Attachment_J.1_-_VAT_Reimbursement_Processes.pdf

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LIST OF DOCUMENTS EXHIBITS AND OTHER ATTACHEMENTS

Attachment J.I – Partner Procedures for VAT Refund

Attachment J.II – Vat Exemption Partner Registration Form

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ATTACHMENT I PARTNER PROCEDURES FOR VAT REFUND

USAID, as part of the United States Government Mission to Ethiopia and in cooperation with the Government of the Federal Democratic Republic of Ethiopia, has arranged for the refund of VAT to ensure that US assistance to Ethiopia remains untaxed and in compliance with applicable US law.

To ensure smooth processing of claims, USAID/Ethiopia is asking that all partners follow the steps outlined below. Please forward these instructions to any sub-partners who will make purchases over $500 that are subject to VAT. Under the revised procedures, they will be responsible for submitting their own claims which you will review and forward to USAID.

Note: VAT refund submissions must be prepared and submitted on a monthly basis (preferably by the 15th of the following month).

1. Confirm the Purchases are Above the De Minimus Amount. For any purchases under the de minimus exemption amount, a partner organization may make the purchases so long as approvals of the purchases as eligible expenses under an award have otherwise been obtained. The VAT paid on purchases under the de minimus amount will be an allowable expense under the award. At the time of this writing, the de minimus amount is any transaction with a total purchase transaction amount of U.S. $500 or less. Therefore, refund submissions may only include VAT paid on transactions over U.S. $500.

Transaction refers to each credit invoice.

2. When a partner organization has made a purchase, the total amount of which shall be over the de minimus exemption, the following procedures shall be followed. These procedures shall result only in approval of particular purchases for purposes of the VAT refund. This process is meant to indicate only approval of particular purchases for purposes of the VAT refund. All expenses are still subject to review and audit and any other necessary approvals or waivers that may be allowed or required in your contract or agreement with USAID still apply.

Note: These procedures only apply to purchases being made with U.S. Government funds.

Should a project use non-U.S. Government funds, USAID/Ethiopia is not able to assist with determining whether such purchase is not subject to VAT.

a. Compile Invoices. First, the partner organization should gather and compile the original, valid invoices for the month which they desire to request VAT reimbursement. The partner organization should then make copies of the original invoices and stamp each of the invoice copies with the organization’s seal. (Note:

See Annex 1: Invoice Requirements for instructions on what constitutes a valid invoice.)

Attach Supporting Documents. The Ethiopian Revenue and Customs Authority (ERCA) has asked that the partner organization attach a copy of construction contracts and lease agreements that relate to the invoices being submitted. If you are submitting a

Page III claim for construction materials and you have not sub-contracted the construction work, please attach a note explaining the work and how it relates to your project. In case of requesting a refund for partial amount of the total VAT value where it is divided to different projects (USAID or non-USAID funded) but of the same invoice, a note has to be attached with each request that shows the division to each projects.

b. Complete the Partner Submission for VAT Refund. Each partner, sub-partner, or sub-sub-partner should initiate a “Partner Submission for VAT Refund” for its eligible purchases, listing each of the invoices that were compiled. Submit two signed copies each with the organization’s seal. (Note: See Annex 2: Procedures for Completing “Partner Submission for VAT Refund” for specific directions.)

c. In the Case of a Sub-Partner or Sub-sub-partner Claim. The sub-partner or sub-sub-partner must forward the completed “Partner Submission for VAT Refund” forms, original invoices and a copy of construction or lease contracts to the partner that has a direct contract or agreement with USAID. This USAID prime partner shall review, sign and stamp each claim before forwarding approved items to USAID.

d. Submit Partner Submission for VAT Refund, Partner Submission for VAT

Refund, and invoices (originals and copies) to USAID/Ethiopia. The USAID prime partner shall submit the completed “Partner Submission for VAT Refund”, the original invoices and stamped invoice copies to the Responsible Officer (the “RO”) at USAID (usually COTR/AOTR or Activity Manager). These documents may not be submitted by fax, email or any other mechanism; they must be submitted in the original hard copy.

e. USAID/Ethiopia’s Procedures. When internal procedures necessary to effect this process are complete, USAID/Ethiopia will take the partner organization’s VAT refund submission to the ERCA and request reimbursement for the partner organization.

f. Collect Original Invoices from USAID/Ethiopia. Once the refund submission is presented to the ERCA, the partner organization contact listed on the “Partner Submission for VAT Refund” will be notified that the original invoices may be collected from USAID/Ethiopia.

g. Prepare Designation Letter. Once USAID/Ethiopia collects the VAT refund check from the ERCA, the partner organization contact listed on the “Partner Submission for VAT Refund” will be notified. (Note: Refund checks will be issued in the name of the partner organization, unless otherwise requested.) The partner organization must prepare a “Designation Letter” to USAID/Ethiopia designating the individual who will be picking up the check the authority to do so on behalf of the partner organization.

h. Collect VAT Refund Check from USAID/Ethiopia. The partner organization should contact Asebe Woldeamanuel, VAT Clerk, via email at aswoldeamanuel@usaid.gov or via phone at 011-130-6002 ext. 6057 or 011-130- 60-57 to make arrangements to collect the VAT refund check. The partner organization representative should then bring the “Designation Letter” to USAID/Ethiopia and collect the VAT refund check.

