Circular No. 123/2007/TT-BTC guides the implementation of tax policies and tax incentives for programs and projects using official development assistance (ODA) sources.

CIRCULAR

Hsafe school a) Report to the Ministry of Natural Resources and Environment on the results of training and upgrading, including listing the teaching staff participating in teaching, evaluating the participation of trainees in the training process, the results of organizing examinations for completing the training and upgrading program on land valuation business, the issuance of Certificates and the use of Certificate codes, summarizing the feedback from trainees on the quality of the training and upgrading program on land valuation business, and other relevant matters. Tax policies and tax incentives for programs and projects using official development assistance (ODA) funds

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Pursuant to current tax laws and ordinances of the Socialist Republic of Vietnam, and detailed implementing decrees of the Government regarding these laws and ordinances;

Pursuant to Article 28 of the Management and Utilization Regulations for Official Development Assistance issued together with Decree No. 131/2006/NĐ-CP dated November 9, 2006 of the Government on the issuance of the Management and Utilization Regulations for Official Development Assistance;

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;

The Ministry of Finance guides the implementation of tax policies for programs and projects using official development assistance funds as follows:

I. GENERAL PROVISIONS

1. This Circular applies to programs and projects using official development assistance funds (hereinafter referred to collectively as ODA projects), which have been approved by competent authorities.

2. Terms defined in Point 2, Article 1, and Article 4 of the Management and Utilization Regulations for Official Development Assistance issued together with Decree No. 131/2006/NĐ-CP are used in this Circular and shall be understood as defined in Point 2, Article 1, and Article 4 of the aforementioned regulations. In addition, in this Circular, the following terms are understood as follows:

- "Main contractor" refers to organizations or individuals directly signing contracts with the ODA project sponsor or the capital provider for the ODA project to construct works or supply goods and services for the ODA project. Main contractors include foreign main contractors and domestic main contractors.

- "Subcontractor" refers to organizations or individuals signing contracts with the main contractor to undertake part of the work under the main contractor's contract with the ODA project sponsor or the capital provider for the ODA project. Subcontractors include foreign subcontractors and domestic subcontractors.

3. Types of taxes applicable to ODA projects according to the guidance provided in this Circular include: export tax (XK), import tax (NK), special consumption tax (TTĐB), value-added tax (GTGT), income tax for high-income earners (TNCN), corporate income tax (TNDN), fees, and charges.

II. TAX POLICIES AND TAX INCENTIVES APPLICABLE TO NON-REPAYABLE ODA PROJECTS

1. Import tax (NK), value-added tax (GTGT), and special consumption tax (TTĐB) on imported goods:

Non-repayable ODA project sponsors and main contractors implementing non-repayable ODA projects are exempt from paying import tax (NK), special consumption tax (if applicable), and value-added tax (GTGT) on goods directly imported or entrusted for import by the ODA project sponsor or main contractor for the purpose of implementing the ODA project.

Documents to be presented to the customs authority at the place of importation include:

- Customs declaration forms;

- Declaration form confirming aid, certified by the financial authority in accordance with Circular No. 82/2007/TT-BTC dated July 12, 2007 of the Ministry of Finance guiding the financial management system for non-repayable foreign aid included in state budget revenue;

- A copy of the notice of successful tender attached to the goods supply contract specifying that the winning bid price does not include import tax (for cases where the successful bidder imports or entrusts the import of goods);

The customs authority shall implement the exemption from import tax (NK), special consumption tax (if applicable), and value-added tax (GTGT) on imported goods for non-repayable ODA aid projects.

2. Value-added tax (GTGT) on goods and services purchased in Vietnam:

2.1. The non-repayable ODA project sponsor can be refunded the value-added tax (GTGT) paid when purchasing goods and services in Vietnam if the contract signed with the main contractor includes value-added tax (GTGT) and the project sponsor is not allocated state budget funds to pay the value-added tax (GTGT). The refund of value-added tax (GTGT) shall be carried out in accordance with Point 4, Section V of this Circular.

