To:

- Ministries, ministerial-level agencies
- Provincial/municipal People's Committees
- Provincial/municipal Tax Departments

The Finance Ministry has recently received official letters from several enterprises and provincial/municipal Taxation Departments, reporting on the value added tax (VAT) policy on goods and services provided to or installed for projects with non-refundable aid from foreign organizations or individuals for Vietnam. Regarding this matter, the Finance Ministry gives the following opinion:

Pursuant to the Finance Ministry's Circulars No. 120/2003/TT-BTC of December 12, 2003, and No. 32/2005/TT-BTC of April 26, 2005, providing guidance on VAT:

- Where unions, federations, associations, socio-political organizations, etc. (referred to collectively as associations) use foreign non-refundable aid money for purchasing goods in Vietnam, the associations shall be refunded the VAT amounts written in VAT invoices and paid upon goods purchase.

- Where foreign donors directly sign contracts with domestic business establishments for execution of non-refundable aid projects, they shall be exempt from VAT. Meanwhile, domestic business establishments which have declared and paid VAT by credit method, and provided VAT-liable goods or services to foreign donors at VAT-exclusive prices shall have the input VAT on goods or services supplied to projects credited or refunded.

The Finance Ministry hereby notifies the above-said opinion to concerned units for knowledge and implementation.

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Truong Chi Trung