CIRCULAR

providing guidelines to the implementation of Governmental Decree
No. 68/1998/ND-CP dated September 3, 1998 stipulating concrete regulations
on the implementation of the Ordinance on Natural Resource Tax (amended)
****

In implementing the amended Ordinance on Natural Resource Tax issued by the National Assembly Standing Committee on April 16, 1998 and Governmental Decree 68/1998/ND-CP dated September 3, 1998 providing concrete regulations on the implementation of Ordinance on Natural Resource Tax (amended), the Ministry of Finance hereby provides implementation guidelines as follows:

I. Tax payers and subject to tax

l. All organizations and individuals belonging to all economic sectors, including State-owned enterprises, joint stock companies, limited liability companies, co-operatives, private enterprises, foreign-invested enterprises or the foreign partners taking part in business co-operation contracts (BCCs) signed in accordance with the Law on Foreign Investment in Vietnam, business house- holds, and other organizations and individuals which tap natural resources in accordance with legal regulations of Vietnam must register, list and pay natural resource tax as regulated in Article 1 in the Ordinance on Natural Resource Tax (amended), except those set in item 5 in I in this circular, regardless of their areas of business, scale and form of operation.

2. Natural resources subject to tax are natural resources found in the land, islands, inner waters, special economic zones and the continental shelf belonging to the sovereignty of the Socialist Republic of Vietnam, including:

a. Metallic minerals: comprising ferrous metals (iron, manganese and titanium...), and non-ferrous metals (gold, rare earth, platinum, tin, wolfram, copper, lead, zinc and aluminium...).

b. Non-metallic minerals: soil for making bricks, dug soil, soil used for construction and soil used for other purposes; stone, sand, gravel; coal, precious stone, mineral water and natural hot water as regulated in the Law on Minerals.

c. Petroleum: crude oil as regulated in item 2 in Article 3 in the Law on Oil and Gas.

d. Fuel gas: natural gas as regulated in item 3 in Article 3 in the Law on Oil and Gas.

e. Products of natural forests, including: wood (branches, tops, twigs, trunks and roots), bamboo of all kinds, herbs, and flora and fauna allowed to be tapped being products of natural forests.

f. Natural aquatic products: natural kinds of animals and plants in natural seas, rivers, lakes, ponds and lagoons.

g. Natural water comprising: ground water, underground water, except hot water and natural mineral water as set in b.

h. Other natural resources not belonging to the above-mentioned groups.

3. Deliberate exploitation of natural resources not allowed to be tapped will be dealt with in accordance with current laws. When checking and discovering the violation, the tax body must inform and work with the competent body to deal with it according to their range of rights. In cases where the natural resources not allowed to be tapped are detained, confiscated and allowed to be sold, the organization in charge of the sale must calculate the natural resource tax into the selling price and pay it to the State Budget.

4. Foreign-invested enterprises and the foreign partners taking part in BCCs which are paying for the natural resources or paying the tax on natural resources according to the concrete level as set in the investment license granted before June 1, 1998 will be able to continue the payment according to such regulation until the deadline of the license comes, and must later abide by regulations in this circular if they can have their investment license renewed.

5. It is regulated in Article 3 in the Ordinance on Natural Resource Tax (amended) and Article 3 in Governmental Decree 68/1998/ND-CP dated September 3, 1998 that in cases where domestic enterprises set up JVs with the foreign partners operating in accordance with the Law on Foreign Investment in Vietnam, and the Vietnamese partner contributes to the legal capital of the JVs in the form of natural resources as stated in the investment license, the JV will be exempted from the natural resource tax regarding the natural resources used by the Vietnamese partner as legal capital contribution. Every three and six month, the Vietnamese partner must declare the derived natural resources used for capital contribution, and report to the Ministry of Finance to balance it in the State Budget and manage capital according to current regulations.

6. In cases where enterprises mining natural resources are set up based on the BCC and product sharing contract, the natural resource tax the JV is due to pay or of the foreign partner must be stated in the JV contract and is calculated into the share of products given to the Vietnamese partner. When the products are divided, the Vietnamese partner has the responsibility to pay the natural resource tax to the State Budget according to the State Budget Law.