Example: Non-repayable ODA project sponsor A has been authorized to sign a construction contract for a children's hospital with a bid price excluding value-added tax (GTGT) of 4 billion VND and value-added tax (GTGT) of 400 million VND (at a rate of 10%), totaling 4.4 billion VND including value-added tax (GTGT). Additionally, the said project sponsor has been authorized to sign a procurement contract for other goods and services with a bid price excluding value-added tax (GTGT) of 100 million VND and value-added tax (GTGT) of 10 million VND, totaling 110 million VND including value-added tax (GTGT). The project sponsor is not allocated state budget funds to settle payments based on the price inclusive of value-added tax (GTGT).

The non-repayable ODA project sponsor mentioned above is entitled to a refund of the input value-added tax (GTGT) paid for the construction contract and other procurement contracts for goods and services within the country amounting to 410 million VND (400 + 10 million VND).

2.2. In cases where the donor establishes a representative office in Vietnam and directly purchases goods and services for the implementation of non-repayable ODA projects or assigns the ODA project sponsor to implement non-repayable ODA projects, the donor is entitled to a refund of the value-added tax (GTGT) paid. The refund of value-added tax (GTGT) shall be carried out in accordance with Point 4, Section V of this Circular.

2.3. In cases where the non-repayable ODA project sponsor has been allocated state budget funds to pay value-added tax (GTGT) during the implementation of the project, the project sponsor is not entitled to a refund of value-added tax (GTGT).

3. Taxes on main contractors and subcontractors implementing non-repayable ODA projects:

3.1. Import tax (NK), export tax (XK), special consumption tax (TTĐB), and value-added tax (GTGT) on imported goods:

a. Main contractors and subcontractors importing goods during the implementation of contracts signed with non-repayable ODA project sponsors must pay import tax (NK), special consumption tax (if applicable), and value-added tax (GTGT) in accordance with the Law on Export Tax, Law on Import Tax, Law on Special Consumption Tax, Law on Value-Added Tax, and current guiding documents (except for goods imported by main contractors as specified in Point 1, Section II of this Circular).

b. Foreign main contractors and foreign subcontractors are exempt from import tax (NK) and do not need to pay value-added tax (GTGT) on machinery, equipment, and transportation vehicles imported into Vietnam under the temporary importation and re-exportation scheme for the purpose of serving construction works of non-repayable ODA projects, and they are exempt from export tax (XK) upon re-exportation.

Procedures for exemption from import tax (NK), non-payment of value-added tax (GTGT) upon importation, and exemption from export tax (XK) upon re-exportation shall be implemented in accordance with Circular No. 59/2007/TT-BTC dated June 14, 2007 of the Ministry of Finance guiding the implementation of export tax, import tax, and tax management for exported and imported goods.

The customs authority shall organize the implementation of tax exemption for imported goods, non-collection of VAT at the import stage, and tax exemption for exported goods when re-exporting machinery, equipment, and transportation means temporarily imported and re-exported to implement ODA projects with unconditional grants for foreign main contractors and subcontractors.

Upon completion of the construction period of the project, the foreign main contractor and subcontractor must re-export the aforementioned goods. In cases where sales occur on the Vietnamese market, such actions must be approved by competent state authorities and taxes for imports and VAT must be declared and paid according to current tax laws.

For passenger cars with less than 24 seats and vehicles designed to carry both passengers and cargo equivalent to passenger cars with less than 24 seats, tax exemptions for temporary importation and re-exportation do not apply. Foreign main contractors and subcontractors wishing to import these vehicles into Vietnam for their own use must pay import taxes and excise duties as stipulated. Upon completion of the construction project, foreign main contractors and subcontractors must re-export these vehicles to foreign countries and will be refunded import taxes and excise duties according to regulations. The amount of refund and procedures for refunds shall be carried out in accordance with Circular No. 59/2007/TT-BTC dated June 14, 2007, issued by the Ministry of Finance guiding the implementation of export and import taxes, tax management for imported and exported goods, and Circular No. 119/2003/TT-BTC dated December 12, 2003, issued by the Ministry of Finance guiding the implementation of Decree No. 149/2003/NĐ-CP dated December 4, 2003, of the Government detailing the implementation of the Law on Excise Tax and the Law Amending and Supplementing Certain Provisions of the Law on Excise Tax.

