Circular No. 38/2010/TT-BTC guiding tax provisions applicable to organizations and individuals that transfer the rights to explore, exploit and process minerals

Issue nos 03-Q4IApril 2010 OFFICIAL GAZETTE 31 (Gong Rio nos 143-144/Apr//1, 2010) THE MINISTRY OF FINANCE Article 1. Subjects and scope of application Organizations and individuals that are allowed to transfer the rights to explore, exploit and process Circular No. 38/2010rrT-BTC of March minerals under Clause 6, Article 53 of the 19, 2010, guiding tax provisions Government's Decree No. 160/2005/ND-CP and applicable to organizations and have actually transferred these rights shall be regarded as having transferred investment projects individuals that transfer the rights to and obliged to pay taxes under this Circular, explore, exploit and process minerals Article 2. Value-added tax Pursuant to the Law on Minerals and the Government's decrees detailing the Transfer of the rights to explore, lllIploit and implementation of the Law on Minerals; process minerals and transfer of land use rights are not liable to value-added tax. Pursuant to current laws and ordinances on In case of transferring the whole investment taxes, charges and fees, and the Government's project on mineral exploration, explottation and decrees detailing the implementation ofthese laws processing accompanied by works and and ordinances; infrastructure facilities on land, machinery, Pursuant to November 29, 2006 Law No. 78/ equipment and vehicles, the values of ~se works 20061QH II on Tax Administration, and the and infrastructure facilities on land, machinery, Government's documents guiding the equipment and vehicles must be separated and implementation ofthe Law on TaxAdministration; liable to value-added tax under the Law.on Value- Added Tax and its guiding documents. In case the Pursuant to the Government's Decree No. 118/ values of these items cannot be separated, value- 2oo8/ND-CP ofNovember 27, 2008, defining the added tax shall be paid at the rate of 40% of the functions, tasks, powers and organizational whole transfer value. structure of the Ministry of Finance; Infurtherance ofthe Prime Minister's directing Article 3. Enterprise income tax opinions notified in the Government Office's An organization earning income from the Official Letter No. 50NPCP-KTTH ofJanuary 5, transfer ofthe rights to explore, exploitand process 2010, minerals shall pay enterprise insome tax, specifically as follows: The Ministry of Finance guides the implementation of tax regulations applicable to Payable Enterprise organizations and individuals that transfer the enterprise = Taxed income x income tax rights to explore, exploit and process minerals income tax rate under Clause 6, An/de 53 of the Government's amount Decree No. 160120051ND-CP of December 27, 2005, detailing and guiding the implementation 1. Determination of taxed income of the Law on Minerals, and the Law Amending Investments Taxed Transfer Transfer and Supplementing a Number of Articles of the = not yet Income pnce expenses Law on Minerals as follows: recovered

© VIETNAM LAW & LEGAL FORUM 32 OFFICIAL GAZETTE Issue nos 03-04lAorii 2010 (Gong BaD nos 143-144/Apri/1, 2010) In which: - Transfer expenses include expense for - Transfer price is the total value actually carrying out necessary legal procedures for the transferred under the transfer contract. transfer; charges and fees paid upon carrying out transfer procedures; expenses for the transaction, In case the transfer contract indicates the negotiation and signing of the transfer contract mode of payment in installments or deferred and other documented expenses for the transfer. payment, the transfer price is the total value actually transferred within the time limit 2. Tax rate indicated in the transfer contract and exclusive The enterprise income tax rate applicable to of installment or deferred payment interests. the transfer of the right to explore, exploit and In case the transfer contract does not indicate process minerals is 25%. a payment price or the tax office has grounds to 3. Incomes from the transfer of the rights to believe lhat the payment price has not been explore, exploit and process minerals shall be determined based on the market price, the tax separately accounted and are ineligible for office lll~ inspect and request the parties to the enterprise income tax incentives. transfer to provide information relating to the 4. In case the transfer of a project on mineral determinetion of present and future values of the exploration, exploitation and processing is transferred project before the parties decide on associated with a real estate transfer, income from the transfer and it shall assess the contract's the real estate transfer shall be separately payment VAlue after referring to the market price, accounted for tax declaration and payment under the priceet.which the project might be transferred the Law on Enterprise Income Tax and its guiding to a third party or the prices of similar transfer documents, and may not be added to incomes or contracts. offset against losses of other business operations. - Investments in a project on mineral exploration, exploitation and processing not yet Article 4. Personal income tax recovered means reasonable expenses specified An individual earning incomes from the in the L_ on Enterprise Income Tax and its transfer of the rights to explore, exploit and guiding documents and determined based on process minerals shall pay personal income tax books and documents by the date of transfer, on incomes from capital transfer, specifically as minus recovered expenses previously accounted follows: as taxable incomes for the determination of Payable payable business income tax amounts. personal Taxed income x Tax rate In case the rights to explore, exploit and income tax = process minerals are further transferred by the amount organization, investments in the project shall be determined to be equal to the value of the 1. Determination of taxed income previous transfer contract plus additional Investments Taxed Transfer Transfer expenses (if evidence documents are available) = not yet income price expenses minus recovered expenses. recovered

© VIETNAM LAW & LEGAL FORUM Issue nos 03·04lApril2010 OFFICIAL GAZETTE 33 (Gong Bao nos 143-144/Apri/1, 2010) In which: documented expenses for the transfer. - Transfer price is the total value actually 2. Tax rate transferred under the transfer contract. The personal income tax rate applicable to In case the transfer contract indicates the incomes from capital transfer is 20% under Article mode of payment in installments or deferred 17 of the Government's Decree No. lOO/20081ND- payment, the transfer price is the total value CP of September 9, 2008, detailing a number of actually transferred within the time limit articles of the Law on Personal Income Tax. indicated in the transfer contract and exclusive 3. In case the transfer of the rights to explore, of installment or deferred payment interests. exploit and process minerals is associated with a In case the transfer contract does not indicate real estate transfer, income from the real estate a payment price or the tax office has grounds to transfer shall be separately accounted for personal believe that the payment price has not been income tax declaration and payment under theLaw determined based on the market price, the tax on Personal Income Tax and its guiding office shall assess the transfer price under the Law documents. on Tax Administration and its guiding documents. Article 5. Other taxes, charges and fees - Investments in a project on mineral Other taxes, charges and fees must comply exploration, exploitation and processing not yet with current relevant legal documents, recovered means reasonable expenses related to the generation of taxable incomes from business Article 6. Organization of implementation operations under the Law on Personal Income Tax This Circular takes effect 45 days from the and its guiding documents and determined based date of its signing. For cases in which the transfer on books and documents by the date of transfer, of the rights to explore, exploit and process minus recovered expenses previously accounted minerals is completed before the effective date as taxable incomes for the determination of of this Circular and for which taxes have been payable personal income tax amounts. paid, no adjustment is required to be made, Tbe In case the rights to explore, exploit and time of completion of the transfer of die rights process minerals are further transferred by the to explore, exploit and process minerals is the individual, investments in the project shall be time when the parties to the transfer contract determined to be equal to the value of the obtain approval of a competent licensing agency. previous transfer contract plus additional Other matters not guided in this Circular expenses (if evidence documents are available) comply with current tax laws. minus recovered expenses. Any problems arising in the course of - Transfer expenses include expenses for implementation should be reported to the Ministry carrying out necessary legal procedures for the of Finance for consideration and decision.- transfer; charges and fees paid into the state budget upon carrying out transfer procedures; For the Minister of Finance expenses for the transaction, negotiation and Deputy Minister signing of the transfer contract and other lawfully DO HOANG ANH TUAN

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