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This memo and the attachments hereto supplant and replace in whole those documents and instructions distributed prior to this date. In case of a conflict between the documents and/or instructions distributed prior to this date, the instructions herein and documents attached hereto shall govern.

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Annex 1: Invoice Requirements

The Ethiopian Revenue and Customs Authority (ERCA) has a number of requirements in order to make VAT reimbursements for purchases from US Government funds. ERCA will only refund VAT and not other types of taxes such as turnover taxes or withholding taxes. In order to get reimbursed for VAT, purchases need to be made from VAT-registered suppliers. ERCA will not reimburse VAT for goods and services purchased without a valid (legal) VAT invoice even if the purchase was made from a VAT-registered entity.

Original invoices – Original invoices must be presented to USAID/Ethiopia upon submission of all VAT refund claims. USAID/Ethiopia needs to compare original invoices with the invoice copies to confirm the invoices are real. Note: For those partner organizations whose main office is outside of Ethiopia, they should submit their VAT refund submissions prior to sending original invoices to the main office.

Customer name on invoices – The name of the customer on any invoice, receipt or other documentation should always match the legal name of the partner, sub-partner, or sub-sub-partner, not the project title or an individual name. This should match the “Organization Requesting Refund” name at the top of the “Partner Submission for VAT Refund.” This name also should match with partner’s Bank Account name, as it is used by ERCA to issue a Cheque. Abbreviations of the partner name on invoices that don’t match the full partner name on the refund submission will be rejected.

Types of Invoices

Tax Invoice - A sales invoice issued by a VAT-registered person or legal entity in return for the purchase of goods or services.

A tax invoice can take on one of the following forms:

a. Credit sales invoice with cash Receipt;

b. Cash sales invoice;

c. Credit register slip (fiscal invoice) with cash receipt voucher;

d. Cash register slip (fiscal invoice) with attachment.

Credit (Cash) Sales Invoice - This type of invoice should contain, at a minimum, the following elements:

a. A heading “Value Added Tax Credit (Cash) Sales Invoice” (pre-printed) - ERCA requires that all invoices have the phrase “Value Added Tax Credit Sales Invoice” or “Value Added Tax Cash Sales Invoice” to ensure that VAT has been paid on the transaction. Invoices with heading other than the above mentioned like “Value Added Tax Invoice”, “Cash Receipt/Voucher” or “Cash Invoice” are not eligible for VAT refund.

b. Supplier’s Name and Registered Trade Name (pre-printed)

c. Supplier’s Tax Identification Number (TIN) and VAT Registration Number (both pre-printed)

d. Sequential Invoice Number (pre-printed)

e. Description of Goods and Services Purchased. If an additional document is reference

Page VI under service description, every supporting document should be attached. For example in the case of Hotel services some credit/cash invoices refer to guest bills or invoices that shows the given service clearly. In such cases the guest bill or invoice mentioned on the cash/credit invoice should be attached.

f. Net Purchase Price

g. VAT Amount

h. Total Inclusive Amount (Net Purchase Price plus VAT Amount) both in figure and words

i. Date of Transaction

j. Name and Signature of Cashier

k. Customer’s Name - On the “TO” part of the invoice the supplier should write the name of the partner organization.

Note: If an invoice is missing one of the above elements, the refund request will be ineligible, and therefore, rejected.

Cash (Credit) Register Slip – Typically, suppliers provide a cash register slip in a hotel or supermarket. The cash register slip is required to contain the following information:

a. Date and Time

b. Taxable Amount

c. VAT Amount

d. Machine Register Code (MRC) or ET Number

e. Name of Customer

f. Name and signature of User (or Cashier)

g. Address of Supplier

h. Supplier TIN number

i. FS Number

j. Description of Goods or Services Purchased

k. Customer TIN number

Some Cash Register Slips do not contain all of the required information to claim a refund for VAT from ERCA. Therefore, if the cash register slip misses one of the above elements, it needs to be supported by an attachment which should contain the following information:

a. Date and Time

b. Taxable Amount

c. VAT Amount

d. Total Amount

e. Machine Register Code (MRC) or ET Number

f. Name of Customer

g. Name and signature of User (or Cashier)

h. Address of Supplier

i. FS Number

j. Description of Goods or Services Purchased

Note: In case of cash register machine failure, your supplier should provide a valid VAT Credit/Cash Sales Invoice.