3.2. Value Added Tax (VAT), Corporate Income Tax (CIT), and other types of taxes, fees, and charges for providing goods and services in Vietnam:

The main contractor providing goods and services to the ODA grant recipient project must pay VAT (if the contract includes VAT), CIT, and other types of taxes, fees, and charges as prescribed by tax, fee, and charge laws.

The sub-contractor providing goods and services to the main contractor of the ODA grant recipient project must pay VAT, CIT, and other types of taxes, fees, and charges as prescribed by tax, fee, and charge laws.

If foreign main contractors and sub-contractors receive direct payments from sponsors without implementing Vietnamese accounting practices, they are responsible for transferring the taxes payable to the ODA grant recipient project owner or the foreign main contractor for submission on behalf of the foreign main contractor and sub-contractor according to Circular No. 05/2005/TT-BTC dated January 11, 2005, issued by the Ministry of Finance guiding the tax regime applicable to foreign organizations without Vietnamese legal status and foreign individuals conducting business or generating income in Vietnam.

3.3. Individuals working for the main contractor and sub-contractor must pay Personal Income Tax (PIT) as prescribed by PIT laws.

3.4. In cases where the main contractor (regardless of whether the main contractor is a VAT taxpayer under the deduction method or the direct method) signs a contract with the ODA grant recipient project owner or sponsor to implement an ODA grant recipient project at a price excluding VAT, the main contractor is entitled to a refund of the input VAT paid when purchasing goods and services to fulfill the contract signed with the project owner or sponsor. The refund of VAT shall be implemented according to Point 4, Section V of this Circular.

Example: Company A signs a contract with the ODA grant recipient project owner to build a school at a bid price excluding VAT of 4 billion VND, then Company A is entitled to a refund of the input VAT paid for goods and services purchased to fulfill the contract signed with the project owner.

The main contractor must separately account for input VAT on purchases of goods and services to fulfill contracts for supplying goods and services signed with the ODA grant recipient project owner or sponsor. If separate accounting for input VAT is not possible, no VAT refund will be granted.

4. Personal Income Tax (PIT) for individuals working for the ODA grant recipient project owner and the ODA grant recipient project management board:

Vietnamese and foreign individuals working for ODA projects and ODA project management boards must declare and pay PIT according to PIT laws.

5. Tax incentives for foreign experts working on ODA grant recipient projects:

In cases where individuals who are foreigners are recognized by the Ministry of Planning and Investment as foreign experts implementing ODA programs and projects and are eligible for tax and fee benefits as stipulated in the Regulation on Foreign Experts attached to Decision No. 211/1998/QĐ-TTg dated October 31, 1998, of the Prime Minister, they are exempt from import tax, excise tax, VAT, stamp duty, and PIT as guided by Circular No. 52/2000/TT-BTC dated June 5, 2000, issued by the Ministry of Finance guiding the implementation of tax and fee exemptions for foreign experts implementing ODA programs and projects.

III. TAX POLICIES AND TAX INCENTIVES APPLICABLE TO ODA LOAN PROJECTS (HEREINAFTER REFERRED TO AS ODA LOANS)

1. Import tax (NK), value-added tax (GTGT), and special consumption tax (TTĐB) on imported goods:

The ODA loan project owner importing directly or through agency importation must fulfill import tax, VAT, and excise tax obligations according to the Law on Export and Import Taxes, the Law on VAT, the Law on Excise Tax, and related implementing regulations.

2. Value-added tax (GTGT) on goods and services purchased in Vietnam:

When purchasing goods and services in Vietnam, the ODA loan project owner must fulfill VAT obligations according to the Law on VAT and related implementing regulations.

