Exploring CHANGE’s Tax Evasion Charges Part 3: Donations Subjected to Value-Added Tax

Imposing taxation on the kindness of foreign entities.

Exploring CHANGE’s Tax Evasion Charges Part 3: Donations Subjected to Value-Added Tax

Thuy Tung wrote this article in Vietnamese, which was published in Luat Khoa Magazine on September 29, 2023. Lee Nguyen translated the article into English.

In Vietnam, like in other countries, the value-added tax (VAT) is the tax the consumers must pay for the products or services they purchase. It is calculated and included in the invoice or receipt. It is presumably worth 5-10% of the item's value in most countries. This amount initially flows from the buyer's pocket to the seller and then into the state's coffers.

Now, you may picture the following scenario:

The European Union (EU) wants to donate 1 billion dong to a non-profit organization in Vietnam, such as CHANGE, to organize climate change adaptation training courses. This money comes from the taxes of EU citizens, which the EU uses to help people in need in other countries. In essence, they give Vietnam the money to improve the quality of life for the people inside the country.

The Vietnamese government then imposes a VAT on that money received from the EU. This means that the EU has to pay an additional 50-100 million dong in taxes to the Vietnamese government when it provides financial aid for those in need in that same country.

You then may think there is something wrong with this scenario. And your thinking is correct.

Unfortunately, this is a very peculiar situation that can be better understood by examining how non-profit organizations in Vietnam receive grants, donations, or foreign aid when dealing with their own government.

There are two ways to receive grants in Vietnam: (1) By applying to the state and/or the relevant authorities for approval and (2) By signing a scientific and technological service contract with the donors.

To be exempt from taxes, non-profit organizations must follow the first method. However, receiving this approval is not a straightforward process.

Crumbling Under the Weight of Administrative Procedures

Non-profit organizations utilizing foreign aid must allocate substantial time, energy, and financial resources toward administrative and financial procedures before implementing projects.

The first step is obtaining aid approval. The second is compliance with accounting and tax regulations and tax exemptions deemed suitable for their organizational structure. Scientific and technological organizations have to comply with these procedures.

Since its establishment and commencement of operations in 2013, CHANGE has had to contend with at least 49 relevant legal documents issued and enforced by Vietnamese authorities. These include regulations governing internal management, periodic reporting to authorities, approval and execution of aid projects, meetings with foreign elements, accounting procedures, taxes, tax exemptions, and handling violations.

Some of these regulations are regarded as semi-licenses for carrying out activities involving the use of foreign aid. For instance, one regulation stipulates: “Organizations that have been granted licenses for scientific and technological activities are only eligible for value-added tax and corporate income tax reductions when the state authority responsible for science confirms that their contracts are for scientific research and technological development.” [1]

Alternatively, regulations regarding the approval procedures for international conferences and seminars for foreign aid projects must be licensed for execution. These projects must have a foreign aid project execution license and confirmation of aid before proceeding with the VAT refund process [2].

Adhering to these regulations has become a burden for all parties involved since the issuance of Decree No. 80/2020/ND-CP (replacing Decree No. 93/2009/ND-CP), especially since the leadership of CHANGE, MEC, LPSD, GreenID, and PLD were arrested and sentenced for tax evasion since 2022. [3][4] This burden encompasses administrative and financial aspects placed on the organizations and their sponsors.

It also burdens state agencies and local authorities tasked with reviewing, approving, and managing the implementation of foreign aid projects. [5] This is illustrated in an inspection report by the Ministry of Planning and Investment (MPI) on VUSTA, which shows that 100% of the 92 selected foreign aid projects violated these administrative and financial regulations.

These projects included those aiding VUSTA and some member organizations from Jan. 1, 2018, to June 30, 2022, including CHANGE. This situation arose because of several "errors" on the part of the MPI and the Ministry of Finance. [6]

Regardless of where the fault actually lies, those who ended up in prison were the leaders and employees of non-profit organizations; at least five individuals have been imprisoned for tax evasion since 2022.

Hesitance Towards Scientific and Technological Service Contracts

Some foreign sponsors entered into contracts to provide scientific and technological services to non-profit organizations to alleviate administrative burdens and legal risks for partners. In this approach, these sponsors must pay an additional 5% or 10% of the total value of the aid so that non-profit organizations can issue them VAT invoices.

At this point, the grant becomes a "service" in a "buyer-seller" relationship. However, foreign sponsors and taxpayers cannot use this "service" like the typical goods or services provided by businesses.

This is the second method mentioned earlier in the article.

Even though they pay a VAT, some foreign sponsors do not accept the generation of profit for non-profit organizations from executing scientific and technological service contracts. This means they are only willing to pay for the expenses incurred to carry out the activities under the signed contract. Without profit, no corporate income tax can be generated.

Some sponsors refuse to pay the VAT or corporate income tax because they cannot explain this procedure to the taxpayers in their own countries; it is difficult to explain why they must be taxed over money sent to another country for aid and charity.

Conversely, some local non-profit organizations also refuse to accept grants if the sponsor does not agree to pay the VAT and corporate income tax.

In effect, it appears that the goodwill of foreign partners is not welcomed in Vietnam, not because the Vietnamese people object but because of the unreasonable taxes imposed by the government on those who want to help.


In Part 4, we will explore how the Vietnamese government imposes VAT on foreign aid grants.


1. Clause 3, Article 10 of the 2013 Law on Science and Technology; Clause 13, Article 4 and Clause 15, Article 10 of Circular No. 219/2013/TT-BTC.

2. Decision No. 06/2020/QD-TTg dated February 21, 2020, of the Prime Minister on organizing and managing international conferences and seminars in Vietnam (replacing Decision No. 76/2010/QD- TTg).

3. Decree No. 80/2020/ND-CP dated July 8, 2020, of the Government on management and use of non-refundable aid that is not part of official development aid from foreign agencies, organizations, and individuals for Vietnam.

4. On December 10, 2021, the United Nations Special Rapporteur on the Rights to Freedom of Peaceful Assembly and of Association and the Special Rapporteur on Freedom of Opinion and Expression of the Human Rights Council expressed concerns regarding Decree No. 80/2020/ND-CP, Decision No. 06/2020/QD-TTg, and several other regulations. The Special Rapporteurs recommended that the Government of Vietnam amend these provisions to fulfill the national obligation to respect the human rights of all people, including the rights to freedom of association and peaceful assembly (Document No. OL VNM 7/21).

5. Vinh Anh, 2022, Viện trợ phi chính phủ nước ngoài: Nhiều khó khăn cần tháo gỡ.

6. The Conclusion No. 722/KL-BKHDT dated February 7, 2023, of the Ministry of Planning and Investment concluding 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 Jan. 1, 2018, to June 30, 2022.

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