Name of recommendations: Recommendations on amending regulations of price bracket for calculating royalties for groups and the same types of natural as well as kinds of resources having the same physicochemical properties according to the Circular No. 44/2017 / TT-BTC

Status: Responded

Recommended by units: The Hanoi Gemstones and Gold Joint Stock Company

Official letter: No 2065/PTM - VP, dated: 2018-09-17

Recommended contents:

The Hanoi Gemstones and Gold Joint Stock Company, formerly known as the Hanoi Gemstones and Gold Company, is a State-owned enterprise under Vietnam Gemstones  and Gold Corporation (old Cooperation), established under a decision of number 1942 / QD-TCCB on July 15, 1996 of the Ministry of Heavy Industry (now is the Ministry of Industry and Trade). In 2005, the Company equitized under the Decision No. 2720 / QD-BCN dated August 25, 2005 of the Ministry of Heavy Industry (now is the Ministry of Industry and Trade) in which the State shareholder (the Mineral Corporation - VINACOMIN) owns 48.31% of shares.

Recently, our company had been informed that the General Department of Taxation – the Ministry of Finance was collecting opinions from localities, associations and enterprises ... about price bracket for calculating royalties for groups and the same types of natural as well as kinds of resources having the same physicochemical properties  (Circular No. 44/2017 / TT-BTC). As a company specializing in gemstone business, we found that there were some following problems:

In the Circular No. 44/2017 / TT-BTC in code II20 on Diamonds, Ruby, Sapphire item II200102 and II200201 on natural resource tax rates of ruby ​​and sapphire jewelry without defects > 2mm from VND 25,000,000 to VND 30,000,000 million / member was not reasonable because:

+ Ruby and Sapphire according to geological reserves (241.08 kg) as well as mining reserves (299.03 kg) were calculated in units of kilograms (kg) and each kilogram of ruby ​​products and raw sapphire might be thousands of pellets sized from 2mm to 10mm and larger. Through reality exploration of the Company (Results of classification and quality classification at the Exploration Report of Ruby-Sapphire in Ty-Khe Met Hill area, Chau Binh Commune, Quy Chau District, Nghe An Province by the Cong The Company that approved by the Mineral Reserves Assessment Council) for the ruby-sapphire with size from 2-3mm to 56% (without counting tablets) and types with sizes from 3-5mm to 33.69% (not counting tablets). Thus, it could be seen that ruby ​​and sapphire were small in size from 2-5mm to 89.69% and according to the analysis results of this type, the number of tablets could not be counted, so it was impractical to apply the price calculated by tablets.

+ Ruby and sapphire exploited that had quality class A + B + C + D + E, in which only types A and B were valuable jewelry and grade D and E were not valuable for jewelry. According to the results of classification and quality decentralization in the Exploration Report, rubies, sapphires of type A and B only occupied 21.5% and were in the group of small size from 2-5mm (count of tablets could not be counted). The fact that ruby and sapphire had size> 5mm achieved quality with jewelry value was very rare and could not be determined, depended very much on the chance factor.

+ Currently according to the Company's business practices as well as the market type A ruby and rough sapphire (type of commercial value) with the size of 2-3mm, only from USD 1,000 to 2,000 / kg (about VND 23,500. 000 - VND 47,000,000 / kg).

- The use of calculation units was also unreasonable because of Ruby gemstone content - Sapphire was calculated in g / m3 and the volume was calculated in kilograms (kg): Report of Ruby-Saphia exploration in Ty- Khe Met Hill area, Chau Binh Commune, Quy Chau District, Nghe An Province was recognized by the Mineral Reserves Assessment Council with the Decision No. 143 / QD-HDTL / CT to realize the temporary norm of calculating Ruby-Saphia reserves in the Ty-Khe Met Hill area, Chau Binh Commune, Quy Chau District, Nghe An Province: The minimum content of ruby ​​+ sapphire + corindon was> 2mm, according to the volume > 4g / m3. The Company's exploration report was approved by the Mineral Reserves Assessment Board at the Meeting on January 15, 2009 and then the reserves of the mine was approved by the Mineral Reserves Assessment Council according to the Decision. No. 647 / QD-HDTLKS dated February 26, 2009, according to this Decision, the quarry Ruby-Saphia Ty-Khe Met Hill Area, Chau Binh Commune, Quy Chau District, Nghe An Province had gem reserves (Ruby- Sapphire) type A + B + C + D + E was 241.08 kg.

- About product prices: Based on the production and business results of Quy Chau Gemstone mine in previous years of Nghe An Gemstones and Gold Company (now was Nghe An Gemstones and Minerals Company under the Hanoi Gemstones and Gold Joint Stock Company) from 1992-1995 with the average USD selling price of 1kg of rough exploited gemstones that was about VND 437,000,000/kg - equivalent to about 39,700/kg, including 01 valuable tablet with most weight 56carat (11.2g) sold with USD 560,000 (about VND 6,160,000,000 at the exchange rate at that time), and at the same time based on the level of inflation and the general price increase of Vietnam to the time of the project. Let us temporarily calculate the average selling price of 1kg of raw gemstones at VND 600,000,000/kg. At present, our company expected to sell from VND 800,000,000 - 960,000,000/kg of exploited ruby-sapphire products.

From the above data, the prices of ruby ​​and jewelry sapphire that were not disabled> 2mm from VND 25,000,000 to VND 30,000,000 according to the Circular No. 44/2017 / TT-BTC of the Ministry of Finance.should only apply to the sapphire type A with size > 5 mm and was manipulated (ccould not be determined in exploitation due to chance factors), but applying to royalties tax rates of rubies and sapphires was not suitable in reality and was impossible to implement.

Through the above comments and analysis, the Hanoi Gemstones and Gold Joint Stock Company would like to propose the General Department of Taxation – The Ministry of Finance to amend the code of II20 on Diamond and Ruby-Sapphire on the natural resource tax rates of ruby and sapphire of the Circular No. 44/2017 / TT-BTC:

- Use units in kilograms (kg).

- Combining group codes II200102 with II200103 into group code II200102; The group code II200201 with II200202 into group code II200201.

- Applying a price for calculating royalties for rubies and sapphires: Minimum price: VND 800,000,000/kg and maximum price of VND 960,000,000/kg (This price was relatively consistent with the proposal of the Nghe An Provincial People's Committee at the Document No. 2857 / UBND-KT dated May 3, 2018 to the Ministry of Finance and the General Department of Taxation requesting the Ministry of Finance to supplement 02 categories: Code II200105: Ruby rough with the price of VND 800,000,000 / kg and Code II200205 : Sapphire with a price of VND 800,000,000/kg).

Hanoi Gemstones and Gold Joint Stock Company would like to request the General Department of Taxation – the Ministry of Finance, the Ministry of Natural Resources and Environment, the Vietnam General Department of Geology and Minerals to provide a royalty tariff for rubies and sapphires with the unit of kilogram (kg) and the price from VND 800,000,000 -960,000,000/ kg as proposed by the company to facilitate the company to soon fulfill its financial obligations to the State as well as paying mining rights, completing the application for mining license at Ty-Khe Met Hill area, Chau Binh Commune, Quy Chau District, Nghe An Province and being granted a Mining License in the most recent time for employees of the Company to have jobs and income to help them stabilize their lives and feel secure working.