3. Tax policies for main contractors and sub-contractors implementing ODA loan projects:

3.1. Import tax (NK), export tax (XK), special consumption tax (TTĐB), and value-added tax (GTGT) on imported goods:

a. Main contractors and sub-contractors importing goods during the execution of contracts signed with the ODA loan project owner must pay import tax, excise tax (if applicable), and VAT according to the Law on Export and Import Taxes, the Law on Excise Tax, the Law on VAT, and current implementing regulations.

b. Foreign main contractors and subcontractors are exempt from import tax and do not have to pay VAT on machinery, equipment, and transportation vehicles imported into Vietnam under the temporary importation and re-exportation method for construction purposes of ODA loan projects, and are exempt from export tax upon re-exportation as specified in Point 3.1.b, Section II of this Circular.

For passenger cars with less than 24 seats and vehicles designed to carry both passengers and cargo equivalent to passenger cars with less than 24 seats, tax exemptions for temporary importation and re-exportation do not apply. Foreign main contractors and subcontractors wishing to import these vehicles into Vietnam for their own use must pay import taxes and excise duties as stipulated. Upon completion of the construction project, foreign main contractors and subcontractors must re-export these vehicles to foreign countries and will be refunded import taxes and excise duties according to regulations. The amount of refund and procedures for refunds shall be carried out in accordance with Circular No. 59/2007/TT-BTC dated June 14, 2007, issued by the Ministry of Finance guiding the implementation of export and import taxes, tax management for imported and exported goods, and Circular No. 119/2003/TT-BTC dated December 12, 2003, issued by the Ministry of Finance guiding the implementation of Decree No. 149/2003/NĐ-CP dated December 4, 2003, of the Government detailing the implementation of the Law on Excise Tax and the Law Amending and Supplementing Certain Provisions of the Law on Excise Tax.

3.2. Value Added Tax (VAT), Corporate Income Tax (CIT), and other types of taxes, fees, and charges for providing goods and services in Vietnam:

Main contractors providing goods and services to the ODA loan project sponsor must pay VAT, corporate income tax, and other types of taxes, fees, and charges as prescribed by tax laws, fee regulations, and charge rules.

Subcontractors providing goods and services to the main contractor of the ODA loan project must pay VAT, corporate income tax, and other types of taxes as prescribed by tax laws, fee regulations, and charge rules.

Foreign main contractors and foreign subcontractors are not required to follow Vietnamese accounting practices if they receive direct payments from the financier. In such cases, these foreign contractors are responsible for transferring the taxes owed to the ODA loan project sponsor or the foreign main contractor to pay the taxes on behalf of the foreign main contractor and foreign subcontractor according to the guidance provided in Circular No. 05/2005/TT-BTC dated January 11, 2005 issued by the Ministry of Finance regarding tax regimes applicable to foreign organizations without Vietnamese legal status and foreign individuals conducting business or generating income in Vietnam.

3.3. Main contractors providing goods and services to the ODA loan project sponsor are not entitled to a refund of the VAT input tax paid when purchasing goods and services to fulfill contracts signed with the ODA loan project sponsor as specified in Point 4, Section V of this Circular. The main contractor will be eligible for deduction and refund of VAT input tax applied to businesses subject to VAT under the deduction method if they meet the conditions and procedures as guided in Circular No. 32/2007/TT-BTC dated April 9, 2007 issued by the Ministry of Finance guiding the implementation of Decree No. 158/2003/NĐ-CP dated December 10, 2003, Decree No. 148/2004/NĐ-CP dated July 23, 2004, and Decree No. 156/2005/NĐ-CP dated December 15, 2005 of the Government detailing the implementation of the Law on Value Added Tax and the Law Amending and Supplementing Certain Provisions of the Law on Value Added Tax.

3.4. Individuals working for main contractors and subcontractors must pay personal income tax as prescribed by personal income tax laws.

4. Personal income tax of Vietnamese and foreign individuals working for the ODA loan project sponsor, the ODA loan project management board; tax incentives and fees for foreign experts working for ODA loan projects are implemented as specified in Points 4 and 5, Section II of this Circular.

5. For mixed ODA loan projects where non-repayable ODA funds are financed through separate agreements or disbursed separately for specific activities within the project, the corresponding project implementation shall apply the tax policies outlined in Section II of this Circular.

In cases where there is no separate financing agreement or separate disbursement for specific activities of non-repayable ODA funds, the tax policy for mixed ODA loan projects shall be implemented as for ODA loan projects outlined in Section III of this Circular.