II. Basis for tax calculation and tax table

The amount of natural resource tax due to be paid in a tax payment period is calculated as follows:

The amount to be paid is equal to the multiplication of the commercial volume of natural resources actually tapped, the price subject to tax of each unit of natural resources and the tax rate, minus the amount of tax reduction or exemption (if there is any).

1. The commercial volume of natural resources actually tapped is the quantity, weight or volume of the natural resources actually tapped in a tax payment period, not depending on the current situation and purposes of exploitation (for on-spot sale, barter, inner consumption, preservation or production...)

-Regarding those kinds of natural resources of which the quantity, weight or volume of the actually tapped volume cannot be identified as they contain numerous elements and the content of waste is high the natural resource tax will be calculated based on the quantity, weight or volume of each element derived from sorting and classification.

eg. A company in a tax payment period must grade thousands of cum of soil, stone and water (the exact volume of which cannot be identified) in order to obtain two kg of gold dust and 100 tonnes of iron ore. The natural resource tax it must pay then is calculated based on the obtained volume of gold dust and iron ore.

-In case of irregular, non-mechanized, scattered or mobile exploitation of natural resources resulting in management difficulties, the seasonal or periodical volume of tapped natural resources can be contracted. The tax body works with the local authorities and specialized management body to identify the contracted volume. As well, if the tapped volume of natural resources are concentrated at major purchasing points and if the purchasers agree, the provincial or municipal tax department can decide in writing to allow the purchasing organizations or individuals to pay the natural resource tax in place of the exploiting entities.

2. Price subject to tax: It is regulated in Article 7 in Governmental Decree 68/1998/ND-CP dated September 3, 1998 that the price subject to natural resource tax is the selling price of each unit of the natural resources at the place of exploitation, an d is concretely identified in each of the following cases:

a. Regarding those kinds of natural resources of which the volume can be identified at the exploitation stage, and which can be sold immediately after the exploitation (such as soil, stone, sand, gravel, seafood...), the price subject to natural resource tax is the actual selling price at the place of exploitation minus the turnover tax or not including the VAT (if there is) due to be paid. If expenses are incurred due to transportation, forwarding and storing from the place of exploitation to consumption, these expenses will be deducted when the price subject to natural resource tax is identified; in such cases, if the tapped natural resources are not sold (but for example used for the following production process), the price subject to tax set by the provincial or municipal People's Committee will be applied in accordance with the principle regulated in Article 7 in Governmental Decree 68/1998/ND-CP dated September 3, 1998.

b. Regarding those kinds of natural resources of which the volume can be identified at the exploitation stage, but cannot be sold after having been sorted and classified, the price subject to natural resource tax is the selling price of the sorted and classified products, deducting expenses incurred from the exploitation place to other places, with the percentage of the classified product against the volume of natural resources actually tapped clarified for the unit price subject to tax to be identified, and minus the turnover tax or not including VAT.

eg. One tonnes of clean coal sells for VND65,000, of which the cost of grading and transportation from the place of exploitation to the selling point accounts for VND10,000. The ratio of clean coal of the exploited volume is 80 percent. So the price subject to tax of one tonne of coal at the place of exploitation is the multiplication of VND65,000 minus VND10,000 and 80 percent, and the turnover tax or VAT is deducted after that.

c. Regarding those types of natural resources of which the volume cannot be identified at the exploiting stage due to much waste and sophisticated nature, the price subject to tax is the actual selling price of each substance at the place of exploitation , minus the turnover tax or not including VAT.

eg. Gold dust, iron ore.

d. Regarding natural resources which are tapped and used as production materials such as natural water used for producing purified water and mineral water, as well as beer and beverages, or soil used for industrial production or handicrafts, the price subject to natural resource tax is the selling price of the final product minus expenses incurred during the production process (including the turnover tax and VAT to be paid but not exploitation costs), with the minimum level not lower than the price subject to tax set by the provincial or municipal People's Committee.

