CIRCULAR

FINANCE MECHANISM APPLIED TO WHOLLY STATE-OWNED SINGLE-MEMBER LIMITED LIABILITY COMPANIES PARTICIPATING IN POLITICAL OBJECTIVES, ASSURANCE OF SOCIAL SECURITY, AND REGULATION OF SUPPLY AND DEMAND OF THE ECONOMY

Pursuant to the Government's Decree No. 215/2013/ND-CP dated December 23, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Finance;

In the Furtherance of Deputy Prime Minister Vu Van Ninh's Notice No. 146/TB-VPCP dated April 0, 2014;

After reaching a consensus with the Ministry of Labor, War Invalids and Social Affairs in Dispatch No. 3657/LDTBXH-KHTC dated September 11, 2015;

At the request of Director of Corporate Finance Administration;

The Minister of Finance promulgates a Circular on finance mechanism applied to wholly state-owned single-member limited liability companies participating in political objectives, assurance of social security, and regulation of supply and demand of the economy,

Chapter I

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Article 1. Regulated entities and scope

1. Scope: This Circular provides guidance on finance mechanism applied to wholly state-owned single-member limited liability companies operating under the Law on Enterprises and participating in political objectives, assurance of social security, and regulation of supply and demand of the economy under the Prime Minister’s Decisions or voluntarily according to state policies for purposes other than making a profit and accepted by the Prime Minister.

2. Regulated entities: Wholly state-owned single-member limited liability companies (business corporations, general companies, companies) participating in political objectives, assurance of social security, and regulation of supply and demand of the economy; owner’s representative agencies, agencies, organizations, and individuals relevant to fulfillment of political objectives, assurance of social security, and regulation of supply and demand of the economy.

3. Activities in national defense and security, provision of public products and services specified in the Government's Decree No. 130/2013/ND-CP dated October 16, 2013 and the Government's Decree No. 93/2015/ND-CP dated October 15, 2015 are not regulated by this Circular.

Article 2. Interpretation of terms

For the purpose of this Circular, the terms below are construed as follows:

1. "wholly state-owned single-member limited liability companies" (hereinafter referred to as enterprises) include:

a) Single-member limited liability companies that are parent companies of business corporations; parent companies of state-owned corporations; parent companies in parent company-subsidiary company relationship;

b) Independent single-member limited liability companies affiliated to Ministries, regulatory bodies, the People’s Committees of provinces, or corporations.

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2. "political objectives, assurance of social security, and regulation of supply and demand of the economy" (hereinafter referred to as "political objectives") are objectives under directives or decisions of the Prime Minister or voluntarily performed according to state policies for purposes other than making a profit and accepted by the Prime Minister.

3. "business operation" includes business activities of an enterprise other than political objectives.

Chapter II

GENERAL PROVISIONS

Section I: FINANCE MECHANISM APPLIED TO WHOLLY STATE-OWNED SINGLE-MEMBER LIMITED LIABILITY COMPANIES PARTICIPATING IN POLITICAL OBJECTIVES, ASSURANCE OF SOCIAL SECURITY, AND REGULATION OF SUPPLY AND DEMAND OF THE ECONOMY

Article 3. Mechanism for exemption and reduction of land rents, land levies, water surface rents

Any enterprise participating in accomplishment of political objectives that satisfy conditions for exemption or reduction of land rents, land levies, or water surface rents shall be granted exemption or reduction of land rents, land levies, or water surface rents on the area of land or water surface serving accomplishment of political objectives as prescribed in the Government's Decree No. 45/2014/ND-CP dated May 15, 2014 on collection of land levies and the Government's Decree No. 46/2014/ND-CP dated May 15, 2014 on collection of land rents, water surface rents, and amendments thereto (if any).

Procedures for granting exemption and reduction of land rents, land levies, water surface rents shall comply with the Law on Tax administration and its instructional documents.

Article 4. Revenue management

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Article 5. Expenditure management

Expenditures incurred during participation in accomplishment of political objectives shall be separately, reasonably, and legitimately accounted for in accordance with the Law on Corporate income tax and relevant legislative documents.

Enterprises shall open detailed accounting books to separately monitor expenditures incurred during participation in accomplishment of political objectives as follows:

1. Fixed assets, current assets dedicated to accomplishment of political objectives, and other expenditures serving accomplishment of political objectives shall be accounted  for according to actual documents.

2. If it is not possible to separate fixed assets, current assets, and other expenditures serving accomplishment of political objectives, expenditures (including depreciation of fixed assets and costs of current assets and other costs) shall be accounted for according to the ratio of revenue from business operation and provision of products and services during participation in accomplishment of political objectives to total revenue from the enterprise's overall business operation.

Article 6. Amounts payable to state budget

Amounts payable to state budget shall comply with effective regulations.

Article 7. Settlement of difference between revenue and expenditure

The difference between revenue and expenditure of business operation and provision of products and services during participation in accomplishment of political objectives shall be aggregated with the enterprise's business outcomes when determining corporate income tax as prescribed by law;

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- The revenue is smaller than expenditure, the difference shall be offset against by the profit from the enterprise's overall business operation.

Article 8. Accounting and audit

1. The enterprise shall make separate reports on accomplishment of political objectives according to the Appendix enclosed herewith.

2. The enterprise shall make and submit reports on accomplishment of political objectives together with annual financial statements to the owner’s representative agency and the finance authority at the same level.

3. Enterprises their financial statements audited, including revenues and expenditures on accomplishment of political objectives as the basis for provision of subsidies or grant of exemption or exemption of land levies, land rents, water surface rent, and preferential corporate income tax .

Article 9. Accounting

The account system applied to enterprises shall be used.

Section II: ASSESSMENT OF BUSINESS EFFECTIVENESS OF COMPANIES PARTICIPATING IN POLITICAL OBJECTIVES, ASSURANCE OF SOCIAL SECURITY, AND REGULATION OF SUPPLY AND DEMAND OF THE ECONOMY

Article 10. Exemptions when assessing business effectiveness and drawing up salary budgets of enterprises participating in accomplishment of political objectives

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1. Assessment of the enterprise's capital preservation level.

2. Ranking of the enterprise or its manager.

3. Commendation for the enterprise or its manager.

4. The allocation of the annual salary budget and actual salaries for the enterprise's employees and manager.

Chapter III

IMPLEMENTATION

Article 11. Effect

1. This Circular comes into force form March 07, 2016.

2. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance for consideration./.

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PP MINISTER
DEPUTY MINISTER




Tran Van Hieu

APPENDIX

(Enclosed with Circular No. 14/2016/TT-BTC dated January 20, 2016 of the Ministry of Finance)

REPORT ON BUSINESS OPERATION AND PROVISION OF PRODUCTS AND SERVICES DURING PARTICIPATION IN ACCOMPLISHMENT OF POLITICAL OBJECTIVES

Unit: million VND

No.

Content

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Reporting year

Ratio (%)

Estimation

Reality

Compared to previous year

Compared to estimation

1

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3

4=3/1

5=3/2

I

Business outcomes

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1

Total revenue

2

Total expenditure (minus land rents, land levies, water surface rents exempted or reduced)

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3

Difference between revenue and expenditure = (1 - 2)

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II

Incentives

1

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2

Land levies exempted or decrease in land levies

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3

Water surface rents exempted or decrease in water surface rents

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Corporate income tax at concessional rate

Note: Use data of activities serving accomplishment of political objectives.

[Location and date]

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CHIEF ACCOUNTANT

DIRECTOR