Circular No. 109/2007/TT-BTC guides the financial management regime of the State for non-governmental foreign aid not included in state budget revenue.

CIRCULAR

Guidelines on the State Financial Management System for Non-Governmental Foreign Aid Not Included in State Budget Revenue

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Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 64/2001/QĐ-TTg dated April 26, 2001 of the Prime Minister promulgating the Regulation on the Management and Use of Non-Governmental Foreign Aid;

The Ministry of Finance issues guidelines on the State financial management system for non-governmental foreign aid not included in state budget revenue as follows:

Part 1

GENERAL PROVISIONS

1. These guidelines provide guidance on the State financial management system for non-governmental foreign aid provided by foreign non-governmental organizations, other organizations, and foreign individuals, including overseas Vietnamese, who support non-state organizations in Vietnam to achieve humanitarian and development goals through negotiations, signing, and approval in accordance with the Regulation on the Management and Use of Non-Governmental Foreign Aid issued together with Decision No. 64/2001/QĐ-TTg dated April 26, 2001 of the Prime Minister.

Other forms of support from foreign non-governmental organizations and other organizations and individuals not covered above shall be considered gifts and are not subject to the management and guidance provided for in these guidelines.

2. Non-governmental foreign aid not included in state budget revenue refers to the non-governmental foreign aid mentioned in Section 1, Part I of these guidelines, which is directly supported by sponsors to non-state organizations to enhance their capacity and operational conditions, and approved by the competent authority of the non-state organization (as stipulated in Point 2, Article 6 of the Regulation on the Management and Use of Non-Governmental Foreign Aid issued together with Decision No. 64/2001/QĐ-TTg dated April 26, 2001 of the Prime Minister).

3. Non-state organizations referred to in these guidelines include the following types of legal entities.

a) Political organizations, political-social organizations;

b) Social organizations, social-professional organizations;

c) Social funds, charitable funds;

d) Economic organizations;

đ) Other non-governmental organizations.

4. Non-governmental foreign aid not included in state budget revenue may be used for the following purposes.

a) Regular activities expenses;

b) Research, training, and seminar expenses;

c) Purchase and construction of working facilities for the organization;

d) Other organizational expenses.

5. Non-governmental foreign aid not included in state budget revenue provided by non-state organizations must bear full responsibility under the law for transparent management, effective use, and compliance with intended purposes and commitments made to sponsors. Project leaders/aid-receiving units are not required to bid when using aid funds for expenditures as prescribed in the management and use of state budget funds.

Part 2

SPECIFIC PROVISIONS

I. RECEIVING AID

To implement tax exemption provisions for non-reimbursable aid goods, when receiving direct aid in the form of goods, basic construction projects carried out under the "turnkey" methodor using aid funds to purchase goods, such goods must be confirmed as aid according to the following regulations. or use aid funds to purchase goods, such goods must be confirmed as aid in accordance with the following provisions.

1. Authority to confirm aid

The competent authority to confirm non-governmental foreign aid not included in state budget revenue is the Ministry of Finance.

2. Requesting entity for aid confirmation.

The project leader/aid-receiving unit is the entity requesting aid confirmation, and the request for confirmation is reflected in the aid confirmation declaration form.

3. Aid confirmation declaration form.

3.1. The aid confirmation declaration form issued together with these guidelines includes.

- Form C1-HD/XNVT. "Declaration Form for Confirmation of Imported Aid Goods" (Annex 1a) is used for declaring imported equipment, machinery, materials, raw materials, utensils, and other goods from abroad;

- Form C2-HD/XNVT. "Declaration Form for Confirmation of Domestic Aid Goods and Services" (Annex 1b) is used for declaring domestic purchases of equipment, machinery, materials, raw materials, utensils, and other goods (including service costs) funded by foreign aid;

- Form C3-HD/XNVT. "Declaration Form for Confirmation of Aid in Cash" (Annex 1c) is used for declaring foreign cash aid.

In cases where foreign aid is provided in the form of goods, individual items, and cash to complete a basic construction project and then handed over to Vietnam under the "turnkey" method (hereinafter referred to as construction aid), the project leader/aid-receiving unit still uses Forms C1, C2, and C3-HD/XNVT for declaration and confirmation of aid, but must mark the section "construction aid" and provide additional information about the project (name, location, expected construction and handover time). After completion and handover by the sponsor, the project leader/aid-receiving unit needs to compile these declaration forms into a list confirming construction aid (according to the form at Annex 2 of these guidelines). This list, along with the acceptance report, serves as legal grounds for the tax authority to process VAT refunds.