Organizations and individuals which tap natural resources must properly abide by regulations on accounting, book-keeping and documentation mechanism, and their price subject to tax is calculated and identified according to guidelines provided in a, b, c or d. In other cases and where natural resources are tapped for purposes other than those set in a, b, c and d, the price subject to natural resource tax to be applied is one set by the provincial or municipal People's Committee according to principles regulated in Article 7 in Governmental Decree 68/1998/ND-CP dated September 3, 1998. The provincial or municipal Tax Department must consult the local Finance-Pricing Department and the specialized management body to identify the price subject to natural resource tax to submit to the provincial or municipal People's Committee for decision and reporting to the General Department of Tax.

e. The price subject to natural resource tax regarding natural water used for hydro-power plants is the selling price of commercial electricity, and regarding wood is the selling price at the second storing yard. Regarding oil and fuel gas, the price subject to natural resource tax will abide by regulations set in the Law on Oil and Gas, and Article 47 in Governmental Decree 84/CP dated February 17, 1996 providing concrete regulations on the implementation of the Law on Oil and Gas.

f. The natural resource tax table will abide by the tax rate table attached to Governmental Decree 68/1998/ND-CP dated September 3, 1998 (attached to this circular). Based on the value of each type of natural resource, exploitation conditions and management requirements regarding each type of natural resource, the managing ministry or branch will collect statistics and documents related to the natural resource exploited to report to the Ministry of Finance for adjustment of natural resource tax rate in line with the tax table regulated in Article 6 in the Ordinance on Natural Resource Tax. The adjustment of natural resource tax rates can only be done in cases of necessity and regarding specific types of natural resource with no exception.

III. Listing, registration and payment of natural resource tax

1. In accordance with Article 9 in Governmental Decree 68/1998/ND-CP dated September 3, 1998, organizations and individuals which exploit natural resources have the responsibility to:

-Register natural resource exploitation activities at the tax department at least 1Q days after the receipt of the license to tap natural resources, or five days before the merging, incorporating, splitting, disbandment or bankruptcy, or any changes to the exploitation activities. The registration is made in two copies, one of which is sent to the tax department which directly manages the tax collection and the other kept at the exploiting business (model 1 attached to this circular).

-Properly follow the set mechanism regarding sale documentation, money collection and accounting process in accordance with current relevant regulations.

-List the amount of natural resource tax to be paid for the previous month every month or at least on the 10th day of the following month (model 2 attached to this circular), also in cases where no natural resource tax is derived, and send it to the tax department. The list is made in two copies verified by the taxman directly managing the tax collection, one of which is sent to the tax department and the other kept at the exploiting business. In cases of exploiting natural minerals which are hard to list every month, the listing period can be longer, more suitable to the nature of the exploitation in accordance with written guidelines of the provincial or municipal tax department.

-Pay the natural resource tax according to the deadline set in the notice of the tax department, but no later than the 25th day of the month following the month in which the natural resource tax is derived.

-Within 30 days after the end of the operational year or exploitation contract, organizations and individuals tapping natural resources must make and send the natural resource tax payment balance to the tax department. Within 10 days after the tax department checks and issues the notice, organizations and individuals tapping natural resources must make and remit the natural resource tax payment balance to the tax department. Within 10 days after the tax department checks and makes the notice, organizations and individuals tapping natural resources must pay the short tax (if there is) to the budget; the excess tax paid will also be returned within this set period of time, or transferred to the amount to be paid next time.

In cases where organizations and individuals carry out non-mechanized, scattered or irregular natural resource exploitation activities, they can be allowed by the tax department to pay the tax according to contracting method as regulated in point 1 in part II of this circular, and the tax department must base on the declaration of the exploiting entities as well as practical investigation findings regarding the natural resources, capital, workforce, equipment and facilities and the price of natural (resources in order to accurately identify the amount of natural resources actually exploited and the natural resource tax to be paid. The setting of the contracting level must be made public, fair and consistent to the exploitation capacity of the exploiting business . The contracting of natural resources can be included in the contracted collection of other kinds of tax.

2. The body which directly manages the collection of natural resource tax has the following duties, rights and responsibilities:

-Providing guidelines to, and urging exploiting businesses to register and list the payment of natural resource tax.

-Checking the registration, tax payment listing and tax balance of exploiting businesses.

-Calculating the tax or organizing the investigation, supervision and setting of the contracting level; compile and approve tax records, inform exploiting businesses of the amount of natural resource tax to be paid and the payment deadline in accordance with relevant regulations; and issue legal collection receipt to the businesses which pay natural resource tax.

