Circular No. 142/1999/TT-BTC of the Ministry of Finance guides Value Added Tax (VAT) for projects using Official Development Assistance (ODA) funds.

CIRCULAR

Guidelines for value-added tax applicable to

projects using official development assistance (ODA) funds

________________________

Pursuant to Law on Value Added Tax No. 02/1997/QH9 dated May 10, 1997 and detailed implementing decrees of the Government regarding the Law on Value Added Tax;

Pursuant to Resolution No. 90/1999/NQ-UBTVQH10 dated September 3, 1999 of the Standing Committee of the National Assembly on amending and supplementing certain lists of goods and services not subject to value added tax and the rates of value added tax on certain goods and services;

Pursuant to Decision No. 223/1999/QĐ-TTg dated December 7, 1999 of the Prime Minister on value added tax applicable to projects using official development assistance (ODA) funds;

The Ministry of Finance provides guidance on the implementation of value added tax (VAT) for programs and projects (hereinafter referred to as projects) using ODA funds as follows:

I. FOR PROJECTS USING NON-REPAYABLE ODA FUNDS:

1. For imported goods and materials:

Imported goods and materials for the implementation of projects using non-repayable ODA funds are exempt from value added tax. When importing goods and materials for these projects, the Project Owner or Contractors shall submit to the Customs Authority a certificate confirming non-repayable aid goods issued by the competent authority along with the import documentation to avoid payment of VAT.

2. For domestic goods and services:

a. Goods and services provided by main contractors for projects using non-repayable ODA funds are exempt from VAT (main contractors refer to organizations or individuals who directly sign contracts with the Project Owner to undertake construction, consultancy, or supply major goods and materials for the project). Main contractors are entitled to a refund of VAT paid when purchasing domestic goods and services.

After receiving the payment invoice from subcontractors or domestic suppliers, the main contractor shall submit the relevant documents to the tax authority for a refund. In addition to the initial documents required, which include a copy of the investment decision by the competent authority, a copy of the contract signed with the Project Owner (copies stamped with confirmation by the Project Owner), and a copy of the sub-contract signed with subcontractors or purchase contract signed with domestic suppliers (stamped with confirmation by the main contractor), each time requesting a refund, the main contractor shall submit to the tax authority:

- A letter requesting a VAT refund according to Form No. 09/GTGT issued together with Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance.

- A list of VAT invoices for goods and services purchased for project implementation according to Form No. 03/GTGT issued together with Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance.

b. Goods and services purchased directly by the Project Owner from domestic suppliers who have already paid VAT are eligible for a refund. After receiving the payment invoice from domestic suppliers, the Project Owner shall submit the relevant documents to the tax authority for a refund. The refund documents follow the guidelines set out in Clause a above, except for a copy of the sub-contract signed with subcontractors.

II. FOR PROJECTS USING ODA LOANS ELIGIBLE FOR NON-REPAYABLE STATE BUDGET INVESTMENT:

Projects using ODA loans eligible for non-repayable state budget investment as stipulated in Article 2 of Decision No. 223/1999/QĐ-TTg dated December 7, 1999 of the Prime Minister include projects using loan funds and mixed ODA projects (projects using part of non-repayable ODA funds but without separate agreement funding) fully or partially funded by the State Budget (Central or Local).

These projects are entitled to a refund of VAT paid upon importation and purchase of domestic goods and services for project implementation.

1. For imported goods and materials:

VAT paid upon importation of goods and materials as prescribed in the Law on Value Added Tax shall be refunded. Refund documents include:

+ A letter requesting a VAT refund according to Form No. 09/GTGT issued together with Circular No. 89/1998/TT-BTC dated June 27, 1998 of the Ministry of Finance.

+ Investment decision or project approval by the competent authority (a copy stamped with confirmation by the Project Owner - submitted initially).

+ Export and import declaration forms (a copy stamped with confirmation by the Project Owner).

+ Receipts for VAT payment on imported goods from Customs or bank transfer payment receipts confirmed by the Treasury (original).

+ Entrusted import contract for cases where other enterprises are entrusted to import (a copy stamped with confirmation by the Project Owner or main contractor).

+ Contract between the Project Owner and the main contractor in cases where the main contractor handles the import procedures (a copy stamped with confirmation by the Project Owner).

If the Project Owner directly imports goods and materials subject to VAT, the Project Owner may request that the VAT payable be recorded as income and expenditure together with customs duties (if any). Procedures and steps for recording income and expenditure are carried out similarly to those for recording customs duties.

2. For domestic goods and services:

VAT paid by the Project Owner for purchasing domestic goods and services shall be refunded. Immediately after receiving the payment invoice from suppliers, the Project Owner shall submit the relevant documents to the tax authority for a refund. Refund documents follow the provisions set out in Clause b Point 2 Section I above.

If the Project Owner awards contracts to main contractors and the bid price does not include VAT, then when settling accounts with the Project Owner, the main contractor will not charge VAT and the main contractor is entitled to a refund of VAT paid for purchasing goods and services. In addition to the guidelines set out in Clause a Point 2 Section I above, the main contractor must initially submit a letter from the Project Owner requesting a direct refund to the main contractor due to the bid price not including VAT.

III. FOR OTHER LOAN PROJECTS:

Projects using ODA funds borrowed from the State Budget, including mixed ODA projects, which do not fall under non-repayable State Budget investment or partial capital support, must pay VAT according to the Law on Value Added Tax and current guiding documents.

The project owner shall self-fund the VAT payment from domestic capital sources and not use ODA funds for VAT payments. The VAT paid during the implementation of the project can be deducted or refunded according to the guidelines set forth in Circulars No. 89/1998/TT-BTC dated June 27, 1998, and Circular No. 93/1999/TT-BTC dated July 28, 1999, issued by the Ministry of Finance.

