What are cases where non-refundable ODA project owners are entitled to refund of VAT in Vietnam?

What are cases where non-refundable ODA project owners are entitled to refund of VAT in Vietnam?

Based on Clause 2, Article 5 of Circular 181/2013/TT-BTC which stipulates VAT policies for goods and services purchased in Vietnam by owners of non-refundable ODA project owners as follows:

Tax policy for the Project Owner

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2. VAT for goods and services purchased in Vietnam.

a) The owner of the non-refundable ODA project shall be refunded the VAT amount paid when purchasing goods and services in Vietnam if the contract signed with the main contractor is approved to include VAT and the project owner does not receive state budget funds to pay VAT. VAT refunds are implemented according to the guidance in Article 8 of this Circular. In cases where the state budget arranges counterpart funds to pay VAT for projects, the project owner is not refunded the input VAT paid on goods and services purchased in Vietnam, regardless of whether the contract signed with the main contractor is approved to include VAT or not.

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b) In cases where the sponsor establishes a representative office in Vietnam and directly purchases goods and services to implement the non-refundable ODA project, or authorizes the project owner to implement it, the sponsor shall be refunded the VAT amount paid. VAT refunds are implemented according to the guidance in Article 8 of this Circular.

Simultaneously, based on Article 13 of Circular 181/2013/TT-BTC governing VAT refunds for non-refundable aid ODA projects with a domestic funding component as follows:

VAT Refund for non-refundable ODA project owners having a Domestic Funding Component

In cases where the non-refundable ODA project has capital structure partly from non-refundable ODA funds and partly from counterpart funds from the State Budget and community contributions (these capital portions are designated for part of the project's work but not for paying VAT), the project owner or main contractor is granted a VAT refund for goods and services purchased from the non-refundable ODA fund for project purposes as regulated in Clause 2, Article 5 and Clause 2, Article 6 of this Circular. No VAT refund is granted for goods and services purchased with counterpart funds from the State Budget and community contributions. The project owner or main contractor must keep separate accounts for the VAT on goods and services purchased from the non-refundable ODA funds; if no separate account is kept, the project owner is not refunded VAT, and the main contractor receives input VAT credit and refund as regulated in Clause 2, Article 6 of this Circular.

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Thus, the owner of a non-refundable ODA project is entitled to a VAT refund in the following cases:

- In situations where the ODA project owner purchases goods and services in Vietnam and the contract with the main contractor, approved to include VAT, is not funded by the State Budget to cover VAT costs.

- In cases where the non-refundable ODA project has a capital structure partly from non-refundable ODA funds and partly from counterpart funds from the State Budget and community contributions (these funds are designated for part of the project's work but not for paying VAT), the project owner or main contractor is granted a VAT refund for goods and services purchased from non-refundable ODA funds for project purposes.

Note: If the project is funded by the State Budget for covering VAT, the project owner is not entitled to a VAT refund for goods and services purchased in Vietnam, regardless of whether the contract with the main contractor, approved to include VAT, includes or excludes VAT.

What are cases where non-refundable ODA project owners are entitled to refund of VAT in Vietnam? (Image from the Internet)

What are included in the VAT refund application for non-refundable ODA projects in Vietnam?

Based on Clause 2, Article 8 of Circular 181/2013/TT-BTC which stipulates the VAT refund dossier for non-refundable ODA project owners as follows:

Procedures and documentation for VAT refunds for non-refundable ODA project owners, donor representatives, and main contractors eligible for VAT refunds

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2. VAT refund documentation, deadline for declaring input VAT, reception organization, and implementation of VAT refunds shall follow the guidance in the Law on Tax Administration and its guiding documents.

In the VAT refund dossier submitted to the tax authorities, 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 the postal system.

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Additionally, according to sub-point c.1, point c, clause 1, Article 28 of Circular 80/2021/TT-BTC stipulating VAT refund dossiers for owners of non-refundable ODA projects as follows:

- A copy of the international treaty or non-refundable ODA fund agreement or an exchange document on the commitment and receipt of non-refundable ODA funds; a copy of the Decision approving the project document, non-project or Investment decision for the program and the Project document or Feasibility Study Report approved in accordance with points a, b Clause 2 Article 90 of Decree 114/2021/ND-CP.

- Request for confirmation of eligible expenses for non-business funds concerning non-business expenses and a request for payment of investment funds concerning investment expenses of the project owner according to point d Clause 2 Article 90 of Decree 114/2021/ND-CP and point a Clause 10 Article 10 of Decree 11/2020/ND-CP.

- Invoice and voucher list for purchased goods and services as per Form 01-1/HT issued with Appendix 1 Circular 80/2021/TT-BTC.

- A copy of the confirmation document from the managing agency of the ODA program/project for the project owner, confirming that the program/project is provided as non-refundable ODA that qualifies for VAT refund and is not provided with counterpart funds from the state budget to pay VAT.

- In cases where the project owner delegates part or all of the project to another unit or organization for management and implementation according to the regulations on the management and use of non-refundable ODA funds, but this content is not mentioned in the documents stipulated at points c.1.1, c.1.4 Clause 1 Article 28 Circular 80/2021/TT-BTC, an additional copy of the document delegating the management and implementation of the non-refundable ODA project to the unit or organization requesting a tax refund is required.

- If the main contractor prepares the tax refund dossier, besides the documents stipulated at points c.1.1, c.1.2, c.1.3, c.1.4 Clause 1 Article 28 Circular 80/2021/TT-BTC, an additional copy of the contract between the project owner and the main contractor showing the payment price according to the contract result excluding VAT is needed.

- Taxpayers are required to submit the documents stipulated at points c.1.1, c.1.4, c.1.5, c.1.6 Clause 1 Article 28 Circular 80/2021/TT-BTC for the first tax refund request dossier or when changes and supplements occur.

Is the VAT refund dossier for non-refundable ODA projects a pre-refund or post-refund inspection dossier in Vietnam?

Based on point a, clause 1, Article 33 of Circular 181/2013/TT-BTC which classifies refund dossiers as follows:

Classification of Refund Dossiers

1. Dossiers subject to pre-refund inspection include those in the following cases:

a) Dossiers from taxpayers requesting a refund for the first time in each case entitled to a refund as per legal provisions on taxes. If a taxpayer's refund dossier submitted to the tax administration is not eligible for a refund as per legal provisions, the next refund request is also considered a first-time refund request. Specific cases include:

a.1) Cases entitled to refunds under VAT law include:

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a.1.3) VAT refund for non-refundable aid ODA programs and projects;

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Thus, the VAT refund dossier for a non-refundable aid ODA project is classified as a pre-refund inspection dossier.