-Checking and supervising natural resource exploitation activities; periodically and regularly checking documentation and accounting records so that to timely discover and address violations.

-Requiring taxpayers to produce accounting records, documentation and other documents related to the calculation and payment of natural resource tax; requiring credit organizations, banks and other related organizations and individuals to produce references related to the calculation and payment of natural resource tax.

-Dealing with administrative tax violations, and settling complaints related to natural resource tax.

-Keeping in achieves and using statistics and documents provided by exploiting businesses and others in accordance with current relevant regulations.

The tax department has the right to set the natural resource tax amount due to be paid for the businesses according to regulations in Article 9 in the Ordinance on Natural Resource Tax (amended).

3. All organizations and individuals when transporting natural resources must produce a sales invoice or documented proof of the completion of natural resource tax obligation.

4. Natural resource tax is a source of collection of the State Budget, and is paid to the State Treasury at the place of exploitation. In cases where the exploiting businesses are small and scattered, the amount of natural resource tax is small and the State Treasury is too far away, the tax department can collect the tax directly for transfer to the treasury later. Based on the actual situation, the tax department must set a deadline regarding the day and the amount of tax to be collected.

IV. Natural resource tax reduction and exemption

1. In accordance with Article 10 in the Ordinance on Natural Resource Tax (amended) and Article 12 in Governmental Decree 68/1998/ND-CP dated September 3, 1998 providing concrete guidelines for the implementation of the ordinance, the reduction and exemption of natural resource tax will be conducted as follows:

-If projects subject to investment preferences as regulated in the Domestic Investment Encouragement Law and other legal documents of the Government providing concrete guidelines for the implementation of the Domestic Investment Encouragement Law exploit natural resources (except oil and gas), they are to enjoy a reduction of at most 50 percent of the natural resource tax to be paid in the first three years after they start exploiting; regarding projects belonging to the above-mentioned group and which are operational, tax reduction for the remaining period of time since the Ordinance on Natural Resource Tax (amended) comes into effect will be considered. The tax body which directly manages the cases will base on the establishment license, the investment preference certification and regulations in legal documents providing guidelines for the implementation of the Domestic Investment Encouragement Law to decide the tax reduction.

2. Organizations and individuals which exploit natural resources and encounter natural disasters, wars and sudden accidents resulting in losses to the natural resources they have listed and paid the tax for will be exempted from the tax levied on the lost natural resources. In cases where the natural resource tax is already paid, it will be returned or transferred to the amount of natural resource tax due to be paid next time as long as the payers agree. The level of loss will be identified as follows.

-Regarding natural resources which are lost in specific volume, the losses will be identified according to the specific lost volume.

-Regarding natural resources which suffer from quality and content degradation, the price of natural resource tax and amount of tax due to be paid will be re-valued and identified. The amount of exempted natural resource tax is equal to the differential between the amount of tax calculated and listed previously and the amount calculated after the occurrence of the losses.

eg. The ratio of clean coal in the exploited volume is 80 percent, but this drops to 50 percent due to rains and storms, and in this case the price subject to tax will be re-calculated and the tax differential to be exempted identified.

Procedures regarding asking for tax reduction include:

-The petition document in which the masons of the losses are clearly stated, and so are the losses and amount of tax asked to be reduced.

- The recorded minutes of the check and verification of the direct managing tax body is attached to be petition for natural resource tax reduction. The director of the tax department decides to grant the natural resource tax to organizations and individuals suffering from losses.

