THE MINISTRY OF FINANCE
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SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No. 123/2007/TT-BTC
Hanoi, October 23, 2007
 
CIRCULAR
GUIDING THE IMPLEMENTATION OF TAX POLICY AND TAX INCENTIVES FOR PROGRAMS AND PROJECTS FUNDED WITH OFFICIAL DEVELOPMENT ASSISTANCE (ODA)
Pursuant to the current tax laws and ordinances of the Socialist Republic of Vietnam and the Government’s decrees detailing the implementation thereof;
Pursuant to Article 28 of the Regulation on the management and use of official development assistance, issued together with the Government’s Decree No. 131/2006/ND-CP of November 9, 2006;
Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003, defining the tasks, powers and organizational structure of the Ministry of Finance;
The Ministry of Finance guides the implementation of tax policy for programs and projects funded with official development assistance as follows:
I. GENERAL PROVISIONS
1. This Circular applies to programs and projects funded with official development assistance (below collectively referred to as ODA projects) approved by competent authorities.
2. The terms defined at Point 2, Article 1, and in Article 4 of the Regulation on the management and use of official development assistance, issued together with Decree No. 131/2006/ND-CP, which are used in this Circular, have the same meanings as defined at Point 2, Article 1, and in Article 4 of the said Regulation. In addition, in this Circular, the terms below are construed as follows:
- “Main contractor” is an organization or individual directly signing a contract with the ODA project owner or the ODA project donor for construction and installation of works or provision of goods and services for the ODA project. Main contractor includes foreign main contractor and Vietnamese main contractor.
- “Subcontractor” is an organization or individual signing a contract with the main contractor for performing a portion of the work under the contract signed between the main contractor and the ODA project owner or donor. Subcontractor includes foreign subcontractor and Vietnamese subcontractor.
3. Taxes imposed on ODA projects under the guidance in this Circular include import duty, export duty, special consumption tax, value added tax, income tax on high-income earners, business income tax, charges and fees. 
II. TAX POLICY AND TAX INCENTIVES FOR NON-REFUNDABLE ODA PROJECTS
1. Import duty, value-added tax (VAT), special consumption tax on imported goods:
Non-refundable ODA project owners and main contractors executing non-refundable ODA projects do not have to pay import duty, special consumption tax (if any) and VAT for goods they directly import or import through entrustment for executing non-refundable ODA projects.
A dossier to be produced to the customs office in the place where the goods are imported comprises:
- The customs dossier;
- The declaration of aid with the finance agency’s certification, made according to the Finance Ministry’s Circular No. 82/2007/TT-BTC of July 12, 2007, guiding the regime of financial state management of foreign non-refundable aid belonging to the state budget;
- A copy of the contract-winning notice, attached with the goods provision contract, showing the successful bid exclusive of import duty (for the case in which the contract winner imports goods or entrusts the import of goods).
Customs offices do not collect import duty, special consumption tax (if any) and/or VAT on the goods imported for executing non-refundable ODA projects.
2. VAT on goods and services purchased in Vietnam:
2.1. Non-refundable ODA project owners shall be refunded VAT amounts they have paid for goods and services bought in Vietnam if their approved contracts signed with main contractors cover VAT and the project owners are not provided with state funds for paying VAT. The VAT refund is effected under the guidance at Point 4, Section V of this Circular.
Example: Non-refundable ODA project owner A has a contract, which has been approved by competent authorities, on construction of a pediatrics hospital with a total value of VND 4.4 billion, including the VAT-exclusive price of VND 4 billion and a VAT amount of 400 million (VAT rate of 10%). In addition, the project owner also has another contract, which has been approved by competent authorities, on purchase of goods and services with a total value of VND 110 million, including the VAT-exclusive price of VND 100 million and a VAT amount of 10 million. The project owner was not allocated state budget funds for paying VAT-inclusive prices.  
The project owner will be refunded an input VAT amount of VND 410 (400 + 10) million already paid for the construction contract and the contract on purchase of domestic goods and services.
2.2. If the donor has a representative office in Vietnam and directly purchases goods and services for the execution of a non-refundable ODA project or assigns it to the non-refundable ODA project owner, the donor will be refunded the paid VAT amount. The VAT refund is effected under the guidance at Point 4, Section V of this Circular.
2.3. If the non-refundable ODA project owner has been allocated state budget funds for paying VAT in the course of project execution, it is not entitled to VAT refund.
3. Taxes on main contractors and subcontractors executing non-refundable ODA projects:
3.1. Import duty, VAT, special consumption tax on imported goods:
a/ Main contractors and subcontractors importing goods in the course of performing contracts signed with non-refundable ODA project owners shall pay import duty, special consumption tax (if any) and VAT under the laws on import duty and export duty; special consumption tax; and VAT, and current guiding documents (except for goods imported by main contractors stated at Point 1, Section II of this Circular).
b/ Foreign main contractors and foreign subcontractors are exempt from import duty and do not have to pay VAT on machinery, equipment and means of transport imported into Vietnam by the mode of temporary import for re-export serving the construction of work under non-refundable ODA projects, and are exempt from export duty upon re-export.
