fee – Duane Morris Vietnam

Recently, the Ministry of Planning and Investment issued the Draft Decree on the Government’s incentives for businesses suffering from the consequence of the corona virus pandemic. It is aimed that by the end of 2021, at least 01 million businesses will have access to favorable credit policies, reduction or termination of payment of tax, land fees as well as electricity, water, telecommunication charges. The Draft Decree is pending the Prime Minister’s approval.

Under the Draft Decree, there are four key groups of tasks for government agencies.

Group 1: Implement flexible and effective measures to prevent and control the COVID-19 pandemic, creating conditions for enterprises to stabilize and maintain production and business activities.

Group 2: Ensure stable production, smooth and efficient circulation of goods, overcome supply chain disruptions

_ Apply fast-track customs clearance for aid or donation from abroad for the healthcare sector to deal with the pandemic
_ Allow enterprises to submit scanned copies certified by digital signatures for documents that must be submitted as originals in the form of paper/notarized/certified original to resolve bottlenecks of customs clearance of goods

Group 3: Support to cut costs, remove difficulties in cash flow for businesses

_ Propose policies suspending or reducing the social insurance premiums in 2021 for businesses until June 2022.
_ Develop a plan to support air transport enterprises, and report to the Prime Minister in September 2021.
– Requesting shipping companies to publicly and transparently list shipping rates to eliminate unreasonable increase in freight rates that lead to cost burden for enterprises
_ Reduce of electricity prices for goods warehouses of logistics and processing enterprises in the agriculture, forestry, fishery and a number of commodity industries with export turnover of over USD 1 billion USD. Continue to reduce electricity prices for tourist accommodation establishments.
– Expeditiously implement the issued policies on relaxation and reduction of taxes, fees, charges and land rents; implement preferential tax policies for imported goods to finance COVID-19 prevention and control after being approved by the Government.
– Extend the deadline for paying excise tax on automobiles manufactured or assembled in Vietnam. Continue to reduce registration fees for domestically manufactured or assembled cars for an additional period of time in line with the COVID-19 pandemic.
_ Research to allow travel businesses to temporarily withdraw deposits for domestic and international travel and tourism services; reduce deposit withdrawal settlement time from 60 days to 30 days; continue to extend the reduction of the license fee for travel service business and issue tourist guide cards until the end of 2021.
_ Continue to administer monetary policy to control inflation, contributing to stabilizing the macro-economy; encourage credit institutions to continue reducing lending interest rates for existing loans and new loans to support production and business.
_ Supplement policies on debt rescheduling, exemption and reduction of interest and fees, keeping the same debt group for customers affected by the Covid-19 epidemic
_ Research and consider the exemption of trade union fees for members of businesses affected by the COVID-19 pandemic in 2021 and 2022

Group 4: Regarding labor issues, experts

_ Propose policies to flexibly apply and relax regulations and conditions on the grant and extension of work permits for foreign experts working in Vietnam
_ Adjust regulations on tax finalization and bad debt and for borrowing capital to pay wages to employees when restoring production and business.

This is the second Draft Decree issued by the Ministry of Planning and Investment upon collection and investigation of opinions from Deputy Prime Minister Vu Duc Dam, Deputy Prime Minister Le Van Thanh and opinions of 15 ministries. As such, it has reflected the current situations as well as takes into consideration the cities’ and provinces’ proposals. The Vietnam Government has continuously proved that it accompanies the business community to immediately implementing measures to remove difficulties and bottlenecks in production and business with the motto “soonest – most effective” in order to minimize damage and negative impacts on the business sector.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

The economy of Vietnam is heavily dependent on the mining industry. Using modern, high technology in mining was emphasized by Directive No. 2/CT-TTg of January 2012 and Decree No. 15/2015/ND-CP and during a visit by the Prime Minister to Australia. However, the legislation governing the mining sector seem unfriendly to both foreign and local investors, especially concerning the high royalty rates and other taxes and fees, particularly:

• Payment for mining rights: Under Decree No. 203/2013/ND-CP, mining companies have to make a payment between 1-5% of the original value of the original ore to get mineral exploitation rights before receiving licenses. This fee is impractical and will deter foreign companies from investing in the mining industry. The reason behind is that in this period, they must spend a lot on exploitation and mining construction without any revenue. Accordingly, they will seek to reduce their investment in mining technologies to pay for such fee. Consequently, advanced and environmentally friendly technology is not used by mining companies for exploitation, resulting in economic inefficiency. In light of the above, the Government should amend the Decree to allow such fee to be paid on an annual basis after the mining companies make revenue.
• Environmental protection fee: Circular No. 158/2011/TT-BTC imposes the environmental protection fee on the basis of “the quantity of crude metal mineral ores actually exploited”. The calculation of such fee is only based on the mineral output without taking into account the level of pollution caused by each mine. This regulation is not fair because mining companies using advanced technology to limit impacts on the environment and those which are using cheap technology and destroying the environment must pay the same fee. It will discourage mining companies from investing in modern machinery and technology to protect the environment. The Circular should be amended to reflect the fee calculated in proportion to the levels of pollution caused by mining exploitation.
• Royalty tariff on minerals: Under Resolution No. 712/2013/UBTVQH13, the natural resources tax has considerably increased for many types of minerals such as wolfram (18%), titanium (16%), copper (13%), iron (12%), etc. Although the natural resources tax for gold, silver, alumina and bauxite, tin, lead and zinc was not increased but was subject to 10% royalty tariff. Moreover, the Ministry of Finance proposes increasing tax on exploitation of natural resources for almost minerals at 15-50% from 1 January 2016. This has increased the tax burden on the mining companies and it is likely that they will be liquidated. Therefore, the Government should support this industry by postponing the tax increase.
• Corporate income tax for mining enterprises: Decree No. 122/ND-CP amending and supplementing a number of articles of the Government’s Decree No. 124/2008/ND-CP detailing and guiding the implementation of a number of articles of the Law on Enterprise Income Tax No. 14/2008/QH12 reduced Corporate Income Tax for all companies to 25% except for mining of precious and rare natural resources which are currently fixed at 50%. Under this Decree, the rate will be reduced to 40%, more than 70% of the mine areas located in difficult social-economic areas. The Decree also confirmed that mineral exploitation activities do not enjoy other incentives of the enterprise income tax.

Although the royalties, fees and taxes of the mining operations in Vietnam are high, but the ways they are collected and spent afterwards are not transparent. The business community is not informed of fee management. The environmental protection fee must be used to recover the environment at the mining areas, however, the mining companies have to pay a fee for this. The Government should publicize information on licensing and financial obligations of the applicants for mining operations and fee management.
Additionally, the Government should not raise taxes at this period because an increase in tax and mining right fee will cause a reduction in investment of the mining companies in the technology. Accordingly, they will use cheap machinery and technology for their mining exploitation activities and this goes contrary to the Prime Minister’s Directive.
In conclusion, in order to encourage more investments in mineral exploitation operations and use of advanced and environmental friendly technology for mining industry, the Government should control the tax collection instead of raising taxes and provide transparency on fee and tax management.

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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

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Tag: fee

VIETNAM – THE GOVERNMENT ISSUES FAVORABLE POLICIES ON TAX AND FEES FOR BUSINESSES AMID THE WORST COVID-19 OUTBREAK

Mining in Vietnam – And the Message is:Better Transparency on Fee and Tax Management by Authorities