CIRCULAR

GUIDING THE MANAGEMENT AND ACCOUNTING OF VALUE ADDED TAX REIMBURSEMENT CAPITAL FOR PROJECTS USING OFFICIAL DEVELOPMENT ASSISTANCE (ODA) CAPITAL

Pursuant to the March 20, 1996 Law on the State Budget of and the May 20, 1998 Law No. 06/1998/QH10 amending and supplementing a number of articles of the Law on the State Budget;
Pursuant to the Value Added Tax Law No. 02/1997/QH10 of May 10, 1997 and the Government�s Decrees detailing the implementation of the Value Added Tax Law;
Pursuant to the Prime Minister’s Decision No. 223/1999/QD-TTg of December 7, 1999 on value added tax applicable to projects using official development assistance (ODA) capital;
The Ministry of Finance hereby guides the management and accounting of value added tax for investment projects using ODA capital as follows:

I. GENERAL PROVISIONS:

1. Investment projects using ODA loans (including projects using ODA loans and projects using mixed ODA), which fall under the category of non-refundable investment from the State budget, shall be refunded the value added tax (VAT) amount which the project owners or principal contractors (referred collectively to as units eligible to tax reimbursement) have already paid into the budget when importing or buying domestic goods and/or services for the implementation of their projects.

- Source for tax reimbursement shall be VAT reimbursement fund.

- After being refunded with the VAT under the provisions in Finance’s Ministry’s Circular No. 122/2000/TT-BTC of December 29, 2000 guiding the implementation of Decree No. 79/2000/ND-CP which details the implementation of the Value Added Tax Law, the financial bodies and the project owners shall have record the refunded amount as an increase in investment capital allocated by the budget to the projects and annually, fully account them into the value of works and assets of the units.

2. Projects using non-refundable ODA shall not have to pay VAT. In cases where the project owners or the principal contractors have paid VAT in the buying prices of goods and/or services, they shall be refunded the paid tax amounts by the State.

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The units eligible to tax reimbursement, which have already paid VAT in the buying prices of goods and services for the implementation of the projects before December 7, 1999 (the effective date of the Prime Minister’s Decision No. 223/1999/QD-TTg), shall also be refunded with the paid tax amounts.

II. SPECIFIC PROVISIONS:

1. In order to have grounds for carrying carry out VAT reimbursement procedures, the units eligible to tax reimbursement shall have to fully provide vouchers prescribed in the Finance�s Ministry’s Circular No. 122/2000/TT-BTC of December 29, 2000 guiding the implementation of Decree No. 79/2000/ND-CP which details the implementation of the Value Added Tax Law.

The tax bodies must not refund the paid tax amount when the units eligible to tax reimbursement have not yet fully provided vouchers according to the prescribed regimes.

2. After refunding the VAT amounts to units eligible to tax reimbursement, the tax bodies shall have to send the tax reimbursement decisions (original) to the project owners and the Ministry of Finance (Investment Department) for the latter to have grounds for recording the investment capital increase.

2.1. Quarterly, the Ministry of Finance (Investment Department) shall sum up the amounts of tax reimbursement capital of ODA-funded projects which are managed by the ministries, branches and localities according to set form, and at the same time:

- Elaborate a dispatch approving the estimates, clearly inscribing: the entry of expenditures regarding capital construction capital allocations for centrally-run projects in Item 902 (non-budget allocations); and at the same time, enter the VAT of ODA-funded projects as a revenue according to Chapter 160, Group 10, Clause 10, Item 014, sub-Item 99, and send such dispatch to the State Budget Department for the latter to carry out procedures for revenue/expenditure entry and transfer capital construction capital to the State Treasuries.

- Send the detailed list of the amounts of VAT reimbursement capital of locally-run ODA projects (according to set form) to the State Budget Department for the latter to carry out the procedures for the additional entry of expenditure for capital construction capital of localities according to Chapter 160, Group 10, Clause 06, Item 125, Sub-item 02; and the same time, enter the VAT amount of ODA-funded projects as a revenue according to Chapter 160, Group 10, Clause 10, Item 014, Sub-Item 99.

2.2. The Central State Treasury shall base itself on the revenue and expenditure entry vouchers of the State Budget Department to account the central State budget expenditures on capital construction investment for projects, and at the same time, enter the VAT amount of ODA-funded projects as revenue of the central budget. The Central State Treasury shall notify the project owners thereof for the latter to make comparison and record an increase in budget-allocated capital. At the year-ends, it shall make final settlement of capital construction capital refunded from the VAT reimbursement funds of ODA-funded projects as for capital allocated by the State budget.

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2.4. The owners of projects using ODA capital shall, basing themselves on the vouchers issued by the State Treasuries, open books in order to monitor and record the increases of capital construction investment capital from the VAT reimbursement fund, and fully reflect such increases in the annual projects value and in the final settlement when the projects are completed.

3. Projects using ODA aid capital shall not have to pay VAT. In cases where the project owners or the principal contractors have already paid to budget VAT in the buying prices of goods and/or services and are refunded by the State the paid tax amounts, when being reimbursed with the paid tax amounts, the project owners shall make accounting thereof as follows:

- If the project owners or the principal contractors have been allocated domestic reciprocal capital from budget for paying VAT, when being reimbursed with the paid tax amounts, they shall have to repay such to the State budget, and at the same time, the State Treasuries and the project owners shall account the decrease of investment capital allocation.

- If the project owners or the principal contractors have not yet been allocated reciprocal capital, but used their own capital (or other capital sources) to pay VAT in the buying prices of goods and/or services, they shall also be refunded with the paid tax amounts by the State. They shall use the reimbursed tax amount to repay to the capital accounts which have been advanced thereto.

4. For units eligible to tax reimbursement, which have paid VAT in the buying prices of goods and/or services for the implementation of the projects before December 7, 1999, the effective date of the Prime Minister’s Decision No. 223/1999/QD-TTg, after being reimbursed with tax, the project owners shall be allowed to make the accounting according to the provisions at Point 3, Section II of this Circular.

5. Cases, that are permitted by the competence agencies to records revenue and expenditure of VAT imposed import goods, shall not be eligible to tax reimbursement. The project owners shall account the investment capital allocation and include such in their reciprocal capital plans.

6. The project owners and the State Treasuries shall have to fully account the amount of VAT reimbursement capital from the VAT reimbursement fund in the final settlement of capital construction investment capital with financial bodies strictly according to prescribed regimes.

7. For projects using ODA capital under the mechanism of re-lending from the budget (including projects using mixed ODA - non-refundable ODA and ODA loans, in which the amount of non-refundable ODA are provided under a separate agreement), the project owners must not use ODA capital, but seek and use the source of domestic capital for paying VAT as prescribed by law.

III. IMPLEMENTATION ORGANIZATION:

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In the course of implementation, if difficulties and troubles arise, units are requested to promptly report them to the Ministry of Finance for coordination and settlement.

FOR THE MINISTER OF FINANCE
VICE MINISTER




Pham Van Trong