Circular No. 1199/TCT/NV5 of the General Department of Taxation dated March 23, 2000 on guiding the implementation of VAT refund for projects using ODA funds.

Respected: Provincial Tax Departments
under the central government

To implement Circular No. 142/1999/TT-BTC dated December 10, 1999 of the Ministry of Finance guiding the implementation of Decision No. 223/1999/QĐ-TTg dated December 7, 1999 of the Prime Minister on VAT applicable to projects utilizing official development assistance (ODA) funds, the General Department of Taxation guides the provincial tax departments on the following issues:

1. Subjects eligible for VAT refund:

- For projects using non-repayable ODA funds (including the non-repayable ODA portion funded through separate agreements within projects borrowing ODA funds that are invested by the State budget without repayment and projects borrowing ODA funds relented from the State budget): The main subjects eligible for VAT refund are the principal contractors. When settling payments with subcontractors and domestic suppliers, the principal contractors include VAT in their payments. The VAT paid by the principal contractors will be refunded according to the guidelines set out in Circular No. 142/1999/TT-BTC.

In cases where project sponsors directly purchase goods and services that have already had VAT included in their purchase prices, such VAT will also be refunded according to the guidelines set out in Circular No. 142/1999/TT-BTC.

- For projects using ODA loan funds that are invested by the State budget without repayment: The main subjects eligible for VAT refund are the project sponsors. If the tender contract between the project sponsor and the principal contractor specifies that the tender price does not include VAT, then the principal contractor will be entitled to a refund of the VAT paid when importing or purchasing goods and services from subcontractors and domestic suppliers for the project. In this case, when settling payments with the project sponsor, the principal contractor does not charge output VAT.

- For projects using non-repayable ODA funds or ODA loan funds that are invested by the State budget without repayment that were underway before Decision No. 223/1999/QĐ-TTg took effect, when settling payments for completed work prior to the effective date of Decision No. 223/1999/QĐ-TTg, the project sponsor or principal contractor pays the suppliers or subcontractors at prices inclusive of VAT. The VAT paid will be refunded as follows:

+ In cases where the principal contractor is exempted from VAT according to Circular No. 82/1998/TT-BTC dated June 30, 1998 of the Ministry of Finance and did not charge VAT when settling payments with the investor, the full input VAT paid by the principal contractor to subcontractors will be refunded according to the guidelines set out in Circular No. 142/1999/TT-BTC.

+ In cases where the principal contractor pays output VAT equivalent to the turnover tax rate according to Circular No. 82/1998/TT-BTC, the principal contractor will be refunded the unutilized input VAT, and the investor will be refunded the VAT paid to the principal contractor.

+ In cases where the principal contractor calculates and pays VAT according to the current Law on Value Added Tax, the project sponsor will be refunded the entire amount of VAT paid. The principal contractor declares and pays VAT according to current regulations.

In cases where the principal contractor is a consortium consisting of multiple parties and each party performs separate tasks, each member of the consortium is the subject eligible for VAT refund. If the consortium members divide income according to a contract, the consortium as a whole is the subject eligible for VAT refund. If the consortium members divide revenue according to a contract, the party responsible for issuing invoices to the project sponsor is the subject eligible for VAT refund. The tax department must carefully review the consortium contract to accurately determine the subject eligible for VAT refund, issue tax registration numbers, and process the VAT refund according to regulations.

2. Documents for requesting VAT refund: The documents for requesting VAT refund for ODA-funded projects have been detailed for specific cases in Circular No. 142/1999/TT-BTC dated December 10, 1999 of the Ministry of Finance. The tax departments must guide and require project sponsors or principal contractors to fully comply with the requirements for VAT refund documents to avoid delays in issuing refund decisions.

According to the guidelines in Circular No. 142/1999/TT-BTC, ODA loan projects invested by the State budget without repayment are projects utilizing ODA loan funds provided by the central or local government budgets for all or part of the counterpart funding and recorded in the investment decision of the competent authority.

In cases where the investment decision does not clearly specify that the project funds come from non-repayable ODA funds or ODA loan funds invested by the State budget without repayment, the tax department requires the project sponsor or principal contractor to provide additional confirmation in writing from the authority issuing the investment decision.

For projects decided upon by the Prime Minister, the Ministry of Finance (Department of Foreign Financial Affairs) will confirm the source of project investment funds. For cases requesting refunds of VAT paid before the effective date of Decision No. 223/1999/QĐ-TTg, the project sponsor or principal contractor must provide clear explanations regarding the calculation of VAT for the project, the output and input VAT generated, and the amount of VAT requested for refund according to the guidelines in Circular No. 142/1999/TT-BTC.

The project sponsor and principal contractor are responsible for the accuracy of the documents submitted for VAT refund.

