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THE MINISTRY OF
FINANCE
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SOCIALIST REPUBLIC
OF VIET NAM
Independence – Freedom – Happiness
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No: 206/2003/QD-BTC
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Hanoi, December 12, 2003
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DECISION
ON
ISSUANCE OF THE REGULATIONS ON MANAGEMENT, USE AND DEPRECIATION OF FIXED ASSETS
THE MINISTER OF FINANCE
- Pursuant to the Law on Business Income Tax
(BIT) No.09/2003/QH11 dated 17 June 2003;
- Pursuant to Government Decree No.86/2002/ND-CP dated 5 November 2002,
stipulating functions, duties, powers and organizational structure of
ministries and ministerial equivalent agencies;
- Pursuant to Government Decree No.77/2003/ND-CP dated 1 July 2003, stipulating
functions, duties, powers and organizational structure of the Ministry of
Finance;
- With a view to enhancing the management, use and depreciation of fixed assets
by enterprises; to enabling enterprises to charge in full and in a correct
manner the depreciation costs of their fixed assets; to replacing machinery and
equipment and applying advanced technologies and modern techniques in line with
business activities of enterprises and the national economy;
- Following the proposal of the Director of the Legislation Department;
DECIDES:
Article 1: To
issue together with this Decision the “Regulations on management, use and
depreciation of fixed assets”.
The regulations shall apply to State
companies, State joint stock companies, one-member State limited companies,
more-than-one-member State limited companies, enterprises with controlling
shares or capital of the State.
Other enterprises shall only be obliged to apply
the provisions related to determination of the depreciation costs of fixed
assets for calculation of Business Income Tax (BIT).
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Article 3: The
Director of the Legislation Department, the Ministry’s Office Manager, the
Director of the Business Finance Department, the General Director of Taxation,
heads of units belonging to or under the control of the Ministry of Finance
shall, within their respective functions and powers, be responsible for
developing, guiding and examining the implementation of this Decision.
FOR MINISTER OF
FINANCE
DEPUTY MINISTER
Le Thi Bang Tam
REGULATIONS
ON
MANAGEMENT, USE AND DEPRECIATION OF FIXED ASSETS
(issued together with Decision No.206/2003/QD-BTC dated 12 December 2003 of
the Minister of Finance)
Section I: GENERAL
PROVISIONS
Article 1: Subjects for and scope of application:
1. The regulations shall apply to State
companies, State joint stock companies, one-member State limited companies,
more-than-one-member State limited companies; enterprises with controlling
shares or capital of the State.
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2. The management, use and depreciation
stipulated in the Regulations shall be applied to each fixed asset of
enterprises.
Article 2: Terms used in the Regulations are interpreted as follows:
1. Tangible fixed assets mean capital goods
mainly in material forms (an asset has its independent structure or a system
comprising many assets linked together to perform one or a number of particular
functions) which meet the standards of tangible fixed assets and which, while
engaged in many business cycles, still maintain their initial material form
such as buildings, architectural structures, machinery, equipment,…
2. Intangible fixed assets mean assets
without material forms, which meet the standards of intangible fixed assets and
represent an amount of value related to many business cycles such as expenses
directly relating to land use right, issuance right, patent, copyright,…
3. Financial leasing fixed assets mean fixed
assets that the enterprise leases from a financial leasing company. Upon
termination of the leasing term, the lessee shall have the right to purchase
the leased assets or continue to lease assets in accordance with the conditions
agreed in the financial leasing contract. The total rent paid for an asset
stated in the financial leasing contract shall be at least equivalent to the
value of such asset at the time when the contract is signed.
All financial leasing fixed assets which fail
to meet the above regulations shall be considered operation leasing fixed
assets.
4. Similar fixed assets mean fixed assets
with a similar use in the same line of business and with an equivalent value.
5. Historical cost of fixed assets:
- Historical cost of tangible fixed assets
means the total expenses that the enterprise has to incur to acquire such
assets, calculated up to the time when the fixed assets are put into use.
