Circular No. 42/2007/TT-BTC guiding the implementation of the Government’s Decree No. 68/1998/ND-CP of 3 September 1998 detailing the implementation of the Ordinance on Royalties (amended) and Decree No. 147/2006/ND-CP of 1 December 2006 amending and supplementing a number of articles of Decree No. 68/1998/ND-CP

Article 3 of the J.awon Petroleum; For natural-resources subject to royalties rates basedon one unitof exploitednaturalresource, the 4. Gas meaning naturalgasdefined in Clause3,

Article 3 of the Law on Petroleum; payableroyalties shallbe determined as follows: Royalties to be paid in the period = Quantity of 5.Products ofnatural forests, including plantand commercial natural resources exploited intheperiod animal speciespermitted for exploitation whichare x Royalties rate based on one unit of natural products ofnatural forests, suchastimber (including resource. treebranches, tops,firewood, stumps androots, etc., defined according tothestandards setbytheMinistry I. Quantity of commercial natural resources ofAgriculture andRuralDevelopment), bambooof actually exploited variouskinds; pharmaceutical materials of various UnderArticle 6 oftheGovernment's DecreeNo. kinds, etc., and plant and animal species permitted 68/1998/ND-CP ofSeptember 3, 1998, detailing the for exploitation; implementation of the Ordinance on Royalties 6. Natural aquatic resources, including natural (amended), the quantity used for calculation of © VIETNAM LAW & LEGAL FORUM Issue nos 06·07IAugust 2007 OFFICIAL GAZETTE 21 (C6ng Bao nos 546-547/August 9,2007) royalties shall be determined ineachcaseasfollows: bricks = 100 m3• 1.For the type of natnral resource which can he .4 For natural water used for hydropower determined in termsof quantity, weightor volume, generation: It is the electricity volume sold by the thetaxable quantity ofcommercial natural resources generation establishment to anelectricity buyerand is thequantity, weightor volume ufnatural resources determined through the electricity counting system actually exploited during thetaxperiod, irrespective meeting Vietnam measurement standards and of the present conditions and the purposes of located at the delivery and receipt point. This exploiting natural resources (for immediate sale, electricity volume iscertified bytheelectricity buyer exchange, internal use or as provisions for and seller. snbsequent production. etc.). S. In case of exploitation carried out manually, 2. For the type of naturalresource whichcannot in a scattered manner or on a mobile or irregular be determined interms ofquantity, weight orvolume basis, with theannually exploited quantity ofnatural actuallyexploited as itcontains different substances resources estimated at under VND 200,000,000, andgreatcontents of extraneous matters, thetaxable whichis difficult to manage, a presumptive quantity quantity of natural resource shall be calculated on of natural resource can be set on a seasonal or the basis of the quantity, weightor volumeof each periodical basis. Tax offices shall coordinate with substance collected as a result of sorting and local administrations and specialized management classification. bodies to fix the presumptive exploited quantityof Example: One company in a tax period must natural resource. screen and sort out thousands of cubic meters of Also in the same case, if the exploited natural earth,rock and water(thequantity of whichcannot resources arecollected andboughtbya single buyer be determined) in order to obtain 2 kg of gold only and if accepted in writing by the buyer, the nuggets, 100tonsofiron are, etc.,theroyalties shall murucipal/provtncial Tax Department may decide be calculated on the basis of the quantities of gold (in writing) to let the buyer pay royalties on behalf nuggets andironare.Atthesametime,thequantities of the exploiter. ofothertypesofnatural resources exploited andused for exploitation activities, such as water exploited II. Thxableprices and used for screening and sorting activities, shall UnderArticle 7 ofthc Govcmmcnt'sDecreeNo. be determined. 68/1998/ND-CP of September 3, 1998 detailing 3. For the typeof natural resource exploited and the implementation of the Ordinance on Royalties immediately usedfor theproduction of products or (amended) and Clause 2, Article 1, of the provision of otherservices, its taxable quantity shall Government's Decree No. 147/2006/ND-CP of be calculated on the basisof the outputof products December 1, 2006,amending and supplementing a produced intheperiod andthenatural resource waste numberof articles of the Government's DecreeNo. norm per productunit. 68/1998/ND-CP, the price for calculating royalties is the sale price of one unit of natural resources at Example: In order to produce 1,000 bricks the place of exploitation in compliance with the (unbaked), 1 m3 clay is needed. If in the month, market price principle and shall be determined in the clay-exploiting establishment produces each specific case as follows: 100,000 bricks, the quantity of exploited clay subject to royalties is 100,000 bricks (:) 1,000 1. For natural resources the quantity of which © VIETNAM LAW & LEGAL FORUM 26 OFFICIAL GAZETTE Issue nos 06·071Augus12007 (Gong Bao nos546-5471August 9, 2007) may be determined at the exploitation stage and (-) expenses incurred at the screening, sorting and which may be sold immediately afterthe exploitation selection stage and converted by content or (such as earth, stone, sand, gravel, aquatic products, proportion so as to determine the taxable priee as etc.), the taxable price of one unit of natural resource the actual sale price of the exploited natural is the actual sale price exclusive of VAT. resource exclusive of value added tax. 2. For exploited natural resources of the same Example: The sale price of clean coal is VND quality grade part of which is sold at the place of 65,OOO/ton (exclusive of VAT), the cost of screening, exploitation at the market price and part uf which is sorting and transportation from the plaee of transported away for sale or production, processing, exploitation to the place of sale is VND 1O,000/ton screening sorting, etc., the taxable price of one unit and the proportion of clean coal in actually exploited of the whole quantity of natural resource exploited coal is 80%, then: in the month is the sale price of one unit of natural Price for resource at the place of "xploit"tion, which is calculating obtained by dividing total turnover (exclusive of royalties 80 on one ton = (VND 65,000 - VND 10,000) x valued added tax) from natural resources sold at the d~.