IV. COLLECTION AND PAYMENT OF TAXES

Goods, machinery, equipment, and transportation vehicles imported for ODA projects that have been exempted from import tax, special consumption tax, and VAT as specified in Point 1, Section II; Point 1, Section III of this Circular, if used for purposes other than those for which the exemption was granted or sold at the domestic market, must obtain permission from the competent state authorities. The ODA project sponsor, main contractor, and subcontractor must make up for the exempted import tax, special consumption tax, and simultaneously pay VAT.

Procedures for making up for import tax, special consumption tax, and declaration and payment of VAT shall be carried out in accordance with the Law on Import Tax, Law on Export Tax, Law on Special Consumption Tax, Law on Value Added Tax, and related implementing regulations.

In cases where the ODA project sponsor is a state management agency, political organization, social-political organization, or occupational social organization that does not engage in business operations, and is permitted to sell goods purchased for the ODA project or liquidate assets in the domestic market, the ODA project sponsor must use invoices as prescribed by the Ministry of Finance.

V. IMPLEMENTATION

1. Responsibilities of the ODA Project Sponsor Regarding Tax Obligations During the Implementation of the ODA Project:

Providing documentation for tax administration of ODA projects: Within fifteen working days from signing construction contracts, supply contracts, or service provision contracts with foreign main contractors or ODA program/project sponsors, the ODA program/project sponsors must submit a copy of the contract (stamped and confirmed by the authorized person of the ODA program/project sponsor) to the local tax authority where the project management office is located and the tax authority where the construction site of the ODA project is situated (in case the construction site is in a different locality from the location of the ODA project management office). If the contract is signed in a foreign language, a summary of the contract in Vietnamese containing key information including scope of work, contract value (including detailed components constituting the contract value - if any), payment terms, contract duration, obligations and responsibilities of the parties involved in the contract must be submitted. The ODA project sponsor is legally responsible for the accuracy of the information submitted to the tax authority.

Determining the form of ODA provision and applicable tax policy: The basis for applying tax policies as guided in this Circular is the investment decision and approval of the ODA project by the managing agency of the ODA program/project and the guidance on the form of ODA provision in Decree No. 131/2006/NĐ-CP dated November 9, 2006 of the Government. In cases where the investment decision or approval of the ODA project does not clearly specify the form of ODA provision as non-repayable ODA, preferential ODA loans, or mixed ODA loans, the ODA project sponsor or the main contractor must supplement a document issued by the managing agency of the ODA program/project confirming the form of ODA provision for the project. Specifically, for projects decided on investment by the Prime Minister (national key projects), a confirmation document from the Ministry of Planning and Investment regarding the form of ODA provision for the project is required.

Perform tax obligations, fees, and charges in accordance with the current laws on taxes, fees, and charges and the guidance provided in this Circular.

Notify the main contractors who have signed contracts to supply goods and services to the ODA Project Owner about the tax policies and tax benefits that the contractors are required to implement and enjoy.

Prepare financial plans: The ODA Project Owner must calculate all tax amounts as guided in this Circular, arising during the entire project implementation before submitting the project for approval by the competent authorities overseeing the ODA program or tender results. The ODA Project Owner must determine the import tax, excise tax, VAT (except where not payable or refunded), and other fees and charges to be paid, and prepare a counterpart fund plan to ensure funds for the aforementioned taxes. For corporate income tax payable by contractors included in the contract value, and personal income tax included in labor costs, no counterpart fund plan shall be prepared.

Financial planning shall be carried out in accordance with the guidelines issued by the Ministry of Finance.

Report to the financial management authority managing the project's finances the amount of VAT refunded according to the guidelines on financial management mechanisms for ODA projects issued by the Ministry of Finance.

2. Responsibilities of the Tax Management Authority:

Guide ODA Project Owners, Sponsors, main contractors, and subcontractors to register for taxes, declare and pay taxes or receive tax refunds (if applicable) in accordance with the prescribed regulations, and notify bank accounts and budgetary records for tax payments.

Review tax declarations, check accounting books, invoices, and other necessary documents for tax calculation.

