Q&A on tax policy on hydropower project transfer

Nghe An Tax Department responded as follows:

In response to Official Letter No. 16/CV-EDCNA dated May 21, 2024 of Nghe An Energy Development Corporation (hereinafter referred to as the Company) requesting guidance on invoicing, declaration and payment of VAT for the transfer of hydropower projects that have been put into operation. Regarding this issue, the Nghe An Provincial Tax Department has the following comments:

- Article 46 of Investment Law No. 61/2020/QH14 dated June 17, 2020 of the National Assembly stipulates the transfer of investment projects as follows:

“Article 46. Transfer of investment projects

1. Investors have the right to transfer all or part of the investment project to another investor when meeting the following conditions:

a) The investment project or the transferred part of the investment project is not terminated according to the law.ruledetermined

b) Foreign investors receiving the transfer of an investment project or a part of an investment project must satisfy the conditions specified in Clause 2, Article 24 of this Law;

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2. In case the transfer conditions specified in Clause 1 of this Article are met, the procedure for transferring the entire or part of the investment project shall be as follows:

a) For investment projects for which investors are approved according to the provisions ofArticle 29 of this Lawand the investment project is granted an Investment Registration Certificate, the investor shall carry out the procedures for adjusting the investment project according to the provisions ofArticle 41 of this Law;

...”

Article 1, Article 2 of Decree No. 94/2023/ND-CP dated December 28, 2023 of the Government stipulating the policy of reducing value added tax according to Resolution No.110/2023/QH15November 29, 2023 of the National Assembly stipulates:

Article 1. Value added tax reduction

1. Reduce value added tax on groups of goods and services currently subject to a tax rate of 10%, except for the following groups of goods and services:

a) Telecommunications, financial activities, banking, securities, insurance, real estate business, metals and prefabricated metal products, mining products (excluding coal mining), coke, refined petroleum, chemical products. Details are in Appendix I issued with this Decree.

b) Goods and services subject to special consumption tax. Details are in Appendix II issued with this Decree.

c) Information technology according to the law on information technology. Details are in Appendix III issued with this Decree.

d) The reduction of value added tax for each type of goods and services specified in Clause 1 of this Article shall be applied uniformly at the stages of import, production, processing, and commercial business. For coal products sold (including coal mined and then screened and classified according to a closed process before being sold), they are subject to value added tax reduction. Coal products listed in Appendix I issued with this Decree, at stages other than the mining and selling stage, are not subject to value added tax reduction.

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In case the goods and services listed in Appendices I, II and III issued with this Decree are not subject to value added tax or are subject to 5% value added tax according to the provisions of the Law on Value Added Tax, the provisions of the Law on Value Added Tax shall apply and no value added tax reduction shall be allowed.

2. Value added tax reduction

a) Business establishments calculating value added tax according to the deduction method shall apply a value added tax rate of 8% to goods and services specified in Clause 1 of this Article.

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Article 2. Effective date and implementation

1. This Decree takes effect from January 1, 2024 to June 30, 2024 on the list and contents of the Vietnamese product industry system (Attached to Decision No. 43/2018/QD-TTg dated November 1, 2018 of the Prime Minister).

Based on the above regulations, for the item "Hydropower works" with product industry code level 7 is 4221013 in the List and content of the Vietnamese product industry system attached to Decision No. 43/2018/QD-TTg not belonging to the group of goods and services specified in Appendix I, II, III issued with Decree No. 94/2023/ND-CP, this product is subject to a value added tax rate of 8% according to the provisions of Decree No. 94/2023/ND-CP of the Government, effective from January 1, 2024 to June 30, 2024.

The Company shall, based on the actual situation, compare with the above-cited legal documents and other relevant legal documents to comply with the regulations.

Nghe An Provincial Tax Department replies for the Company to know and implement./.