~ 100 place of exploitation by total quantity of'thesenatural place of resources sold in the month. exploitation When some quantity of natural resource is 3.2. Forthe type of natural resource the quantity exploited in the month but no turnover is of which cannot be determined at the exploitation generated from the sale thereof at the place of stage as it contains numerous extraneous substances, exploitation, the taxable price uf one unit uf the taxable price of one unit of the natural resource natural resource used for calculating the royalties is the sale price (exclusive of valued added tax) of amount of the month is that of the previous month one unit of pure produ"t. of the substance with the or the accounting price. At the end of the business highest content in the exploited natural resource or period, the actual sale price of the quantity of the sale price of pure products of each substance in exploited natural resource. already declared for the exploited natural resource (if these substances taxation purposes shall be used for determining can be separated after exploitation, for example, gold the payable royalties amount in the royalties nuggets, iron ore, etc. finalization declaration, 4. For timber, the taxable price of one unit of 3. If tbe sale price of one unit of exploited natural resource at the exploitation place mentioned at Point natural resource is the sale price at the delivery site. 1.2 of this Section cannot be determined, the taxable 5. The price for calculating royalties on natural price shall be determined in some specific cases as water used in hydropower generation, which is set follows: at VND 750 per kWh of commercial electricity, is 3.1. For the type of natural resource the applicable from January 1, 2007. Hydropower quantity of which may be determined at the generation establishments which have declared and exploitation stage but which must go through paid royalties on water used in hydropower screening, sorting and selection, etc., before it can generation for 2007 at the taxable price ofVND 700 be sold our, the taxable price of one unit of natural per kWh shall adjust the taxable price under the resource is that of the products which have gone guidance of this Circular when making royalties through screening, sorting and classification less finalization declarations for 2007. © VIETNAM LAW & LEGAL FORUM Issue nos 06·07/Augusl 2007 OFFICIAL GAZETTE 27 (Gong Bao nos 546·5471August 9, 2007) When the average retail price of electricity is royalties shall publicize the taxable price of one unit adjusted, the price for calculating royalties per kWh of each natural resource at their head offices. of hydroelectricity is the pre-adjustment puce for 7. Particularly for oil and gas, the price for calculating royalties per kWh of hydroelectricity calculating royalties is in accordance with the multiplied by the adjustment co-efficient. provisions of the Law 011 Petroleum and Article 46 The adjustment co-efficient shall be determined of the Government's Decree No. 48/2OO0/ND-CP according to the following formula: of September 12, 2000, detailing the implementation Averagereurilpriceof of the Law on Petroleum. I kWh of electricity at the time of adjustment III. Royalties tariff Adjustment co-efficient = Average retail priceof! kWh UnderArticle 8 of the Government's Decree No. of electricity before the time 68/1998/ND-CP of September 3, 1998, detailing the of adjustment implementation of the Ordinance on Royalties (amended), the royalties rate for each type of natural 6. For organizations and individuals exploiting resource exploited complies with the Royalties Tariff naunal resources not fur sale but fur use as Taw promulgated together with Decree No. 68/1998IND- materials for the production of other products or the CPo For some types of natural resources, the royalties provision of other services; organizations and rates arc specified below: individuals exploiting natural resources and paying royalties according to declarations but failing to fully 1. Natural water exploited for the production of comply with the prescribed system of accounting ice (excluding production of purified ice) 1%. books and documents; and for organizations and 2, Apatite ore and serpentine exploited for sale: individuals paying royalties by the assessment 2%. method, they shall apply the taxable price uf one unit of natural resource which is stipulated by 3. Section VII of the Royalties Tariff provincial-level People's Committees for each promulgated together with Decree No. 68/1998/ period. ND-CP of September 3, 1998, detailing the implementation of the Ordinance on Royalties Provincial-level Tax Departments shall assume (amended) is guided as follows: "VII Mineral the prime responsibility for, and coordinate with water, natural water" is as stipulated in Clause 4, provincial-level Finance-Pricing Services and

