty (50) per cent reduction for five subsequent years, commencing from 1 June 1998.
If the conditions for exemption from or reduction of royalties change during the course of operation of organizations or individuals engaged in deep-sea exploitation of marine products, resulting in a reduction of tax incentives, they must promptly make a declaration with the nearest tax office for information and certification. Any failure to make a declaration so as to continue to be entitled to exemption from or reduction of royalties shall be considered to be evasion of royalties and shall be dealt with in accordance with the provisions in article 11 of the Ordinance on Royalties (as amended).
If, after the duration of exemption from and reduction of royalties referred to above (ten (10) years), organizations or individuals engaged in deep-sea exploitation of marine products still suffer a loss, they shall be considered for further reductions of royalties corresponding to the amount of loss of each year for a period not exceeding five consecutive subsequent years.
4. Products of natural forests exploited by authorized individuals residing in commune-level areas with forests used for daily activities, for example timber, tree branches, firewood and bamboo of all kinds, shall be exempted from royalties, even when they are sold as surplus. They shall be sold within the district-level area where they were exploited.
The head of the tax office directly responsible for management shall, based on the proposal of the commune-level peoples committee and the forestry body directly responsible for management of the forests, make a decision to grant exemptions from royalties to these people. The decision shall clearly and specifically state the type of resource permitted to be exploited, place and form of exploitation, and place of consumption. The time -limit stated in each decision shall not exceed three months and after such time limit the tax office shall re -consider and re -examine prior to making a decision on continued exemptions from royalties.
Upon discovery of cases where exemptions from royalties have been taken advantage of in order to exploit indiscriminately natural forests, the tax office shall revoke the decision to grant exemptions from royalties (if any) and forward to the authorized body for resolution in accordance with applicable laws.
5. Natural water in hydro -electricity production which is not supplied to the national grid shall be exempted from royalties.
The head of the tax office directly responsible for management shall, based on the proposal letter made by organizations or individuals exploiting resources together with the opinions of the provincial or municipal department of industry, make a decision on exemptions from royalties in this case.
6. Soil exploited for the following purposes shall be exempted from royalties:
(a) Levelling and construction of national security and defence projects;
(b) Levelling and construction of dykes and irrigation works required for agriculture, forestry or fishing, and road projects;
(c) Levelling and construction of projects with humane or welfare significance, or projects providing preferential treatment to persons who have rendered meritorious services to the country;
(d) Levelling and construction of infrastructure works in mountainous areas (at district-level localities being mountainous districts in the list published by the committee for ethnic and mountain areas) required for the development of local economic and social life;
(dd) Exploitation of soil on the site of allocated or leased areas for levelling and construction within such areas;
(e) Levelling and construction of key national projects determined by the Government on a case-by-case basis.
In the cases in sub-clauses (a), (b), (c), (d) and (dd) above, an organization or individual exploiting resources shall make an application clearly stating the reason as certified and proposed by the provincial or district peoples committees (if the project is under district-level management only) where the project is constructed, so as to present to the tax office directly responsible for management at the exploitation area for consideration and decision on exemptions from royalties.
V. DEALING WITH BREACHES AND REWARDS, COMPLAINTS AND TIME -LIMITS
Dealing with breaches and rewards in respect of organizations and individuals shall be implemented in accordance with articles 11, 13 and 14 of the Ordinance on Royalties.
The right to lodge complaints and the order for authorities to deal with such complaints in respect of royalties shall be implemented in accordance with articles 15 and 16 of the Ordinance on Royalties.
In the event that a fraudulent declaration, tax evasion or mistake in relation to taxation is discovered and concluded, the tax office shall be responsible for re -collecting any amount of tax or fine, or refunding any amount of tax arising within the last five years from the date of the inspection which discovered the fraudulent declaration, tax evasion or mistake in relation to taxation. Where an organization or individual exploiting resources fails to make a declaration or tax payment, the time -limit for re- collection of taxes or fines shall be extended back to the date of commencement of operation of the business establishment.
VI. ORGANIZATION OF IMPLEMENTATION
Tax offices at all levels shall be responsible for publishing and providing guidelines to establishments exploiting resources in order to ensure a thorough grasp and implementation of the Ordinance on Royalties, Decree 68/1998/ND-CP of the Government dated 3 September 1998, and guidelines as provided for in this Circular.
This Circular shall be of full force and effect as of 18 September 1998 and replace previous written guidelines on royalties issued by the Ministry of Finance. During the course of implementation, if difficulties or troubles are encountered, establishments exploiting resources, branches and localities are requested to timely report to the Ministry of Finance for consideration and resolution.
FOR THE MINISTER OF FINANCE DEPUTY MINISTER Pham Van Trong |
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