Examples of Purchases Made on Invalid Invoices A purchase made on a proforma invoice or a quotation and settled from a letter request from a supplier without a VAT invoice is not eligible for a VAT refund.

A payment made on a standard or decorated invoice which is not a VAT invoice is not eligible for a VAT refund.

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Annex 2: Procedures for Completing “Partner Submission for VAT Refund”

Reminder: This form should be filled out by each partner, sub-partner for one month at a time.

ERCA will not accept refund submissions that contain VAT invoices from different months.

Filling out the Fields Before the Chart

1. Organization Requesting Refund – Organization Name

2. Tax Identification No/TIN No – Organization’s Tax Identification Number, if applicable.

In the case of sub-partners or sub-sub-partners they have to write their own TIN, not their prime partner’s.

3. Refund Month – Enter the collective time period of the invoices/VAT payments in which you are seeking refunds (ex. Refund for the month of October 2009). This date is the same with purchase date in the spreadsheet.

4. Address, Subcity/Wereda, Kebele, House No – Enter your organization’s information.

5. Name of USAID Partner – If the organization requesting refund is a sub-partner or sub-sub-partner, then enter the name of the prime partner that has the direct agreement with

USAID.

6. Title of Project – Office name of the overall project as listed on the USAID agreement.

7. Agreement No. – Number listed on the USAID agreement (ex. 663-A-00-05-0111)

Immediately above the chart, write out in words, the VAT refund amount. This must equal the total “VAT Paid” at the bottom of the last column of the chart.

Filling out the Chart

• No – Numerically list according to the number of invoices being submitted. Rows may be added to the chart as needed to accommodate the number of invoices being submitted.

• Name - Supplier’s Name

• TIN – Supplier’s Tax Identification Number (required).

• VAT No - Supplier’s VAT Registration Number (required).

• List of Goods/Services – General description of goods/services on invoice(s).

• Invoice No – Pre-printed sequential number on the invoice. For Fiscal (Cash/Credit register slips) invoices, use their FS Numbers.

• Purchase Date – Date of credit invoice when there is a credit sales invoice. Purchase date

Page VIII and payment date will be the same for cash sales invoice purchases.

• Payment Date – Date of cash receipt voucher when there is a credit sales invoice, or cash sales invoice date when payment is made over the counter.

• NR Check No – (NR = non-returnable) Enter the check number, if applicable, in which the purchase and related VAT was paid.

• Bank – Enter the name of the bank on which the check or cash was drawn.

• Price without VAT – Enter the invoice/purchase amount excluding VAT.

• VAT Paid – Enter the amount of VAT paid on the invoice. (15% calculation included in spreadsheet.)

• Total – Ensure the totals of the “Price without VAT” and “VAT Paid” columns are properly summed. (Summing calculations included in spreadsheet.)

Filling out the Information after the Chart

A. Organization Request Refund

• The completed Partner Submission for VAT Refund must be signed and dated by an authorized person of the organization requesting refund, and must be stamped with the organization’s seal.

• In the case that a sub-partner or sub-sub-partner does not have a bank account under the name of the organization, ERCA can make the check to the partner institution. If a partner does not have a bank account in its name, ERCA can make the check to USAID.

• Provide the name, email, and phone number of the contact person who will collect any documents returned as well as the monthly refund checks which will be initially delivered to USAID. Note that if the refund is written in the name of the sub-partner, a representative of the sub-partner can pick-up the refund check directly from USAID.

B. USAID Partner Organization

• In the case of a sub-partner or sub-sub-partner claim, the completed Partner Submission for VAT Refund must be signed and dated by an authorized person of the prime partner that has a direct agreement with USAID as well the sub-partner or sub-sub-partner. The form must also be stamped with the organization’s seal (partner, sub-partner & sub-sub-partner).

C. USAID Responsible Official

• The completed Partner Submission for VAT Refund must be signed and dated by the

USAID Responsible Official (usually the COTR/AOTR or Activity Manager).

D. USAID Delegated Official

• The completed Partner Submission for VAT Refund must be signed and dated by the USAID Delegated Official (Controller, Deputy Controller, or Executive Officer) whose signature is on file with ERCA as an authorized signatory.

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ATTACHMENT J.II

VAT EXEMPTION PARTNER REGISTRATION FORM

Organization: __________________________________________________

List the name(s) of USAID-funded projects/activities:

If you need more space please continue below.

Below please print the names (no more than two) and title of authorized personnel signing on behalf of the organization:

Specimen Stamp:

Project title:

Contract or Agreement:

Start date:

End date:

Name:

Title: Specimen

Signature

LIST OF DOCUMENTS EXHIBITS AND OTHER ATTACHEMENTS