Circular No. 42/2001/TT-BTC guides the management and accounting of value-added tax refund capital for projects using official development assistance (ODA) funds.

CIRCULAR

Guidelines for managing and accounting for capital refunded as value-added tax (VAT)

for projects utilizing official development assistance (ODA) funds

Pursuant to the State Budget Law on March 20, 1996 and the Law Amending and Supplementing Certain Provisions of the State Budget Law No. 06/1998/QH10 dated May 20, 1998;

Pursuant to the Value-Added Tax Law No. 02/1997/QH9 dated May 10, 1997 and the Government's Decrees detailing the implementation of the Value-Added Tax Law;

Pursuant to Decision No. 223/1999/QĐ-TTg dated December 7, 1999 of the Prime Minister regarding VAT applicable to projects utilizing ODA funds;

AND The Ministry of Finance guides the management and accounting of VAT for investment projects using ODA funds as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Investment projects utilizing ODA loans (including projects utilizing loan funds and projects utilizing mixed ODA funds) which are funded by the state budget without repayment shall be entitled to have the state refund the amount of VAT that the project owners or main contractors (collectively referred to as the entities entitled to VAT refunds) have paid to the state budget when importing goods and purchasing domestic goods and services to implement the projects.

- The source of the VAT refund is the VAT Refund Fund.

- After receiving the VAT refund according to Circular No. 122/2000/TT-BTC dated December 29, 2000 of the Ministry of Finance guiding the implementation of Decree No. 79/2000/NĐ-CP detailing the implementation of the Value-Added Tax Law, the financial authority and the project owner must increase the state budget investment capital allocated to the project and annually settle it fully into the value of the construction works and assets of the entity.

2. Projects utilizing non-reimbursable ODA funds are not subject to VAT. In cases where the project owners or main contractors have already paid VAT included in the purchase price of goods and services, the state will refund the amount of tax already paid.

3. Project owners mentioned in Points 1 and 2 above are not required to allocate counterpart funds in the annual construction investment plan to pay VAT.

Entities entitled to VAT refunds who have paid VAT included in the purchase price of goods and services to implement the projects before December 7, 1999 (the effective date of Decision No. 223/1999/QĐ-TTg of the Prime Minister) are still eligible for VAT refunds.

II. SPECIFIC PROVISIONS

1. To have the basis for processing VAT refunds, entities entitled to VAT refunds must provide complete documents as stipulated in Circular No. 122/2000/TT-BTC dated December 29, 2000 of the Ministry of Finance guiding the implementation of Decree No. 79/2000/NĐ-CP detailing the implementation of the Value-Added Tax Law.

The tax authority shall not process VAT refunds if the entities entitled to VAT refunds have not provided complete documents as prescribed.

2. After completing VAT refunds for entities entitled to VAT refunds, the tax authority has the responsibility to send the decision on VAT refunds (original copy) to the project owner and the Ministry of Finance (Investment Department) to serve as the basis for increasing investment capital.

2.1. Quarterly, the Ministry of Finance (Investment Department) compiles the VAT refund capital of ODA projects managed by ministries, sectors, and localities, and at the same time: - Prepares a notice approving the budget estimate clearly stating the content: allocating construction investment capital outside the budget under item 902 for centrally-managed projects; simultaneously recording VAT revenue from ODA projects under chapter 160 category 10 sub-item 10 item 014 sub-sub-item 99, and sends it to the State Budget Department to process the recording of revenue and expenditure for transferring construction investment capital to the State Treasury.

- Sends a detailed list of VAT refund capital for locally-managed ODA projects to the State Budget Department to process supplementary recording of targeted construction investment capital for localities under chapter 160 category 10 sub-item 06 item 125 sub-sub-item 02; simultaneously recording VAT revenue from ODA projects under chapter 160 category 10 sub-item 10 item 014 sub-sub-item 99.

2.2. The Central Treasury Department bases its accounting entries for central government budget expenditures on construction investment for projects and simultaneously records central government VAT revenue from ODA projects based on the revenue and expenditure vouchers of the State Budget Department. The Treasury Department informs the project owner of this information for reconciliation and recording of increased budget allocation. At the end of the year, the construction investment capital from the VAT Refund Fund of ODA projects is settled as state budget allocation.

2.3. The Provincial Department of Finance bases its accounting entries for local government budget revenue from the higher-level budget transfer and simultaneously records local government budget expenditures on construction investment for projects according to current regulations. At the end of the year, the construction investment capital is settled according to current regulations (including the construction investment capital from the VAT Refund Fund of ODA projects).

2.4. Based on the notification from the Treasury Department, the ODA-funded project owner opens books and records the increase in construction investment capital from the VAT Refund Fund, reflecting it fully in the annual value of construction works and settling the completed works.

3. Projects utilizing grant ODA funds are exempt from VAT. If the project owner or main contractor has already paid VAT included in the purchase price of goods and services and the state refunds the tax paid, the project owner shall account for it as follows:

- If the project owner or main contractor has been allocated counterpart funds from the domestic budget to pay VAT, upon receiving the VAT refund, the project owner or main contractor must repay the state budget, while the Treasury Department and the project owner reduce the allocated investment capital.

- If the project owner or main contractor has not been allocated counterpart funds but had to temporarily use their own funds (or other sources) to pay VAT included in the purchase price of goods and services, they are also entitled to a VAT refund, and the project owner or main contractor can use the refund to repay the temporarily used funds. in case of refund, the project owner or main contractor must repay the state budget, while the State Treasury agency and the project owner shall reduce the disbursement of investment capital.

- If the project owner or main contractor does not have corresponding capital allocated but has to temporarily borrow from their own funds (or other sources) to pay value-added tax included in the purchase price of goods and services, they will also be refunded by the state, and the project owner or main contractor shall use the refund to repay the borrowed funds.

4. For units that have been refunded value-added tax included in the purchase price of goods and services to implement the project before December 7, 1999, the date on which Decision No. 223/1999/QĐ-TTg of the Government Prime Minister took effect, after receiving the refund, the project owner shall account for it as provided for in Point 3, Section II of this Circular.

5. In cases where authorized bodies permit the recording of income and expenditure of import value-added tax, such cases shall not be eligible for refunds. The project investor shall account for capital investment disbursement and include it in the corresponding capital plan of the project owner.

6. Project owners and state treasury agencies are responsible for fully accounting for the refunded value-added tax from the VAT Refund Fund in the final settlement of basic construction investment with financial authorities according to prescribed regulations.

7. For projects utilizing ODA funds under the rescheduling mechanism from the state budget (including projects using mixed ODA funds consisting of non-repayable ODA and repayable ODA funded by separate agreements), the project owner shall not use ODA funds to pay value-added tax but must proactively arrange domestic sources to pay value-added tax in accordance with the law.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date of signature. Cases where value-added tax has already been refunded according to Decision No. 223/1999/QĐ-TTg dated December 7, 1999, of the Government Prime Minister but have not yet been recorded as increased capital shall be implemented in accordance with the guidance provided in this Circular.

During implementation, if there are difficulties or obstacles, units are requested to promptly report them to the Ministry of Finance for coordination and resolution./.