A representative of an enterprise said that since February the enterprise has imported VND1 trillion worth of equipment to implement a wind power project and has paid nearly VND100 billion to the local budget, equal to 10 percent of VAT of imports.

The enterprise has also paid hundreds of billion of dong in VAT for other projects. Therefore, it is expecting to get a tax refund worth trillions of dong.

However, the enterprise has been informed by the tax agency that it won’t get the tax refund because its project is in a conditional business field and it does not have an electricity operating license.

The enterprise therefore has proposed amending the VAT Law and adjusting the provision on the conditions for enterprises in conditional business fields to get a VAT refund if they don’t have an electricity operating license.

“We want the law to allow VAT refunds if enterprises have a PPA (power purchase agreement) instead of an electricity operating license,” the representative said.

Many other wind power project developers have also asked for help.

Van Phong Power Company and Nghi Son Thermopower Company have repeatedly complained about tax refunds for their Van Phong 1 and Nghi Son 2 projects, with the capacity of 1,320 MW and $2.5 billion for each project. Both of them are under construction.

A hydropower company director said he had heard that the General Department of Taxation had released a document dated on February 25 on checking and reclaiming tax refunds from projects that had submitted dossiers before receiving electricity operating licenses.

A provincial taxation body has been asked to collect back VAT refunds, including imposing fines on tax arrears. The fine is 0.03 percent of total tax amount since the days of the refund.
He said the tax arrears collection and the fine will cause very serious consequences to the operation of projects, and may lead to enterprises’ bankruptcy.

Unreasonable rules

In documents to the PM, the National Assembly Steering Committee and relevant agencies, the Vietnam Energy Association pointed out that the requirement on obtaining electricity operating licenses to get tax refunds cannot be implemented.

In documents to the PM, the National Assembly Steering Committee and relevant agencies, the Vietnam Energy Association pointed out that the requirement on obtaining electricity operating licenses to get tax refunds cannot be implemented.

Under Document 10/VBHN-BTC 2018 that guides the implementation of some articles of the VAT Law, power projects are conditional business projects and can receive tax refunds only after they get an electricity operating license.

However, under Circular 21/2020/TT-BTC dated September 9, 2020, the electricity operating license is only granted after the investment of the projects is completed and official acceptance for the work is given.

This means that power projects cannot get a VAT refund during the investment period. Power projects all require huge investment capital and are implemented during long periods, so they need VAT refunds in the first period of investment, which can help them implement the projects.

“Thus, the promulgated regulations on VAT refunds to support projects under the investment period are not applicable to power projects. Therefore, the purposes and the spirit of the amendment of the VAT policies cannot be reached,” the document of the energy association said.

This shows the inadequacy, inconsistency and unfeasibility of regulations on VAT refunds for projects in conditional business fields.

The Vietnam Energy Association therefore has asked appropriate authorities to amend relevant legal regulations, remove inadequate and unfeasible content, and allow power projects in particular and key projects in general to get VAT refunds during the investment period.

This would create favorable conditions for investors to implement projects per the spirit of the Resolution 115/NQ-CP.

Regarding the proposal by the two investors of Van Phong 1 and Nghi Son 2 BOT projects, in the document to the Ministry of Finance (MOF) , the Ministry of Industry and Trade (MOIT) states its view about the requirement on an electricity operating license.

The ministry says the currently applied Law on Electricity as well as the power sector do not have provisions on business licenses in conditional business fields, or certificates on meeting requirements to be eligible for doing business in conditional fields.

Under the Law on Electricity, an electricity operating license is only required for the operation period, and is not required during the construction period.

“An electricity operating licenses is not a business license in conditional business fields, and is not a certificate for meeting requirements to be eligible to do business in conditional fields,” the MOIT document said.

According to the ministry, Van Phong 1 and Nghi Son 2 BOT projects have been observing the regulations on VAT refunds during the construction period and they have received tax refunds many times.

The BOT (build, operate, transfer) contracts of these projects are guaranteed by the Government, so stopping VAT refunds will seriously affect their cash flow, the commercial operation schedule, and the success of the projects.

The ministry also warned that the requirement on electricity operating licenses and the refusal of the VAT refund proposal may lead to problems in legal procedures and the Government’s responsibility in project guarantees.

In conclusion, MOIT asked the MOF to instruct taxation agencies to continue to give VAT refunds to the projects. 

Luong Bang

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