Article I, of the Government's Decree No. 147/ Natural Resources and Environment Services in 2006/ND-CP If December I, 2006. investigating the market prices of natural resources in their localities, making price adjustment plans and 4. For petroleum and gas, their royalties rates are submitting them to provincial-level People's defined in Article 44 and Ai ucle 45 uf the Committees for decision and reporting to the Government's Decree No. 48/2000/ND-CP of Ministry of Finance (the General Department of September 12, 2000, detailing the implementation Taxation). When the sale price of a natural resource of the Petroleum Law. sees big fluctuations (up or down by 20%), the price On the basis of the above royalties rates, the for calculating royalties on the natural resource shall royalties rates are specified ill the Royalties Tariff be adjusted accordingly. (Appendix 2) promulgated together with this Tax offices directly managing the collection of Circular. © VIETNAM LAW & LEGAL FORUM 28 OFFICIAL GAZETTE Issue nos 06·07/Augus12007 (Gong BaD nos 546-5471August 9, 2007) PartUl For organizations and individuals exploiting natural resources manually on a scattered basiswith DECLARATION, REGISTRATION, an annually exploited value of under VND PAYMENT ANDFINALIZATION OF ZOO,OOO,OOO andpayingroyalties by theassessment ROYALTIES methodas guidedby the tax offices, the declaration of royalties, the assessment of payable royalties I. Registration of royalties amounts, and the determination of the period of 1. Newly founded business establishments payment of stable assessed royalties amounts shall engaged inexploiting natural resources shallregister be conducted at the same time with the assessment for the grant of tax identification numbers and the of valued added tax and enterprise income tax payment ofroyalties undertheMinistry ofFinance's according to current regulations. The assessed CirouiarNo.lO/ZOO6ill-BTCofFebruary 14,ZOO6, royalties amountpayableon a monthly basis shall guidingthe implementation ofthePrimeMinister's be based on the quantity of exploited natural Decision No. 75/1998/QD-TTg of April 4, 1998, resources and the turnover used as a basis for stipulating fax identification numbers of taxpayers assessing valuedaddedtax. whopay tax at theirmanagmg tax offices and at tax Tax offices shall accurately determine the offices of the places of exploitation of natural quantities ofnatural resources actually exploited and resources. In the course of implementation, if the payable royalties amounts on the basis of the changingany content of the royalties registration, declarations of natural resources-exploiting business establishments shall make additional establishments and documents on field declaration to theirmanaging tux offices according investigations of natural resources, capital, labor, to currentregulations on tax registration. exploitation methods andpricesofnatural resources. The assessment of payableroyalties amounts must 2. Existing busine ss establishments adding be public, democratic and close to the natural exploitation of natural resources as a new business resources exploitation capacity. line may continue using the tax identification numbers already granted by tax offices for making In the period of payment of stable assessed additional registration of the exploitation of natural royalties amounts, if the arisingquantityof natural resources withthetaxoffices ofthelocalities where resources actually exploited and the price for they are headquartered and the tax offices that calculating royalties thereon are higherthanfigures directly manage their natural resources-exploiting usedforthedeclaration and assessment ofroyalties, units according to current regulations on tax organizations and individuals shall declare them to registration. thetaxoffice for adjustment ofthe payableroyalties amountin the subsequent period. If they fail to do II. Declaration of royalties so and are detected through inspections, they shall be forcedto paythe arisingroyalties amountandbe Organizations andindividuals exploiting natural administratively sanctioned for late royalties resources shallsubmitroyalties declaration dossiers registration but not for tax evasion. to tax offices directly managing the collection of Before exploiting natural resources, organizations royalties. and individuals payingroyalties hy the assessment 1. For organizations and individuals paying method shall declare the payment of royalties on royalties by the assessment method: exploited natural resources at the same time with © VIETNAM LAW & LEClAL FORUM Issue nos 06·07IAugus! 2007 OFFICIAL GAZETTE 29 (C6ng BaD nos 546-547/August 9, 2007) registering royalties with the tax offices directly resources on the basis of accounting prices. managing the collection of royalties according to Accordingly, for making monthly royalties current regulations. At the end of a businessperiod, declarations, business establishments Shall they are not required to make royaltiesfinalization determine royalties to be paid in the month on the declarations, including those that are entitled to basis of the accountingprice of one unit of natural royalties exemptionor reduction on a case-by-case resource sold.At year-end, they shall re-determine basis under the guidancein Part IV of this Circular. the payable royalties amount based on the actual taxable sale price of one unit of natural resource 2. For organizations and individuals paying and make royaltiesfinalizationdeclarations. royalties by the declaration method: d Declaration of estimated rebatable royalties 2.1. Monthly declaration of royalties: amounts: Business establishments which properly aJ Monthly,businessestablishments shall make apply cost-accounting, pay royalties by the fullcalculation anddeclaration ofroyalties according declaration method and are eligible for royaItie. to current regulationsin form No. 01/fNg attached rebate shall estimate rebatable royalties' amounts to this Circular. If no royalties is incurred in the every month under the guidance in Part IV of this month, businessestablishments shall stillfill in and Circularand declare them in monthly declarations. send the declarations to tax offices. 