3.2. Management of aid confirmation declaration forms.

After the Ministry of Finance completes the aid confirmation procedure, the declaration forms are retained and managed as follows.

- The Ministry of Finance retains two copies (for registration of aid confirmation);

- Customs and tax authorities each retain one copy for processing and archiving tax exemptions/refunds;

- The supervisory authority of the project leader/aid-receiving unit retains one copy for monitoring and compiling comprehensive reports on foreign aid;

- The project leader/aid-receiving unit retains one copy for preparing reports on receipt, payment, and settlement of aid programs/projects.

4. Time for filing the aid confirmation declaration form.

||| - Form C1-HD/XNVT: "Declaration of Confirmation of Imported Goods Aid" (Annex 1a) shall be filed immediately after the project owner/receiving entity receives the import documents (invoice; bill of lading; airway bill and/or other transport documents).

||| - Form C2-HD/XNVT: "Declaration of Confirmation of Domestic Goods and Services Aid" (Annex 1b) shall be prepared monthly at the same time as the project owner/receiving entity prepares the detailed list for the decision to refund VAT for the aid program/project.

||| - Form C3-HD/XNVT: "Declaration of Confirmation of Cash Aid" (Annex 1c) shall be filed immediately after receiving the foreign money transfer documents from abroad to Vietnam.

||| 5. Necessary documents to be attached with the declaration of confirmation of aid.

||| 5.1. For the first declaration of confirmation of aid.

||| The project owner/receiving entity must provide the financial authorities at all levels with the following documents.

||| a) Legal dossier of the aid program/project including the following main documents.

||| - Decision approving aid by the competent authority;

||| - Program/project documentation;

||| - Agreement, commitment or notification of aid;

||| - In case of necessity, the Ministry of Finance may request the project owner/receiving entity to cooperate with relevant agencies to provide information on the operating permit of the foreign non-governmental organization providing aid to the program/project.

||| b) Specific documents and certificates to prove the goods, services or construction aid such as import documents, disbursement notice or money transfer documents from the sponsor, domestic purchase and service rental documents, purchase contracts, handover minutes and final settlement documents for construction projects funded by foreign aid in the form of "turnkey"....

||| 5.2. For subsequent declarations of confirmation of aid.

||| The project owner/receiving entity only needs to provide the specific documents mentioned in point 5.1.b) above.

5.3. ||| The project owner/receiving entity must fully declare all the above documents in the declaration of confirmation of aid and bear legal responsibility for the accuracy of the figures and contents declared.

||| 6. Location for confirming aid.

||| The location for confirming aid shall be carried out at the Ministry of Finance (Department of Foreign Financial Affairs, Hanoi, or units responsible for managing and receiving international aid under the Department of Foreign Financial Affairs in Ho Chi Minh City and Da Nang).

||| 7. Some important points to note when filing the declaration of confirmation of aid.

||| 7.1 Price.

||| - Form C1-HD/XNVT: "Declaration of Confirmation of Imported Goods Aid" (Annex 1a) according to the actual purchase price in foreign currency on the import invoice (FOB, CIF, C&F...).

||| - Form C2-HD/XNVT: "Declaration of Confirmation of Domestic Goods and Services Aid" (Annex 1b) according to the price without tax on contracts signed between the contractor/supplier and the program/project owner.

7.2. ||| Exchange rate for converting foreign currency to Vietnamese Dong.

||| According to the foreign exchange accounting rate published monthly by the Ministry of Finance, available on the Ministry of Finance's website at the following direct access address: ||| http://www.mof.gov.vn/

7.3. ||| To facilitate the tax processing of non-refundable aid sources, the declaration of confirmation of aid must ensure the following requirements regarding the declaration of the project owner/receiving entity.

||| - Fully and accurately declare the name and contact address of the aid-receiving entity, project owner, and supervising agency.

||| - Declare the budget unit code of the project owner/receiving entity (if applicable); specifically, for aid-receiving entities that are enterprises or public institutions with income, additional tax code should be declared to facilitate tax refunds.