IV. PROCEDURE FOR REGISTRATION OF TAX IDENTIFICATION NUMBER:

1. For Main Contractors:

- Domestic main contractors shall use the tax identification number already issued for transactions and procedures to claim VAT refunds.

- Foreign main contractors currently operating in Vietnam and holding a tax identification number shall continue to use that number when claiming VAT refunds.

- Foreign main contractors who are first-time operators in Vietnam or are operating in Vietnam but have not been issued a tax identification number (main contractors declaring and paying taxes through Vietnamese organizations or individuals via withholding tax methods) must submit an application form to the local tax authority where their project management office is located (for those with a project management office) or to the local tax authority where the construction site is located, following Model Form No. 04/ĐK-TCT issued along with Circular No. 79/1998/TT-BTC dated June 12, 1998, by the Ministry of Finance. The tax authority will issue a tax identification number to foreign main contractors in accordance with regulations.

2. For Project Owners:

- Project owners who have registered a tax identification number shall use that number when claiming VAT refunds.

- New project owners requiring registration of a tax identification number to claim VAT refunds must submit an application for tax registration to the local tax authority where their project management office is located within ten days of receiving the investment decision from the competent authority, in accordance with the guidelines set forth in Circular No. 79/1998/TT-BTC dated June 12, 1998, issued by the Ministry of Finance.

- In cases where project owners have registered a tax identification number but have delegated responsibility for managing and accounting separately for input VAT incurred during project investment using ODA funds to a project management unit, the local tax authority where the project management unit's office is located shall issue a dependent entity tax identification number to the delegated unit.

V. PROCEDURE FOR VAT REFUNDS:

1. Authority responsible for VAT refunds:

The local tax authority (province or centrally-administered city) issuing the tax identification number shall process VAT refunds according to the guidelines in this Circular. Where a project consists of multiple contracts or is constructed across different locations with separate project management units at each location, the local tax authority where the project owner or main contractor's main project management office is located shall process the VAT refunds.

In cases where project owners import goods and materials and record VAT receipts and payments according to the guidelines in Point 1, Section II of this Circular, they shall not process VAT refunds.

2. Procedure and time limit for VAT refunds:

a. For projects funded by non-repayable ODA and projects funded by the State budget without repayment:

Upon receipt of a valid application for VAT refund from the project owner or main contractor, the provincial or municipal Tax Department shall issue a refund decision within three working days and send it to the Treasury Office and the financial management body of the project. If the main contractor is eligible for a refund, the tax authority shall also send a copy of the refund decision to the project owner for monitoring purposes.

If the application for VAT refund is incomplete, the Tax Department must notify the project owner or main contractor of the reasons within two working days to complete the application.

The Treasury Office shall process the VAT refund for the project owner or main contractor within two days of receiving the tax authority's refund decision.

b. For projects funded by ODA loans from the State budget, main contractors implementing non-repayable ODA-funded projects, or projects funded by the State budget without repayment, but unable to account separately for input VAT for each project, the deduction of input VAT or VAT refund shall be processed according to Circular No. 89/1998/TT-BTC dated June 27, 1998, and Circular No. 93/1999/TT-BTC dated July 28, 1999, issued by the Ministry of Finance.

c. For projects funded by non-repayable ODA or projects funded by the State budget without repayment, which have received investment decisions and are being implemented before Decision No. 223/QĐ-TTg takes effect, the VAT paid by the project owner or main contractor shall be handled as follows:

- Cases where VAT has been calculated and paid according to Circular No. 82/1999/TT-BTC dated June 30, 1999, issued by the Ministry of Finance, the unpaid or underpaid input VAT can be deducted or refunded according to this Circular.

- Projects that have been allocated counterpart funds (prior to 1999) to the local or central government budget (ministries or sectors) or where the bid price includes VAT, the project owner must use the allocated counterpart funds to pay the incurred VAT.

- For projects that have not been allocated funds to pay VAT, the project owner or main contractor may claim a VAT refund according to the above provisions. The refund application must include confirmation from the competent authority that no counterpart funds have been allocated to the project owner for VAT payment.

Due to some project owners and foreign main contractors not having been issued a tax identification number previously, if a project owner or foreign main contractor has paid VAT in the past but the VAT receipt for imported goods or the invoice does not show the tax identification number of the project owner or foreign main contractor, such cases shall be resolved according to the guidelines in this Circular.

3. Inspection and settlement of VAT refunds:

The project owner or main contractor is responsible for the accuracy of the refund application. In case of doubt, the tax authority has the right to inspect the grounds for the refund, and upon completion of the project, the project owner or main contractor must settle the VAT with the tax authority according to regulations.

VI. CAPITAL INCREASE INVESTMENT

For projects using ODA loan capital or mixed ODA projects where non-repayable investment budgets are provided, upon receiving the tax refund decision from the tax authority, the project management financial agency shall increase the capital granted to the Project Owner. When calculating the annual corresponding budget plan according to the Circular Jointly Issued No. 06/1998/TTLT-BKH-BTC dated August 14, 1998 of the Ministry of Planning and Investment and the Ministry of Finance, the Project Owners are not required to calculate the corresponding budget plan for VAT payment.

VII. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date the Prime Minister's Decision No. 223/1999/QĐ-TTg dated December 7, 1999 comes into force and replaces Circular No. 82/1999/TT-BTC dated June 30, 1999 of the Ministry of Finance.

Localities with insufficient VAT refund funds to refund to ODA projects must report to the Ministry of Finance for consideration and adjustment in accordance with Decision No. 1632/1998/QĐ-BTC dated November 17, 1998 of the Minister of Finance.

In the course of implementation, if there are any difficulties, units are requested to report to the Ministry of Finance for consideration and resolution.