2.2. Royaltiesfinalizationdeclaration: - Businessestablishments shallfill in all itemsin a/ Business establishments that apply self- the declaration form (tax identification number, assessmentand self-paymentof royaltiesat the end name, address, location of natural resource of the business period shall make royalties exploitation, etc.) and declare other relevant finalization declarationsaccording to form No. 021 information such as having made tax registration TNg attached to this Circular, Annual royalties withthe taxoffice,andconcurrently certifythe legal finalization declarations shallbe madeandsubmitted validity ofthedeclaredinformatiun(by affixing their to the tax office for determining royalties amounts signature and seal). Declarationsshall be regarded actuallyarisingin the year. as not havingbeen submittedto thetax officeif they are not fully filledin or not duly certified. The time limit for submission of royalties finalization declarationsis 90 days fromthe end of - The deadline for submission of monthly thecalendaryearor fiscal year. In caseof1ermination royalties declaration, to tax officesis the 20th of the of naturalresources exploitationcontracts;merger, subsequent month. Business establishments shall consolidation, division, separation, dissolution, submit their declarations by post or directly to the bankruptcy, transformation of ownership: tax office. The date of submission shall be assignment, sale, contracting and lease of state determined as the date of the postmark affixed by enterprises, business establishments shall make the sending post office (for declarations submitted royaltiesfinalization declarationsand send them to by post) or the date of submission to the tax office the tax office within 45 days from the date of (fordeclarations submitted directly to thetaxoffice). termination of natural resources exploitation bl For types of natural resources for which the contractsor from the date of issuanceof the merger, basesforcalculation of royalties arisingin themonth consolidation, division, separation, solution, have not yet been identifiedand declared,business bankruptcy, transformation of ownership, establishments may estimate the royalties amount assignment, sale, contracting or lease decision by to be paid every month for these types of natural competent authorities. © VIETNAM LAW & LEGAL FORUM 30 OFFICIAL GAZETTE Issue nos 06·07lAugust 2007 (Cong Bao nos 546·5471August 9, 2007) bl For a hydropower generation establishment III. Royalties payment which is headquartered in a locality and has its payable royalties amount divided to other localities 1.Organizations and individuals paying royalties according to regulations of the Ministry of Finance, by the assessment method: Monthly, they shall pay royalties amounts as assessed on the last day of the the tax office in charge of royalties of the locality where the establishment's hydropower plant is month at the latest. located shall send copies of the royalties declaration 2. Organizations and individuals paying royalties and the royalties finalization declaration to related by the declaration ruethod. tax offices entitled to collect royalties for information. 2.1. Monthly, business establishments shall pay their declared royalties amounts into the state budget. cI Determination of rebatable royalties amounts: The deadline for monthly payment of royalties is Businessestablishments eligible for royalties rebate the 20th of the subsequent month. If there are any shall determine by themselves rebatablc royalties outstanding royalties amounts according to their amounts on the basis of actual figures, and royalties finalization declarations, business concurrently compile dossiers stating the bases for establishments shall pay them into the state budget royalties rebate and send them to the tax office within 90 days from the end of the calendar year or according to regulations. fiscal year. Monthly business establishments exploiting 2.2. In case of termination of natural resource natural resources shall assess by themselves their exploitation contracts; merger, consolidation, satisfaction of the royalties rebate conditions, division, separation, dissolution, bankruptcy, estimate the rebatable royalties amounts and declare transformation of ownership; assignment, sale, them in royalties declarations No. 0ltrNg. At the contracting or lease of state enterprises, business end of the year of natural resources exploitation. on establishments shall fully pay outstanding royalties the basis of actual figures on natural resources amounts within 45 days from the date of termination exploited in the year, business establishments shall of natural resource exploitation contracts or from determine by themselves the rebatable royalties the date of issuance of the merger, consolidation, amounts, declare them in annual royalties division, separation, dissolution, bankruptcy, finalization declarations and send them together with transformation of ownership, assignment, sale, the set of documents on the rebatable natural contracting or lease decision by competent resources amounts to their managing tax offices for authorities; if there are any overpaid royalties monitoring and supervision. amounts, the tax office shall refund them or transfer 2.3. Attached to this Circular are the royalties them to the new business establishments according declaration form (No. OI/TNg), the royalties to current regulations. finalization declaration form (No. 02trNg) and the 2.3. For business establishments paying royalties instruction on royalties declaration (Appendix I). into the state budget by transfer via a bank or another 2.4. Business establishments are accountable credit institution, the date of tax payment shall be before law for the truthfulness and accuracy of their determined as the date on which the bank or credit royalties declaration and fully preserve documents institution deducts and transfers the tax money to used for determination of royalties amounts already the treasury as requested in the business declared. establishments' orders of payment into the state © VIETNAM LAW & LEGAL FORUM Issue nos 06·07JAugus12007 OFFICIAL GAZETTE 31 (Cdng Bao nos 546-5471August 9, 2007) budget; for business establishments paying royalties I. Organizations and individuals exploiting in cash, the date of payment shall be determined as natural resources and paying royalties by declaration the date on which the state treasury or tax office which meet with natural disaster, sabotage or receives the tax money stated on the money payment unexpected accident, causing damage to the documents. quantities of natural resources they have declared 2.4. Business establishments shall fully fill in the and paid royalties for, are entitled to exemption from money payment documents as guided by the tax the royalties to be paid for the damaged natural office or state treasury. They shall clearly write on resources. The paid royalties amount, if any, shall the money payment documents the royaltiesamounts be refunded or deducted from the royalties