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6. Reasonable value of fixed assets mean the
value of assets which can be exchanged between parties with knowledge of parity
exchange.
7. Useful life of fixed assets mean the
duration for which the enterprise expects to use fixed assets in business and
production activities, or the duration which, according to the existing
regulations, is determined on the basis of the quantity or volume of products
expected to be produced from the use of such fixed assets in normal conditions
in line with economic-technical parameters of the fixed assets and with other
factors related to the operation of the fixed assets.
8. Wear and tear of fixed assets mean the
gradual devaluation of fixed assets due to their involvement in business and
production activities, natural corrosion, technical advancement etc…during the
course of operation of fixed assets.
9. Value of accumulated wear and tear of
fixed assets mean the total value of wear and tear of fixed assets as at the
time of reporting.
10. Depreciation of fixed assets means the
calculation and systematic allocation of the historical costs of fixed assets
to business and production expenses during the period of using such fixed
assets.
11. The accumulated depreciation of fixed
assets mean the total amount of depreciation costs of fixed assets which have
been charged to business expenses, calculated as at the time of reporting.
12. Book value of fixed assets mean the
difference between the historical cost of fixed assets and the accumulated depreciation
cost (or the value of accumulated wear and tear) of fixed assets, calculated at
the time of reporting.
13. Repair of fixed assets means the
renovation, maintenance and repair of fixed assets when they are broken down
during the course of operation in order to recover their normal operation
capacity.
14. Upgrading fixed assets means the
reformation, construction and installation of, and provision of additional
equipment to, fixed assets in order to improve their capacity, quality and
performance as against the initial capacity, quality and performance of fixed
assets, or to extend the useful life of fixed assets; or the application of new
technology which decreases operation expenses of fixed assets compared with
previous expenses.
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Article 3: Standards and awareness of fixed assets:
1. Standards and awareness of fixed assets:
All means of production whether they are a
tangible fixed asset with independent structure or a system of separate parts
which have been combined together to perform one or a number of particular
functions and which could not operate properly if any part of the asset is
lacking, shall be considered fixed assets if they concurrently satisfy the four
standards below:
a) The future economic interests shall
certainly be gained from the use of such assets;
b) The historical cost of fixed assets must
be determined reliably;
c) Their useful life is equivalent to or
exceeds one year;
d) Their value is from 10,000,000 million dong
(ten million dong) or more.
In the event that a system consisting of many
separate parts linked with one another, in which each component has different
useful life and the system could still perform its main operating function in
case of absence of certain parts and that each part of the asset is required to
be managed separately due to the requirement for management and use of it, the
part of the asset shall be considered an independent tangible fixed asset if it
concurrently satisfies 4 standards of fixed assets.
With respect to livestock working and/or
generating products, each animal shall be considered a tangible fixed asset if
it concurrently satisfies 4 standards of fixed assets.
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2. Standards and awareness of intangible
fixed assets:
Any actual costs incurred by an enterprise,
which satisfies concurrently 4 conditions stipulated in clause 1 of this
Article and does not form tangible fixed assets shall be considered an
intangible fixed asset. Expenses which do not concurrently satisfy the four
standards mentioned above shall be directly charged or gradually allocated to
business expenses of the enterprise.
In particular, costs incurred in the
development stage shall be recognised as intangible fixed assets generated from
internal activities of enterprises if they satisfy the following seven
conditions:
a) The enterprise has a technical feasibility
study ensuring the completion of intangible fixed assets for bringing them into
use as expected, or for sale;
b) The enterprise intends to complete the
intangible fixed assets for use or for sale;
c) The enterprise has an ability to use or sell
such intangible fixed assets;
d) The intangible fixed assets must generate
future economic interests;
dd) The enterprise has enough technical or
financial resources and other resources to complete the stages of development,
sale or use of such intangible fixed assets;
e) The enterprise has an ability to determine
certainly the total costs in the development stage to generate such intangible
fixed assets;
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Expenses for establishment of the enterprise,
training of employees or advertisement incurred before the establishment of the
enterprise, expenses in the research stage, expenses for relocation to another
place, commercial goodwill shall not be intangible fixed assets and shall be
allocated to business expenses over a maximum period of no more than 3 years
from the time when the enterprise commences its operations.
