Exploring CHANGE’s Tax Evasion Charges Part 2: Is CHANGE Guilty of Tax Evasion?

Foreign sponsors are opposed to imposing taxes on charity aid to Vietnam.

Exploring CHANGE’s Tax Evasion Charges Part 2: Is CHANGE Guilty of Tax Evasion?

Thuy Tung wrote this article in Vietnamese, which was published in Luat Khoa Magazine on September 28, 2023. Lee Nguyen translated the article into English.

Our first article for this series stated that the legal system in Vietnam does not have a concept for nonprofit organizations and only recognizes the term “non-commercial legal entities.” It concluded that CHANGE falls into this latter category. [1]

However, the law does not provide comprehensive, clear, and easily applicable regulations regarding accounting and tax exemptions for non-commercial legal entities.

Which Tax Mechanism Applies to CHANGE?

The 2015 Law on Accounting and other related documents only provide regulations for administrative accounting, accounting standards for social and charitable activities, and accounting schemes for businesses. [2][3][4][5]

This legal gap has led to the understanding that social associations and non-public scientific and technological organizations are not obligated to prepare tax or financial reports because they do not generate profits.

Hence, CHANGE is not a government agency or an organization funded by the state budget, which would require it to follow the administrative-accounting rules and regulations. These rules are complex and primarily applicable to funds received through the State Treasury, such as funds from the state budget.

CHANGE is also not a social or charity fund, which are subject to the accounting standards for social and charitable activities. Furthermore, the Ministry of Finance only issued guidance on accounting standards for social and charity activities on July 5, 2022. [6]

The organization is not a commercial legal entity established under the Law on Enterprise; it does not follow business accounting regulations.

It is a non-profit organization established under the Science and Technology Law. The decision to establish the organization was approved by the Vietnam Union of Science and Technology Associations (VUSTA). Likewise, the Ministry of Science and Technology issued CHANGE a science and technology activity license. This is reflected in CHANGE's annual reports on income and expenditures, as demonstrated in the previous article.

Furthermore, the Ministry of Planning and Investment acknowledges that it was slow to issue regulations on statistical reporting for foreign aid that is not part of the state budget. [7] The Ministry of Finance has also not issued legal normative documents regulating the financial management standards for such funding, which applies to CHANGE and other organizations with a similar operational model.

Therefore, the conclusion of the police investigation and the indictment against Hong on the grounds that CHANGE operates as a business model is a forced argument. Consequently, it raised ethical questions when it concluded that CHANGE had evaded value-added tax (VAT) and corporate income tax (CIT) on the aid it has received since its establishment in 2013.

Imposing Taxes on Aid for Nonprofit Organizations

As per the custom on the disbursement mechanism for aid, foreign embassies, United Nations agencies, and non-governmental organizations will not sponsor the VAT for sponsorship agreements that benefit the government or the people of Vietnam.

This can be understood to apply to CHANGE as well.

These sponsors also will not allow CHANGE to seek revenues from the aid that was contributed by their countries' taxpayers' money, which was given to Vietnam under charitable aid. Some institutional sponsors only enter into their sponsorship agreements with non-profit organizations in Vietnam when these organizations' independent audit reports indicate that they operate in a non-profit manner. If there is any kind of profit, the profits are not distributed to the organization's members. [8][9]

The investigation by the Police Investigation Agency under the Ho Chi Minh City Public Security Department reveals that from 2013 to 2022, CHANGE received nearly 68 billion dong in aid to carry out its activities in Vietnam. CHANGE entered into cooperation agreements and service contracts with individuals and organizations, both domestic and foreign, to receive these funds. Of this amount, at least 52.6 billion dong came from foreign organizations.

The investigation does not distinctly categorize the amounts according to cooperation agreements, service supply contracts, or donations from individuals and institutions within and outside Vietnam. However, as per customary practice, CHANGE's foreign sponsors only accept the payment of VAT for service supply contracts. They do not allow CHANGE to pay any taxes for cooperation agreements, except for personal income tax related to salaries and wages paid by CHANGE to its employees and consulting experts.

