On 19 January 2009, the National Assembly issued Decree No. 05/2009/ND-CP providing detailed regulations and guidelines on the amended Ordinance on Royalties ("Decree 05").

Full Update

Decree 05 defines royalty payers as organizations or individuals who exploit natural resources in any form.

Natural resources

Natural resources contained within the land, islands, internal waters, sea territory, exclusive economic zones and continental shelf under the sovereignty and jurisdiction of Vietnam are subject to royalties, including:

  • Metallic mineral resources
  • Non-metallic mineral resources comprising minerals used as common construction materials and exploited soil used for leveling and construction or as raw materials for project works and for other purposes, mineral water and natural water as stipulated in the Mineral Law
  • Crude oil and natural gas as defined in the Law on Petroleum
  • Coal gas as defined in Law amending the Law on Petroleum
  • Natural forest products (including flora, fauna of all kinds and other kinds of natural forest products)
  • Natural sea products (including natural flora and fauna of all kinds in the sea, rivers, canals and lakes)
  • Natural water comprising surface water and underground water
  • Other natural resources

Basis for calculation of royalties

Royalties are calculated based on quantities of actual commercial output, taxable prices and tax rates.

Under Decree 05, the quantity of actual commercial output is the quantity, weight or volume of actual output of resources within the tax period, regardless of the purpose for exploitation of such resources.

The taxable price is the selling price of each resource unit at the exploitation place. For natural resources exploited within a month and of the same grade and quality, the taxable price is the selling price of such resources at the exploitation place, excluding value added tax. If a natural resource is exploited within a month but there is no turnover generated from its sale, then the taxable price is determined on the basis of the taxable price of such resource in the preceding month.

If the selling price of the resource is not determined on the above basis, the taxable price may be calculated on one of the following basis:

  • The average market selling price of a resource of a similar kind with a corresponding value
  • The selling price of pure products and the contents of such substances in the exploited resource
  • A percentage of the selling price of the product produced or processed from the exploited resource

Decree 05 provides that for natural water used in electricity production, the taxable price is the average selling price of commercial electricity. For timber, the taxable price is the selling price at the timber yard. For crude oil, the taxable price is the weighted average price of crude oil sold at the delivery point in accordance with arm's length contracts. The Ministry of Finance shall determine the taxable price if crude oil, natural gas and coal gas are not sold through arm's length contracts.

Royalty tariffs set out in Decree 05 vary with the type, quantity and volume of exploited natural resources.

Exemption and Reduction of Royalties

Royalties are exempted in the following cases:

  • Entities exploiting resources who as a result of an unforeseen natural disaster, epidemic or accident suffer a loss of the exploited resource for which they have declared and paid royalties
  • Individuals who exploit natural forest products for daily activities (such as timber, tree branches, firewood and bamboo of all kinds)
  • Exploitation of natural water used in hydro power production that is not supplied to the national grid
  • Exploitation of soil for non-trading purposes, including national security and defence projects, construction works serving agriculture, forestry or fishing, charity or welfare purposes, development of life in mountainous areas and key national works

Entities engaging in deep-sea exploitation of sea products by high-capacity facilities shall be exempted from royalties for five years from the issuance of the exploitation licence, and granted a 50% reduction for five years thereafter. If after this duration of exemption from and reduction of royalties entities exploiting resources still suffer a loss, further reductions of royalties corresponding to the amount of loss of each year for a period not exceeding five subsequent and consecutive years may be considered.

Decree 05 came in force as from 19 January 2009.

For inquiries related to this Client Alert, please contact:

Dao Nguyen (

Hoang Anh Nguyen (

Chi Do (

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