3. Process for issuing tax registration numbers and VAT refunds:

a) The issuance of tax registration numbers is carried out according to the guidelines in Circular No. 79/1998/TT-BTC dated June 12, 1998 of the Ministry of Finance.b) The process for VAT refunds:

To effectively implement VAT refunds and ensure the refund deadlines for ODA-funded projects as stipulated in Decision No. 223/1999/QĐ-TTg of the Prime Minister and the guidelines of the Ministry of Finance, the tax departments must organize the issuance of tax registration numbers and VAT refunds for principal contractors or project sponsors, ensuring compliance with the refund deadlines specified in Decision No. 223/1999/QĐ-TTg of the Prime Minister and Circular No. 142/1999/TT-BTC of the Ministry of Finance.VAT refund:

To effectively implement VAT refund procedures and ensure the refund deadlines for projects using ODA funds as stipulated in Decision No. 223/1999/QĐ-TTg of the Prime Minister and the guidance of the Ministry of Finance, tax bureaus must organize the issuance of tax registration numbers and VAT refunds for principal contractors or project owners, ensuring compliance with the refund deadlines set forth in Decision No. 223/1999/QĐ-TTg of the Prime Minister and Circular No. 142/1999/TT-BTC of the Ministry of Finance.

Upon receiving the tax refund application file, the Tax Department must check the validity of the file. In cases where the file is incomplete, within two working days, the Tax Department must issue a written notice to the Project Owner or Main Contractor regarding the status of the file and specific requirements for completing it.

Within three working days from the date of receiving all valid documents and certificates, the Tax Department must complete the procedures for VAT refund for the Project Owner or Main Contractor eligible for VAT refund according to Circular No. 142/1999/TT-BTC of the Ministry of Finance and the instructions provided in this circular.

When issuing the Decision on VAT Refund, in addition to the copies circulated as instructed in Circular No. 1497 TCT/KH dated March 19, 1999 of the General Tax Department, the Tax Departments must also send one copy to the financial management agency of the project (the State Budget Department of the Ministry of Finance for cases funded by the Central Government budget, the Provincial Finance Department for cases funded by the Local Government budget), and in cases of VAT refund for the Main Contractor, an additional copy must be sent to the Project Owner.

If the Project Owner directly imports goods subject to VAT, the Project Owner may request to record the VAT payable amount together with the import duty payable amount (if applicable). The procedure for recording such amounts shall be carried out as instructed in Circular No. 4102 TC/TCT dated August 19, 1999 of the Ministry of Finance, which provides guidance on recording import duties and excise duties on imported goods for projects using ODA funds. For these cases, the Tax Department does not need to issue a decision on VAT refund.

VAT refunds shall not be processed for cases where the Project Owner or Main Contractor purchases domestic goods or materials without a valid VAT invoice (except for cases without tax identification number as stipulated in Point 2, Section V of Circular No. 142/1999/TT-BTC of the Ministry of Finance).

4. Examination of the VAT refund application file:

In cases where there are doubts about the refund application file or errors in the preparation of the VAT refund application file by the Project Owner or Main Contractor, the Tax Department has the right to request the Project Owner or Main Contractor to present relevant purchase invoices and documents related to determining the amount of VAT requested for refund. The examination of the VAT refund application file must be conducted reasonably and shall not affect the time for issuing the Decision on VAT Refund.

The input VAT that has been refunded according to Circular No. 142/1999/TT-BTC shall not be deductible when calculating the monthly VAT payable amount for taxpayers. The Tax Departments at provincial and municipal levels must take measures to coordinate among their subordinate units to prevent, detect, and promptly handle cases of exploiting the VAT refund regulations to embezzle state budget funds.

For cases requesting VAT refunds before the effective date of Decision No. 223/1999/QĐ-TTg of the Prime Minister, the Tax Department will process the refund based on the application and supporting documents provided by the Project Owner or Main Contractor. After the refund, the Tax Department will transfer the file to the Management Office for Refund Eligible Entities to verify whether the previously refunded VAT had been declared for deduction or refund by the Project Owner or Main Contractor. If the VAT had already been deducted or refunded previously, the Tax Department will issue a Decision to recover the tax and impose penalties on the taxpayer according to the regulations.

5. For projects utilizing ODA funds borrowed from the state budget, the Project Owners must arrange matching funds to pay VAT to domestic Contractors and Suppliers and pay VAT on imported goods according to the provisions of the Law on Value Added Tax and guiding documents. Cases eligible for VAT exemption or taxation at a turnover rate as specified in Point 4 of Circular No. 82/1999/TT-BTC dated June 30, 1999 of the Ministry of Finance will be implemented until December 10, 1999.

The paid VAT will be deductible or refunded according to the provisions of Circulars No. 89/1998/TT-BTC dated June 27, 1998 and No. 93/1999/TT-BTC dated July 28, 1999 of the Ministry of Finance.

6. To facilitate the Tax Departments' monitoring and implementation of tax management and VAT refund for ODA-funded projects, the General Tax Department attaches a list of ODA projects in various localities up to September 1, 1999 with this circular. The Tax Departments should proactively contact the Planning and Investment Departments of provinces and cities to update the list of approved projects subsequently.

During the implementation of VAT refunds for ODA-funded projects, if any issues arise, the Tax Departments should report them to the General Tax Department for timely guidance on handling.