3. Organizations and individuals catching sea life in offshore areas using large facilities will be exempted from natural resource tax for the first five years starting from the receipt of the license, and enjoy a reduction of 50 percent during the following five years. Large fishing facilities include ships and vessels with the main engine being more than 90 HP. Base on the petition document and the license allowing off- shore fishing of organizations and individuals, the director of the direct managing tax body will decide the tax exemption and reduction for each specific year. Regarding cases where offshore fishing activities were started before June 1, 1998, the natural resource tax exemption and reduction will start from June l, 1998 with the terms regulated.

eg. Enterprise A was granted a license to carry out offshore fishing in December 1997, and as such will be able to enjoy a five year exemption of natural resource tax, and a reduction of 50 percent in the five following years, starting from June 1, 1998. During the operational period, if organizations and individuals catching offshore sea life have any changes regarding conditions for tax exemption and reduction, lowering the tax preference, they must inform the nearest tax body for certification. If they attempt not to inform the tax body of the changes in order to continue to enjoy the tax exemption and reduction, they will be considered tax evaders, and dealt with in accordance with Article 11 in the Ordinance on Natural Resource Tax (amended). After the period of enjoying natural resource tax exemption and reduction (10 years) and organizations and individuals carrying out offshore fishing activities still incur losses, a natural resource tax reduction equal to the losses incurred in each year of a period of no more than five consecutive following years will be considered.

4. Natural resource tax will be exempted regarding natural forest products allowed to be tapped by local people of communes with forests such as wood, branches, firewood, leaves, and bamboo of all kinds for their daily life, including the excessive amount to be sold. The scale of sale is within the district of exploitation. Based on the proposal of the People's Committee of the commune and the forest inspection directly managing the forest, the director of the direct managing tax body will decide the natural resource tax exemption in this case. The decision must clearly state in detail the types of natural resources allowed to be tapped, area and form of exploitation and after that the tax body must re-check the situation before issuing another natural resource tax exemption decision. Those who are discovered as having made use of the natural resource tax exemption to exploit natural forests at random will have their tax exemption decision (if there is) withdrawn by the tax body, and be dealt with by a competent body in accordance with current legal regulations.

5. Natural resource tax exemption will also be applied to natural water used for running hydro-power plants not for the national power grid. Base on the proposal of the exploiting organizations and individuals and after having consulted the provincial or municipal department of Industry, the director of the direct managing tax body will decide the natural resource tax exemption for this case.

6. Natural resource tax exemption will be applied to soil tapped for the following purposes:

1. Leveling and building facilities serving security and national defense.
2. Leveling and building dams and irrigation facilities directly serving agriculture, forestry, fisheries and construction of roads.
3. Leveling and building of facilities constructed for humanitarian or charitable purposes, or in favour of those contributed to the country's revolution.
4. Leveling and building infrastructure facilities in mountainous areas (at district level being mountainous ones included in the list issued by the Committee for Ethnic Minorities and Mountainous Areas) serving the development of local social-economic life.
5. Exploiting within the assigned land area, or the area rented to level and build within the area.
6. Leveling and building major projects of the nation in accordance with the decision of the Government for each specific case.

In cases listed in a, b and c, exploiting organizations and individuals must hand in a petition, clearly stating the reasons, including the verification and proposal of the People's Committee at provincial or district level (if the projects are managed b y the district) where the construction takes place to the direct managing tax body at the place of exploitation for consideration and identification of the tax level.

V. Treatment of violations and awards - Complaints and statute of limitations

The treatment of violations and granting of awards to organizations and individuals will abide by Articles 11, 13 and 14 in the Ordinance on Natural Resource Tax. The right to lodge a complaint and the procedures and range of competence to deal with complaints related to natural resource tax will abide by Articles 15 and 16 in the Ordinance on Natural Resource Tax.

If a false statement, evidence of tax evasion or mistake is discovered and confirmed, the tax body has the responsibility to collect the amount of tax due to be paid or the fine, or return the tax paid within five years prior to the discovery of the false statement, attempted tax evasion or mistake. In cases where the organizations and individuals exploiting natural resources do not list and pay the tax, the term for collecting tax and fine will start on the day they start doing business.

VI. Implementation provisions

Tax bodies at all levels have the duty to inform and provide guidelines to exploiting businesses regarding proper implementation of the Ordinance on Natural Resource Tax, Governmental Decree 68/1998/ND- CP dated September 3, 1998 and regulations in this circular.

The circular takes effect as of September 18, 1998, and replaces all prior guiding legal documents of the Ministry of Tax regarding natural resource tax. If any problems and difficulties arise during the implementation process, exploiting businesses, branches and areas must immediately report to the Ministry of Finance for consideration and settlement.

pp. Minister of Finance
Deputy Minister of Finance

PHAM VAN TRONG