amount paid for each type of tax and fines for each period; to be paid in the subsequent period. particularly for fines paid for late payment of tax The exemption from royalties stated at this Point money or fines, they shall write the date of the tax is only applicable to damaged natural resources office's notice but not the fine paid for late payment which have not yet been processed Into other of each type of tax. When a business establishment products and which still maintain their original has both the tax amount and fine paid in the period physic and chemical characteristics. and the tax amount and fine owed from previous 1. The level of damage ofnatural resources shall periods, which are unspecified, the tax office shall be determined as follows: first deduct the owed tax amount and fine, then the royalties amount and fine paid in the period. - For the type of natural resource suffering from damage in terms of quantity, the damage shall be 2.5. For a business establishment paying royalties determined on the basis of the actual damaaed on water used for hydropower generationto ditterent quantity; localities, the state treasury of the place where the hydropower generation unit pays royalties shall - For the type of natural resources suffering from divide the royalties amount paid by the unit in damage in terms of quality grade and proportion, proportion (%) to beneficiary localities under assessment shall be conducted to re-determine the decision of the Ministry of Finance. taxable prices and payable royalties amounts. The to-he-exempted royalties amount is the difference ParllV between the previously calculated and declared royalties amount and the payable royalties amount ROYALTIES EXEMPTION AND calculated after the damage is caused. REDUCTION Example: The proportion of clean coal in the Royalties exemption and reduction under Article exploited coal is 80%. During the rainy period, this 10 of the Ordinance on Royalties (amended),Article proportion drops to 50%. Therefore, the taxable price 12 of the Government's Decree No. 68/19981ND- must be re-calculated to determine the to-be- CP of September 3, 1998, detailing the on exempted royalties amount. implementation of the Ordinance on Royalties 2. Procedures for application of royalties (amended), Clause 3, Article 1 of the Government's exemption comprise: Decree No. 147/2006/ND-CPofDecemberl,2006, ~mending and supplementing Decree No. 68/19981 - A written request clearly indicating the reason, ND-CP, and the provisions of the Investment Law the natural resource damage, the royalties amount shall be effected as follows: re-determined on the basis of the damage, and the © VIETNAM LAW & LEGAL FORUM 32 OFFICIAL GAZETTE Issue nos 06.07/Augus12007 (Gong Bao nos 546-547/Augusf 9, 2007) proposed to-be-exempted royalties amount (with exploitation of aquatic resources shall promptly certification of the People's Committee of the declare it to the nearest tax office for information commune, wardortownship where natural resources and certification. Anyfailureto make a declaration are damaged; so as to further enjoy the tax rebate level as - A minuteof inspectionand certification by the previously shall be considered tax evasion and be managing tax office, enclosed with the dossier of handledaccording to regulations. requestfor royalties exemption. After the above-mentioned period of royalties exemption andreduction (10years), if organizations II. Those organizations and individuals and individuals exploiting aquatic products in conducting offshore exploitation ofaquatic resources offshore sea areas suffer losses in their business bygreat-capacity vehiclesare entitledtoexemption activities in a year, theyareentitledto a reduction of fromroyalties for the first five yearscounting from royalties corresponding to the loss amount arising the date of issue of exploitation licenses and to a in their offshore exploitation of marine resources 50%reduction of royalties forsubsequent fiveyears. but not exceedingthe payableroyaltiesamountfor Great capacity vehicles are aquatic resources- not more than five consecutive years following the exploiting shipsand vesselsfittedwithmainmotors period of royalties exemption and reduction. A of 90 horsepower (CV) upwards. dossierof declaration for royalties reduction,which shall be sent togetherwiththe royalties finalization Based 0(\ theirlicenses for offshore expluilaliol1 declaration dossier, comprises: of aquaticresources,organizations and individuals shall assess by themselves their satisfaction of -Adocumentshowing howthereducedroyalties royalties exemption and reduction conditions and amountis calculated. notify their managing tax offices of the period in -A writtendeclaration of turnover, expensesand which thevare entitled to royalties exemption and lossarisingfromtheoffshore exploitation of marine reduction. resources. Forbusiness establishments conducting offshore III. Exemption from royalties on natural forest exploitation ofaquatic resources andpaying royalties productspermitted for exploitation by inhabitants by the declaration method, at the end of the tax in forestedcommunes, suchas wood,treebranches, period. they shall determine by themselves the firewood, bambooof vanous kinds,alang grass, in actually exemptedor reducedroyalties amounts in serviceof theirdailylife, including surplusproducts order to make royalties declarations and take responsibility for theexemptedor rcdueedroyalties sold. Exploited products may be sold within the districtwhere they areexploited. amounts theydeclare. Thosethatdishonestly assess theirconditions for royalties exemption orreduction Heads of managing tax offices shall, at the in order to enjoythe exemptedor reduced royalties proposals of commune-level People's Committees amounts higher than they are entitled to shall be andtheforestprotection unitsdirectly managingthe forced to pay the evaded royalties amounts and forests, decide to exempt these products from handled according to regulations. royalties. Such a decision must specifythe types of Duringthe time of operation, if theirconditions natural resources permitted forexploitation, sites and for royalties exemption