Dossiers of application for import duty exemption, non-collection of VAT upon import, and export duty exemption upon re-export comply with the guidance in the Finance Ministry’s Circular No. 59/2007/TT-BTC of June 14, 2007, guiding the imposition of import duty and export duty, and tax administration of imports and exports.
Customs offices shall organize import duty exemption, non-collection of VAT upon import, and export duty exemption upon re-export for machinery, equipment and means of transport temporarily imported by foreign main contractors and foreign subcontractors for the execution of non-refundable ODA projects before re-export.
At the end of the work construction or project period, foreign main contractors and foreign subcontractors shall re-export the above goods. They shall obtain prior permission of competent Vietnamese agencies, make declaration and pay import duty and VAT according to current laws when selling these goods in Vietnam.
Particularly for cars with under 24 seats and cars designed for the transportation of both passengers and cargo equivalent to cars with under 24 seats, they are not entitled to import duty and special consumption tax exemption applicable to the form of temporary import for re-export. Foreign main contractors and foreign subcontractors shall pay import duty and special consumption tax if they import these cars into Vietnam. Upon completion of work construction or projects, they shall re-export these imported cars and be refunded the paid import duty and special consumption tax amounts according to regulations. Refunded tax amounts and tax refund procedures comply with Finance Ministry’s Circular No. 59/2007/TT-BTC of June 14, 2007, guiding the imposition of import duty and export duty, and tax administration of imports and exports, and Circular No. 119/2003/TT-BTC of December 12, 2003, guiding the implementation of the Government’s Decree No. 149/2003/ND-CP of December 4, 2003, detailing the implementation of the Special Consumption Tax Law and the Law Amending and Supplementing a Number of Articles of the Special Consumption Tax Law.
3.2. VAT, business income tax and other taxes, charges and fees for the provision of goods and services in Vietnam:
Main contractors providing goods and services for non-refundable ODA project owners shall pay VAT (if the signed contracts cover VAT), business income tax and other taxes, charges and fees according to the provisions of law on taxes, charges and fees.
Subcontractors providing goods and services for main contractors of non-refundable ODA projects shall pay VAT, business income tax and other taxes, charges and fees according to the provisions of law on taxes, charges and fees.
Foreign main contractors and foreign subcontractors that do not apply the Vietnamese accounting system shall, if receiving direct payments from donors, transfer payable tax amounts to ODA project owners or foreign main contractors for the latter to pay taxes on their behalf under the guidance in the Finance Ministry’s Circular No. 05/2005/TT-BTC of January 11, 2005, guiding the tax regime applicable to foreign organizations without Vietnamese legal status and foreign individuals doing business or earning incomes in Vietnam.
3.3. Individuals working for main contractors and subcontractors shall pay personal income tax in accordance with the personal income tax law.
3.4. If a main contractor (regardless of paying VAT by the deduction or direct method) signs a contract with a VAT-exclusive price with the ODA project owner or donor for executing a non-refundable ODA project, the main contractor is entitled to refund of the input VAT amount paid for goods or services purchased for the performance of the signed contract.  The VAT refund is effected under the guidance at Point 4, Section V of this Circular.
Example: Company A signs with a non-refundable ODA project owner a contract on the construction of a school with the successful VAT-exclusive bid of VND 4 billion. Company A is entitled to refund of the input VAT amount paid for goods and services purchased for the construction of the school under the contract signed with the project owner.
The main contractor shall separately account the input VAT amount paid for the purchased goods and services for the performance of the goods and service provision contract signed with the non-refundable ODA project owner or donor. If unable to do so, the main contractor is not entitled to VAT refund.
4. Personal income tax on individuals working for non-refundable ODA project owners and management units:
Vietnamese and foreign individuals working for ODA projects and ODA project management units shall declare and pay personal income tax in accordance with the current regulations on the personal income tax.
5. Tax incentives for foreign specialists working for non-refundable ODA projects:     
Foreigners who possess written certifications of the Ministry of Planning and Investment as foreign specialists engaged in the implementation of ODA programs or projects and eligible for tax and charge incentives according to the Regulation on foreign specialists issued together with the Prime Minister’s Decision No. 211/1998/QD-TTg of October 31, 1998, are entitled to exemption from import duty, special consumption tax, VAT, registration fee and personal income tax under the Finance Ministry’s Circular No. 52/2000/TT-BTC of June 5, 2000, guiding the tax and fee exemption for foreign specialists engaged in the implementation of ODA programs and projects.
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