Article 4: Determination
of historical cost of fixed assets:
1. Determination of historical cost tangible
fixed assets:
a) Tangible fixed assets purchased:
Historical cost of purchased tangible fixed
assets (including brand-new or second-hand assets) shall consist of the actual
purchase price payable plus (+) taxes (excluding taxes to be refunded) and
relevant expenses calculated to the time when such fixed assets are put into
operation such as interest on loans invested in fixed assets; freight charges,
stevedoring fees; fees for upgrading fixed assets; fees for installation and
trial operation of fixed assets; registration fess;…
Where tangible fixed assets are purchased on
the basis of deferred payment or instalments, the historical cost of purchased
fixed assets shall include the purchase price paid on the prompt payment basis
at the time of purchase plus (+) taxes (excluding taxes to be refunded) and
relevant expenses calculated to the time when such fixed assets are put into
operation such as freight charges, stevedoring fees; fees for upgrading fixed assets;
fees for installation and trial operation of fixed assets; registration fees,…
The difference between the purchase price paid on the deferred payment basis
and the purchase price paid on the prompt payment basis shall be included in
financial expenses at the time of payment, except that the difference is
charged to historical cost of tangible fixed assets in accordance with the
provisions on capitalisation of interest on loans.
b) Tangible fixed assets purchased in the
form of an exchange:
The historical cost of a tangible fixed asset
purchased in the form of an exchange for a non-similar tangible fixed asset or
a different asset shall be the reasonable value of the tangible fixed asset
received or exchanged (after adding the amounts additionally payable or
deducting the amounts receivable) plus (+) taxes (excluding taxes to be
refunded) and relevant expenses calculated to the time when such fixed asset is
put into operation such as freight charges, stevedoring fees; fees for
upgrading the fixed asset; fees for installation or trial operation;
registration fees,…
The historical cost of a tangible fixed asset
which is purchased in the form of an exchange for a similar tangible fixed
asset, or which is sold in exchange for the ownership of a similar tangible
fixed asset is the remaining value of the exchanged tangible fixed asset.
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The historical cost of a tangible fixed asset
which is constructed or produced by the enterprise itself shall include the
actual production cost of the fixed asset plus (+) expenses for installation
and trial operation and other relevant expenses calculated to the time when
such fixed asset is put into operation (except for internal profits,
unreasonable expenses such as wasted materials, labour costs or other expenses
in excess of the amount of expenses regulated for the construction or
production by the enterprise itself).
d. The historical cost of a tangible fixed
asset formed from capital construction under the mode of tendering shall be the
finalisation price of the construction project in accordance with the current
regulations on management of investment and construction plus (+) registration
fee and other relevant fees.
With respect to fixed assets which are
livestock working and/or generating products, or gardens of perennial trees,
the historical cost shall include all actual expenditures paid for the
livestock or gardens of perennial trees from the time when they are formed to
the time when they are put into use in accordance with the current regulations
on management of investment and construction, and other relevant expenses.
dd. Tangible fixed assets granted or
transferred…
The historical cost of a tangible fixed asset
which is granted or transferred … shall include the remaining value of such
fixed asset stated in the accounting books of the granting unit or the
transferring unit, or the value according to the actual assessment of the fixed
asset reception and delivery council plus (+) expenses incurred by the
recipient of asset, calculated to the time when such fixed asset is put into
use such as freight charges, stevedoring fees; expenses for upgrading the fixed
asset, installation and trial operation; registration fee (if any),…
In particular, the historical cost of a
tangible fixed asset transferred among dependent member units of the same
enterprise shall be the original cost shown on the accounting books of the
transferor in line with the record of that fixed asset. The recipient of the tangible
fixed asset shall base on historical cost, accumulated depreciation costs, the
net book value and the record of that fixed asset to record in the accounting
books. Costs related to the transfer of the fixed asset among dependent member
units shall not be added to the original cost, but be allocated to business
expenses in the period.
e. Tangible fixed assets granted, donated or
presented; received as joint venture capital contribution; returned from
contributed capital; discovered as excessive payment.