and reduction change, forms of exploitation and outlets, The period of resulting in a reduction of the tax rebate level, royalties exemption statedin eachdecisionmustnot organizations and individuals conducting offshore exceed 3 months. Tax offices shall conduct © VIETNAM LAW & LEGAL FORUM Issue nos 06.07/Augusl 2007 OFFICIAL GAZETTE 33 (Cong Bao nos 546·5471August 9,2007) inspections again before continuing to issue these 6. Ground leveling and filling for the construction decisions. of key national works as decided by the Government If detecting cases of taking advantage of royalties on a case by case basis. exemption to excessively exploit natural forests, tax 7. The exemption from royalties on soil exploited offices shall withdraw royalties exemption decisions for ground leveling and filling fUI the consuucuon (if any) and refer the cases to competent authorities of works at this Point is also applicable to sand, stone, for handling in accordance with current law. gravels, etc., in the exploited soil which are used in crude form for grounding leveling, filling and IV. Exemption from royalties on natural water construction purposes. used in the generation of hydroelectricity that is not connected to the national electricity grid. When exploited sand, stone, gravel, etc. are then processed into other products for use in production Heads ofmanaging tax offices shall, at the written and business activities, they are not entitled to requests of the exploiting organizations or exemption from royalties but must be declared for individuals (with comments of the provincial-level payment of royalties according to current Industrial Service on the non-connection to the regulations. national electricity grid), shall decide on exemption For cases mentioned at Points I, 2, 3. 4 and 5 of from royalties for this case. this Section, the exploiting organizations or V. Exemption from royalties for soil exploited individuals shall send written requests for-royalties and used for the following purposes: exemption, enclosed with related documents used for obtaining the approval of competent authorities 1. Ground leveling and filling forthe construction of the construction of works in their localities, to of security and national defense works; the managing tax offices in the areas of exploitation for knowledge and monitoring of royalties 2. Ground leveling and filling for the construction exemption. of dykes and water irrigation works in direct service of farm production, forestry, fishery and construction of roads; Part V 3. Ground leveling and filling for the construction TASKS, POWERS AND of works for humanitarian and charitable purposes RESPONSIBILITIES OF TAX OFF'ICES or works reserved for those who have rendered Apart from the tasks, powers and responsibilities meritorious services to the revolution; defined III tax laws and other relevant laws, the tax 4. Ground leveling and filling for the construction offices that manage business establishments have of infrastructure works in mountainous regions (in the following responsibilities: mountainous districts on the list announced by the I. To propagate, disseminate, guide, and respond Committee on Ethnic Minorities and Mountainous to inquiries of business establishments into, tax Regions) for socio-economic development in the policy, tax declaration and payment procedures so regions. that business establishments can correctly 5. Soil exploited within the areas ofland assigned understand and comply with the provisions of tax or leased for leveling, filling, heightening, and law and the tax self-assessment and tax payment building of works; mechanism. © VIETNAM LAW & LEGAL FORUM 34 OFFICIAL GAZETTE I••ue no. OO·07/Augu.t 2007 (Gong Baa nos 546-547/AugusI9, 2007) 2. To monitor the tax self-assessment and according to current law. When detecting cases of payment by business establishments: violations, tax offices shall notify them to functional - Past the prescribed deadline for submission of bodies and coordinate with the latter in handling monthly tax declarations or for annual tax them according to their competence. finalization, tax offices shall send notices reminding 3. When detecting and confirming false the submission of such declarations and impose fines declarations, tax evasion or tax-related mistakes, tax for administrative violations according to current offices shall collect the tax arrears andJor fines or regulations. Past the last deadline for submission of refund tax amounts within the time limit prescribed declarations stated in the reminding notices, if by current tax law. If organizations and individuals business.establishments still fail to pay royalties, tax exploiting natural resources fail to make declarations offices shall assess the payable tax amounts and payment of royalties, the time limit for collection according10 regulations. of tax arrears and fines shall be counted from the - Past the prescribed deadline for royalties time the business establishments commence payment, tax offices shall send tax payment- operation. reminding notices to business establishments, which fail to payor have not yet paid in full ParlVII royalties amounts, and impose fines for royalties amounts still owed to the state budget according ORGANIZATION OF IMPLEMENTATION to regulations. This Circular takes effect 15 days after its 3. To supervise and inspect the royalties publication in "CONG BAO" and replaces the declaration and payment by business establishments. Ministry of Finance's Circular No. 153/1998m- 4. To apply measures to force the payment of BTC of November 26, 1998, guiding the royalties and fines according to the provisions of implementation of the Government's Decree No. law. 68/1998/ND-CP of September 3, 1998, detailing the implementation of the Ordinance on Royalties 5. To keep confidential information provided by (amended), Circular No. 8312005/TT-BTC of production and business establishments according September 22,2005, guiding the experimental self- to regulations. assessment and self-payment of royalties by business establishments under the Prime Minister's Decision ParlVI No. 16l!2005/QD-TTg of June 30, 2005, and Circular No. OS/2006m-BTC