However, if the project is funded with ODA grant but the contract is signed according to a VAT – inclusive price or this project is funded with concessional ODA loan, the foreign contractor has to pay both VAT and EIT.
In case the project is funded with both ODA grant and concessional ODA loan, if these capital sources are financed according to separate financing agreement or separate disbursement for each specific activity of the project, the foreign contractor shall be entitled to apply particular tax policies according to each type of the capital.
In contrast, if there is no separate financing agreement or no separate disbursement for each specific activity of each type of capital, the foreign contractor shall be subject to tax according to the capital source to which the lowest incentives are given.
If the foreign contractor is subject to tax according to a percentage, the percentage for tax calculation with regard to the counseling service is 5% VAT and 5% EIT (Article 12, Article 13 of Circular No. 103/2014/TT-BTC ).
One of the new points of this Decree is the limit on on-lending ODA loan. In which, the on-lent proportion for the enterprises shall not exceed 70% of the total investment capital.
In addition, this Decree also specifies rate of management fees of on-lent loans which shall be 0.25% per year, to be calculated based on the loan balance and loan loss provision applied to enterprises shall be equal to 1.5% per year per loan balance.
This Decree takes effect from July 1st, 2018. To replace Decree No. 78/2010/ND-CP dated July 14th, 2010 and Decree No. 52/2017/ND-CP dated April 28th, 2017.
However, revenue from this service shall be still subject to EIT according to the regulations of Circular No. 78/2014/TT-BTC.
With regard to foreign experts working at the ODA project, if they are certified as foreign experts of the ODA project in accordance with Clause 2 Article 7 of Circular No. 181/2013/TT-BTC, they shall be exempt from PIT.
Accordingly, this clause is only applicable to main contractors rather than subcontractors - in other words, subcontractors are not entitled to receive refund of input VAT already paid on goods, services purchased for performing ODA projects.
a) Execute socio-economic investment and development project which are identified in the local budget spending scheme.
b) Make a local capital contribution to Public-Private Partnership projects.
The use of ODA loans or concessional loans under national target programs defined in the Law on Public Investment according to the mechanism under which the Central budget offers its subsidies to the local budget, loans for response to natural disasters emergencies shall not be covered by this Decree.
This Decree takes effect from June 15th, 2017.
To abolish Clause 3 Article 4, Clause 3 Article 7, point b Clause 1 Article 11, point a Clause 2 Article 12 and Clause 5 Article 19 of Decree No. 78/2010/ND-CP dated July 14th, 2010; To abolish Clause 2 Article 8 of Decree No. 16/2016/ND-CP dated March 16th, 2016.
Accordingly, with regard to method of management of ODA project, this Circular allows the project owner to request the existing project management board to manage the new program/project in order to enhance cooperation, integrity and reduce management cost (Clause 2 Article 12)
The project owner may even manage his own project in the form of assigning his affiliates other than the project management board in these cases:
- Any ODA program/project whose total investment is under USD 350,000;
- Any technical assistance program/project funded by ODA, whose total investment is under USD 200,000;
Accordingly, programs and projects funded by ODA/concessional loans shall be applied financial mechanism according to the following rules:
- Regarding a program/project invested in infrastructure, social welfare or other fields in which investment is not recoverable and the expenditures on which are covered by state budget: ODA/concessional loan shall be fully allocated by state budget (if the expenditures are covered by central government budget); ODA shall be partially allocated or on-lent and concessional loan shall be partial or full on-lent (if the expenditures on the program/project are covered by local government budget).
- With regard to regard to a program/project in which investment is partly or fully recoverable: If expenditures on the program/project are covered by state budget, ODA/concessional loan shall be partially allocated; ODA shall be partially or fully on-lent according to the capital recovery ratio decided by a competent authority.
This Circular takes effect from November 1st, 2016 and replaces Circular No. 218/2013/TT-BTC dated December 31st, 2013.