The historical cost of a tangible fixed asset
which is granted, donated or presented; received as joint venture capital
contribution; returned from contributed capital; discovered as excessive
payment, …. shall be the value according to the actual assessment by the fixed
asset reception and delivery council plus expenses incurred by the recipient of
fixed asset, calculated to the time when such fixed asset is put into use such
as freight charges, stevedoring fees; expenses for upgrading the fixed asset, installation
and trial operation; registration fee,…
2. Determination of historical cost of
intangible fixed assets:
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The historical cost of a purchased intangible
fixed asset shall be the actual purchase price payable plus (+) taxes
(excluding taxes to be refunded) and relevant expenses incurred by the
enterprise, calculated to the time when such intangible fixed asset is put into
use as expected.
Where an intangible fixed asset is purchased
in the mode of deferred payment or instalments, the historical cost of the
intangible fixed asset shall be the purchase price paid on the basis of a
prompt payment at the time of purchase. The difference between the purchase
price paid on the basis of a deferred payment and the purchase price paid on
the basis of a prompt payment shall be included in financial expenses at the
time of payment, except that the difference is charged to historical cost of
the intangible fixed asset in accordance with the provisions on capitalisation
of the interest on loans.
b. Intangible fixed assets purchased in the
form of an exchange:
The historical cost of an intangible fixed
asset purchased in the form of an exchange for a non-similar intangible fixed
asset or a different asset shall include the reasonable value of the intangible
fixed asset received or exchanged (after adding the amounts additionally
payable or deducting the amounts receivable) plus (+) taxes (excluding taxes to
be refunded) and relevant expenses calculated to the time when such intangible
fixed asset is put into use as expected.
The historical cost of an intangible fixed
asset which is purchased in the form of an exchange for a similar intangible
fixed asset, or which is sold in exchange for the ownership of a similar
intangible fixed asset shall be the remaining value of the exchanged intangible
fixed asset.
c. Intangible fixed assets generated from
internal activities of enterprises:
The historical cost of an intangible fixed
asset generated from internal activities of an enterprise shall be expenses
directly relating to the designing, construction and trial production incurred
by the enterprise, calculated to the time when such intangible fixed asset is
put into use as expected.
In particular, expenses arising from internal
activities of an enterprise so that the enterprise has trademarks of goods,
issuance right, list of customers; expenses arising in the research stage and
similar items shall not be determined as intangible fixed assets but shall be
included in business expenses in the period.
d. Intangible fixed assets granted, donated
or presented:
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dd. Land use right:
The historical cost of a fixed asset which is
the land use right (including fixed-term land use right and long-term land use
right) shall be the payment made to obtain the lawful land use right plus (+)
compensatory payments for clearance of site, expenses for levelling the ground,
registration fee,…(excluding expenses paid for construction of projects on the
land); or the value of the land use right from capital contribution.
Where an enterprise leases land, the land
rental shall be gradually allocated to its business expenses and shall not be
recognised as intangible fixed asset.
e. Issuance right, copyright, patent:
The historical cost of a fixed asset which is
the issuance right, copyright or patent shall be the total of actual expenses
incurred by the enterprise to obtain such issuance right, copyright or patent.
g. Trademarks of goods:
The historical cost of a fixed asset which is
the trademark of goods shall be the actual expenses directly relating to the
purchase of such trademark of goods.
h. Computer software:
The historical cost of a fixed asset which is
the computer software (in case where the software is a component which can be
separated from the relevant hardware) shall be the total of actual expenses
incurred by the enterprise to obtain the computer software.