of January 19,2006, HANDLING OF VIOLATIONS, guiding royalties on natural water used for COMMENDATION, COMPLAINTS AND STATUTE OF LIMITATIONS hydropower generation. Problems arising in the course ofimplementation 1.The handling of violations, commendation, and should be reported to the Ministry of Finance for lodging of complaints related to royalties are additional guidance, governed by current law. For the Minister ofFinance 2. All cases of deliberate exploitation of natural VICe Minister resources banned from exploitation shall be handled TRUONG CHI TRUNG © VIETNAM LAW & LEGAL FORUM Issue nos 06.07/Augusl 2007 OFFICIAL GAZETTE 35 (Gong Bao nos 546-5471A ugust 9, 2007) Appendix No.1 at the bottom of the declarations. GUIDANCE ON DECLARATION 01<' 5. Business establishments that exploit various ROYALTIES types of natural resources shall make only one (Attarhed tn the Mil1i,try af Finance's Circular declarationevery month and make a royaltiesfinaliza- No. 4212007!IT-BTC ofApril27, 2007) tion declaration at the end of the year, in which each type of natural resource is declared on a line and the total figure reflects the total arising royalties amollnt. PaN I the estimated rebatable amount and the amount GENERAL PROVISIONS payable in the period of the business establishment. 1.In the royalties declaration form, the following Pan II abbreviation and acronym are used: - 'TN" is an acronym standing for "tai nguyen" GUIDANCE ON MAKING ROYA"IJTIFB (natural resource). DECLARATIONS (Form 01lfNg) - "Business establishment" refers to business organizations and individuals. Column (2): Name of natural resource 2. Business establishments exploiting natural Business establishments shall calculate royalties resources shall make and send to the tax office for each type of natural resource at the current monthly royalties declarations (form No. 0lffNg) royalties rate. Each type of natural resource subject and annual royalties finalization declarations (form to a separate royalties rate shall be declared on one No. 02/TNg). They shall fully write all basic line of the declaration. information on the tax declaration period (month, year) and information on tax registration made with Column (3): Unit of calculation the tax office in the sections coded [01] thru [10]. To use the unit of calculation for each type of natural resource exploited, such as kg, m', ton, barrel, Should there be any change in information from code [02] to code [l 0], business establishments shall kWh, etc. make additional registration with the tax office Column (4): Exploited quantity of commercial according to current regulations and declare the natural resources additionally registered information to the tax office. To enter in this column data on the quantity, 3. Money amounts recorded on declarations shall weight or volume of each type of natural resource be rounded to the monetary unit of Vietnam dong. exploited in the month, regardless of the exploitation Do not write decimal numbers on royalties situation and purpose. declaration forms. If no data arising in the period, to If the exploited natural resources are used for the leave the relevant items blank. Do not fill in dark- production of products or the provisions of services color boxes in the declaration. and their quantity cannot be detennined, the taxable 4. Royalties declarations sent to the tax office quuntity of natural resources shall be determined lit are considered valid only if they are completed the conversion rate based on the natural resource according to the proper form, with all items consumption norm per unit of product or service. accurately filled in as required at Points I, 2 and 3 If the quantity of the exploited natural resource above, and are signed and sealed by the cannot be identified because it contains different representative-at-law of the business establishments substances which need to be sorted, classified and © VIETNAM LAW & LEGAL FOROM 36 OFFICIAL GAZETTE Issue nos 00-07/August 2007 (GOng Bao nos 546-547/August 9, 2007) so on, the taxable quantity shall be determined of natural resource shall be prescribed by a on the basis of the quantity of each type of competent state agency in each period. substance obtained. Column (8): Royalties amount arising in the Particularly for naturalwaterusedfor hydropower period generation,the volume used as a basisfor calculation To enter in this column the data determined as of royalties is the generated volume of electricity follows: sold by the hydropower plant and connected to the electricity grid, calculated in kW/h. Royalties Quantity of Taxable amount commercial price Column (5): Taxable price per unit of natural arising = natural x per unit x Royalties resource in the resource of rate To enter in this column the taxable price of period exploited natural one unit of natural resource. Natural resource- in the resource period exploiting establishments shall determine by themselves the taxable price of one unit of natural or: resource under the provisions of the Royalties Royalties Quantity of Royalties Ordinance and guiding documents currently in amount commercial assessed force. If they cannot yet determine this price in arising = natural resource x per unit the year, they shall make declaration based on a in the exploited of natural temporary price (or accounting price), which may period in the period resource be the previous period's taxable price. Business establishments which have Just started production Column (9): Estimated rebatable royalties shall make deciarations based on the deciared plan amount in the period price. At year end or upon termination of the natural resource exploitation contract, business To enter in this column the estimated rebatable establishments shall re-determine the taxable royalties amount (if any) of each type of natural price according to actual figures for making resource exploited in the month. Monthly, business royaJties finalization declarations. establishments shall base themselves on the conditions for royalties rebate prescribed in the Particularly for natural water used for Ordinance on Royalties and guiding documents hydropower generation, the taxable price per