||| II. SETTING THE LIMIT FOR USING AID.

||| Setting the limit for using non-refundable cash aid. The project owner/receiving entity applies the expenditure level according to the donor's specified standard in the aid agreement or applies the expenditure level agreed upon by the donor's representative, the project owner/receiving entity, and the supervising agency in cases where the donor does not specify in the aid agreement.

||| III. ACCOUNTING AND SETTLEMENT OF AID.

||| The project owner/receiving entity must organize accounting for the process of receiving, managing, and using non-refundable aid in accordance with the detailed regulations and guidance provided in Decree No. 128/2004/NĐ-CP dated May 31, 2004, of the Government on the implementation of certain provisions of the Accounting Law applicable in state accounting and the accounting system prescribed by the Ministry of Finance.

||| Establish a system of vouchers, accounting books, and financial reports to reflect in detail and settle separately the value of aid not included in the state budget revenue according to the accounting laws applicable to accounting units not using state budget funds.

||| IV. FINANCIAL REPORTS AND PUBLIC FINANCIAL INFORMATION.

1. ||| Annual financial reports and settlement reports for aid not included in state budget revenue are annual financial statements. Annual financial statements and annual settlement reports must be submitted to the immediate superior authority (if any) and the same-level financial authority in accordance with Article 24 and Article 25 of Decree No. 128/2004/NĐ-CP dated May 31, 2004, of the Government.

||| 2. The immediate superior accounting unit is responsible for reviewing and approving the annual settlement of non-budgetary aid for subordinate accounting units.

||| 3. The project owner/receiving entity must publicly disclose the content of the annual financial report and the annual financial income and expenditure settlement report for non-refundable aid.

||| 3.1. Content of public financial disclosure includes.

||| - Names of programs, projects, and aid grants;

||| - Name of the aid organization and the aid agreement document;

||| - Value of aid for each program/project and grant;

||| - Settlement of income and expenditure on aid according to the Accounting Law;

||| - Audit results (if any).

||| 3.2. Forms of public financial reporting.

||| - Written report to the immediate superior authority (if any) and the same-level financial authority;

||| - Publicly posted at the headquarters of the organization;

||| - Other forms.

||| 3.3. Time of public disclosure.

||| Public disclosure of financial reports shall be carried out immediately after the annual settlement in accordance with the Accounting Law.

V. FINANCIAL HANDLING IN CASES OF SEPARATION, DIVISION, MERGER, CONSOLIDATION, CHANGE OF OWNERSHIP FORM, DISSOLUTION AND TERMINATION OF OPERATIONS BY FOREIGN ORGANIZATIONS.

1. In principle, financial resources and assets formed from non-repayable foreign aid directly provided to foreign organizations shall remain the property of such organizations for purposes consistent with their organizational and operational charters as prescribed by law. Under no circumstances may these resources and assets be converted into personal property in any form.

2. When any of the situations of separation, division, merger, consolidation, change of ownership form, dissolution, or termination of operations occurs, foreign organizations shall be responsible for implementing specific regulations on financial management as follows:

- Closing accounting books, inventorying assets, determining outstanding debts, preparing financial reports;

- Preparing handover records regarding assets, outstanding debts, and updating accounting books according to the handover records;

- Handing over all accounting documents to the new accounting unit;

- The new accounting unit shall base its accounting books and record entries according to the handover records in accordance with the Accounting Law.

3. The handover of assets and debts between the old accounting unit and the new accounting unit upon decisions to separate, divide, or consolidate must be conducted with the witnessing and confirmation of the agency issuing the decision to separate, divide, or consolidate and the corresponding financial authority.

4. Documentation related to separation, division, merger, consolidation, change of ownership form, dissolution, and termination of operations, which are accounting documents, must be retained for a minimum period of 10 years at the storage location as decided by

the competent authority deciding on separation, division, merger, consolidation, change of ownership form, dissolution, and termination of operations.

Part 3

IMPLEMENTATION

1. This Circular takes effect 15 days from the date of publication in the Official Gazette; it replaces Circular No. 32/2005/TT-BTC dated April 26, 2005, issued by the Ministry of Finance guiding the state financial management regime for non-repayable foreign aid provided to Associations.

3. During implementation, if there are any difficulties, foreign organizations should promptly report them to the Ministry of Finance for study, supplementation, and amendment as appropriate./.