If sponsors do not provide any funds for CHANGE to pay the taxes that Vietnam imposes on non-profit organizations, where may CHANGE acquire the resources to pay these value-added and corporate income taxes?

At this juncture, it can be asserted that CHANGE lacks the financial capability to independently cover VAT and CIT for the amounts arising from its cooperation agreements with foreign sponsors. Hong should not be held responsible for her organization's allegation of tax evasion, as CHANGE does not receive any revenues from its foreign sponsorship.

From an ethical perspective, it can be reiterated that the Vietnamese government should not impose VAT and CIT on aid for cooperation agreements between CHANGE and its foreign sponsors due to the organization’s humanitarian status, as CHANGE has not made any revenues on these aiding funds. Vietnam also should not levy taxes on the amount domestic and foreign individuals donated for CHANGE's community activities.

Thus, on what legal basis did the investigation use to accuse Hoang Thi Minh Hong of evading VAT and corporate income tax besides the fact that Vietnam refuses to accept an international standard practice not to impose taxes on non-profit organizations?


In the following sections, The Vietnamese Magazine will explain why nonprofit organizations that are operating for the community's benefit, such as CHANGE, are subject to value-added tax and corporate income tax on foreign aid when they have not made any revenue from their operation to provide services to the community.


1. Thủy Tùng. (2023, September 27). CHANGE và án trốn thuế - Kỳ 1: Tổ chức phi lợi nhuận hay doanh nghiệp? Luật Khoa Tạp Chí; Luật Khoa tạp chí. https://www.luatkhoa.com/2023/09/change-va-an-tron-thue-ky-1-to-chuc-phi-loi-nhuan-hay-doanh-nghiep

2. Luật kế toán 2015 số 88/2015/QH13 mới nhất. Thuvienphapluat.vn. https://thuvienphapluat.vn/van-ban/Ke-toan-Kiem-toan/Luat-ke-toan-2015-298369.aspx

3. Thông tư 107/2017/TT-BTC hướng dẫn Chế độ kế toán hành chính sự nghiệp mới nhất. Thuvienphapluat.vn. https://thuvienphapluat.vn/van-ban/Ke-toan-Kiem-toan/Thong-tu-107-2017-TT-BTC-huong-dan-Che-do-ke-toan-hanh-chinh-su-nghiep-333131.aspx

4. Thông tư 41/2022/TT-BTC hướng dẫn chế độ kế toán hoạt động xã hội từ thiện mới nhất. Thuvienphapluat.vn. https://thuvienphapluat.vn/van-ban/Ke-toan-Kiem-toan/Thong-tu-41-2022-TT-BTC-huong-dan-che-do-ke-toan-hoat-dong-xa-hoi-tu-thien-499976.aspx

5. Circular No. 200/2014/TT-BTC applies to businesses in all fields and all economic sectors. Circular No. 133/2016/TT-BTC applies to small and medium-sized enterprises. Circular No. 132/2018/TT-BTC applies to micro-enterprises.

6. Circular No. 41/2022/TT-BTC was passed after heated debates in state media and social networks related to singer Thuy Tien calling for donations and support for people in flood areas in the Central region in 2020.

7. The conclusion of the inspection of the management and utilization of foreign-funded resources and foreign donation-calling activities by the Vietnam Union of Science and Technology Associations and its affiliated units from January 1, 2018, to June 30, 2022. (2018). Mpi.gov.vn. https://www.mpi.gov.vn/portal/Pages/2023/Ket-luan-kiem-tra-cong-tac-quan-ly-su-dung-cac-ngu-078857.aspx

8. The investigation revealed that from 2016 to 2022, CHANGE underwent audits conducted by PKF Vietnam Co. Ltd.-Ho Chi Minh City Branch.

9. The European Union requires nonprofit organizations to submit audit reports during the project proposal development and sponsorship agreement signing process.

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