Require ODA Project Owners, main contractors, and subcontractors to provide accounting books, invoices, and other relevant financial documents related to tax calculation, payment, and refund.

Determine the amount of tax due in cases where ODA Project Owners, main contractors, and subcontractors fail to declare within the prescribed time limit, declare inaccurately, or fail to provide complete and accurate information related to tax calculation.

Inspect and audit the tax payment, final settlement, and refund situations of ODA Project Owners, main contractors, and subcontractors in accordance with current laws.

Record and handle tax violations within the scope defined by law.

Be responsible for enforcing tax laws, ensuring accuracy, truthfulness, and objectivity.

Confirm the tax payments made by ODA Project Owners, main contractors, and subcontractors and bear responsibility for the accuracy of the confirmed tax amounts.

3. Implementation of International Agreements:

In cases where international agreements (including international agreements on ODA) signed or joined by the Government of Vietnam contain provisions regarding taxes related to the implementation of a specific ODA project that differ from the guidance in this Circular, the tax policy for that ODA project shall be implemented in accordance with the signed international agreements.

4. Procedures and Documentation for Refunding VAT for Non-Reimbursable ODA Project Owners, Sponsor Representatives, and Main Contractors Eligible for VAT Refunds as stipulated in Point 2, Section 3.4, Chapter II of this Circular:

4.1. The procedures for tax registration and issuance of tax identification numbers for ODA Project Owners, sponsors, and main contractors shall be conducted in accordance with Circular No. 85/2007/TT-BTC dated July 18, 2007, issued by the Ministry of Finance guiding the implementation of the Law on Tax Administration concerning tax registration.

4.2. The documentation for VAT refunds, deadlines for declaring input VAT, organization receiving the documentation, and implementing VAT refunds shall be carried out in accordance with Circular No. 60/2007/TT-BTC dated June 14, 2007, issued by the Ministry of Finance guiding the implementation of certain provisions of the Law on Tax Administration and guiding the implementation of Decree No. 85/2007/NĐ-CP dated May 25, 2007, of the Government detailing the implementation of certain provisions of the Law on Tax Administration.

In the documentation for VAT refunds submitted to the tax authority, the main contractor must clearly state the name of the ODA project, the name of the ODA Project Owner, and the contact address of the ODA Project Owner via postal service.

4.3. When issuing the Decision on VAT Refund, in addition to the interchanged documents as guided in Circular No. 60/2007/TT-BTC dated June 14, 2007, issued by the Ministry of Finance guiding the implementation of certain provisions of the Law on Tax Administration and guiding the implementation of Decree No. 85/2007/NĐ-CP dated May 25, 2007, of the Government detailing the implementation of certain provisions of the Law on Tax Administration, the tax authority must also send an additional copy to the ODA Project Owner when refunding VAT to the main contractor.

4.4. In cases where the ODA Project Owner receives funding from the state budget to pay VAT but subsequently applies for a VAT refund, upon receiving the VAT refund, the ODA Project Owner must return the refunded VAT to the state budget as guided in Circular No. 42/2001/TT-BTC dated June 12, 2001, issued by the Ministry of Finance guiding the management and accounting of VAT refund capital for ODA projects.

During the review of VAT refund documentation for ODA projects, if any doubts arise requiring pre- or post-refund inspections, the tax authority shall act in accordance with the provisions of the Law on VAT, the Law on Tax Administration, and the implementing guidelines.

VI. EFFECTIVE DATE OF IMPLEMENTATION

This Circular takes effect fifteen days after its publication in the Official Gazette, replacing Circular No. 41/2002/TT-BTC dated May 3, 2002, issued by the Ministry of Finance guiding the implementation of tax policies for programs and projects using official development assistance (ODA) sources and any provisions contrary to the guidance in this Circular.

For ODA projects approved by competent authorities before the effective date of this Circular, the determination of tax liabilities and tax benefits shall be carried out in accordance with the guidance in Circular No. 41/2002/TT-BTC dated May 3, 2002, issued by the Ministry of Finance guiding the implementation of tax policies for programs and projects using official development assistance (ODA) sources until the completion of the project./.