kWh currently in force to estimate rebatable royalties shaJl be determined by the Ministry of Finance in amounts in the month for determining the payable each petlod under the guidance in this Circular royalties amount in the month and making Column (6): Royalties rate declarations. To enter in this column the royalties rate Column (10): Payable royalties amount arising applicable to the type of the exploited natural in the period resource according to Appendix 3 to this Circular. To enter in this column the data on the payable Column (7):Royaltiesassessedper urutof natural royalties amounts in the month for various types of resource natural resources, which are determined to be the To enter in this column the royalties assessed royalties amount arising in the period (column 8) per unit of natural resource by competent less the estimated rebatable royalties amount authorities. The assessment of royalties per unit (column 9). © VIETNAM LAW & LEGAL FORUM Issue nos 06=07IAugusI2007 OFFICIAL GAZETTE 37 (Cong Bao nos 546-547/August 9, 2007) Pari/II line corresponding to each item of the column. For columns (2), (3), (6) and (7), to make similar INSTRUCTION ON MAKING ROYALTIES declaration as guided in PartII. FlNALIZATION DECLARATIONS (Form No. 02ffNg) - To enter into columns (4), (5) and (8) the data actually wising in the year. Business establishments exploiting natural - For cases of royalties rebate, business resources shall make tax finalization declarations for establishments shall determine rebatable royalties determining the royalties amounts actually payable amounts in the year according to actual figures and in the yearupon year end ortermination of exploitation declare these amounts in column (9). At the same contracts or in the cases of merger, consolidation, time, they shall compile dossiers of application for division, separation, dissolution, bankruptcy, royalties rebate and send them together with the transformation of ownership; assignment, sale, declarations to the tax office. contracting or lease uf state enterprises. Such The total figure of relevant items in the columns declaration shall be made as follows: reflects the annual amount finalized by business - To declare each type of natural resource on a establishments. Do not fill in dark-color boxes. Appendix No.2 ROYALTIES TARIFF (Attached to Circular No. 42120071TT-BTC ofApril 27, 2007) Royalties rate No. Groups and types of natural resources I Metallic minerals 1 Minerals of ferrous metals (iron, manganese, titanium, etc.) . _- _ ... _ .. -". 2 Minerals of non-ferrous metals: - Mineral sand gold 2 - Gold nuggets 3 - Rare earths 4 - Platinum, tin, tungsten, silver, antimony 5 - Lead, zinc, aluminum, bauxite, copper, nickel, cobalt, molybdenum, 3 mercury, magnesium, vanadium, platinum. - Minerals of other non-ferrous metals 2 © VIETNAM LAW & LEGAL FORUM 38 OFFICIAL GAZETTE Issue nos D6·07IAugusI2D07 (Cdng 880nos 546-547IAugust 9,2007) II Non-metallic minerals (except for thermalmineral water and natural water specified in Section VII below) 1 Non-metallic miuerals used as common construction materials: - Earth exploited for ground-leveling, fill-up or building of projects 1 - Non-metallic minerals used as other commonconstruction 2 materials (stone, sand, gravel, earth for brick-making, ...) 2 Non-metallic minerals used as high-quality construction materials 3 (granite,dolomite, fire clay, quartzite,...) 3 Non-metallic minerals used in industrial production (pyrite, apatite, 4 phosphorus, kaolin, mica, technical quartz, stone for lime and cement manufacture, sand for glass manufacture...) Particularly: apatite, serpentine 2 4 C.oal: Pit anthracitecoal 1 Open-east anthracitecoal 2 Lignite, fat coal 3 Other coals 2 5 Gems: at Diamond, ruby, sapphire, emerald, alexandrite, precious black 8 opal '0/ Adrit, rhodolite, pyrope, beryl, spinel, topaz, crystalline quartz 5 (purple blue, greenish yellow, orange), crlschte, precious pal (in white or scarlet),feldspar, birusa, nephrite c/ Other gems 3 © VIETNAM LAW & LEGAL FORUM Issue nos 00-07/August 2007 OFFICIAL GAZETTE 39 (GIJng Bao nos 546-547/August 9, 2007) 6 Other non-metallic minerals 2 III Petroleum (l) IV Gas (2) V Natural forest products 1 Lug limber uf various kinds: - Group I 40 - Group II 35 - Groups III and IV 25 - Groups V, VI, VII and VIII 15 2 Pit props 15 3 Timber used as raw materials for paper production (storax, pines, 20 etc.) 4 Timber used as masts or poles un river net fishing 20 5 Impregnated timber, mangrove timber 25 6 Tree branches and tops, firewood 5 7 Bamboo of all kinds 10 8 Pharmaceutical materials: - Sandalwood, codonopsis and aloe ?5 - Anise, cinnamon, aquilegia, cardamom 10 - Pharmaceutical materials of other types 5 9 Other natural forest products - Wild birds and animals (those allowed to be hunted) 20 - Other natural forest products 5 VI Natural aquatic resources - Pearl, abalone, holothurian 10 - Shrimp, fish, cuttlefish and other aquatic resources 2 ------ © VIETNAM LAW & LEGAL FORUM 40 OFFICIAL GAZETTE Issue nos 06·071Augus12007 (C6ng Baa nos 546-547!August 9,2007) vn Mineral water, natural water (including thermal natural water) 1 Natural mineral water; purified natural water, bottled or canned 4 2 Natural water used for hydroelectricity generation 2 3 Natural water exploited for production sectors (other than those specified at Points 1 and 2): a) Used as main or auxiliary raw materials which constitute material 3 elements of products I b) Used for general production purposes (industrial hygiene, 1 cooling, making of steam, production of Ice, except purifed ice, etc.) c) Natural water used for production of safe water, for agriculture, forestry, fishery or salt making, and natural water exploited from 0 dug and drilled wells to meet daily needs Natural water exploited for purposes other than those stipulated in 0 " Points 1,2 and 3 vm Other natural resources Salangane's nests 20 Other natural resources 10 (1) (2): Royalties rates for petroleum and gas are applied according to Articles 44 and 45 of the Government's Decree No. 48/2000/ND-CP of September 12, 2000, detailing the implementation of the Petroleum Law.- © VIETNAM LAW & LEGAL FORUM