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4. The historical cost of fixed assets
without invoices or source documents of business individuals or households
establishing private enterprises, limited liability companies or joint stock
companies shall be the reasonable value that the enterprises themselves
determine at the time of registration of their business, and the enterprises
shall be responsible before the law for the accuracy of that value.
Where the value of fixed asset determined by
the enterprise is larger than the market price of fixed assets of the same or
similar kind, the enterprise shall be required to re-determine the reasonable
value of fixed assets for calculation of business income tax (BIT). After the
enterprise re-determines the reasonable value of fixed assets, if the value of
fixed assets still does not conform to the actual market price, the tax office
shall have the right to request the enterprise to re-determine the value of
fixed assets through the local assessment council or an organisation having the
function to valuate assets in accordance with the provisions of the law.
5. The historical cost of fixed assets of
enterprises shall only be changed in the following cases:
a. Reassessment of the value of fixed assets
in accordance with the law;
b. Upgrading fixed assets;
c. Removal one or a number of parts of the fixed
asset;
Upon change of the historical cost of fixed
assets, the enterprise is required to make out a minutes clearly stating the
bases for such change and re-determine the items regarding historical cost, net
book value, accumulated depreciation of fixed assets and practise the
accounting in accordance with the current regulations.
6. The recording of increase or decrease in
the historical cost of fixed assets shall be made at the time of increase or
decrease in fixed assets.
Article 5: Rules
on management of fixed assets:
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Each fixed asset must be managed in terms of
its historical cost, accumulated depreciation cost and net book value:
Net book value of
fixed asset
=
Historical cost of
fixed asset
-
Accumulated
depreciation cost of fixed asset
In
respect of fixed assets which are not engaged in production and business
activities as stipulated in clause 2 of Article 9 of these Regulations, the
enterprise shall mange the fixed assets in terms of their historical cost,
value of accumulated wear and tear and net book value:
Net book value of
fixed asset
=
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-
Value of
accumulated wear and tear of fixed asset
The enterprise is required to manage fixed
assets which have been fully depreciated but still engaged in business
activities in the same manner as other normal fixed assets.
At the end of each financial year, the
enterprise must conduct an inventory of fixed assets. In respect of cases of
excess of or shortfall in fixed assets, the enterprise must make out the
minutes, find out the causes and deal with them.
Article 6: Classification
of fixed assets in enterprises:
Based on the nature of fixed assets,
enterprises shall classify fixed assets according to the following categories:
1. Fixed assets used for business mean fixed
assets used by the enterprise for its business purposes.
a. Tangible fixed assets shall be classified
as follows:
Category 1: Buildings and
architectural structures mean fixed assets of the enterprise which are formed
after a construction process such as offices, warehouses, fences, water towers,
ground, decorative works associated with buildings, roads, bridges, railroads,
harbours, quays.
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Category 3: Means of
transportation, equipment for transmission mean all kinds of means of
transportation including means of transportation for railway, waterway, road,
airway, pipeline and equipment for transmission such as information system,
electricity system, water pipeline, conveyers,…
Category 4: Equipment and
instruments for management mean equipment and instruments used for management
of business activities of enterprises such as computers for administration,
electronic equipment, equipment and tools for measurement, quality-control
equipment, dehumidifiers, vacuum cleaners, termite and woodworm killer,…
Category 5: Gardens of perennial
trees, livestock working and / or generating products mean gardens of perennial
trees such as coffee, tea or rubber trees; orchards, carpets of grass and green
trees; livestock working and / or generating products such as herds of
elephants, horses, buffaloes, cows,…
Category 6: Other kinds of fixed
assets mean all other fixed assets which are not listed in 5 mentioned-above
types, such as pictures, artworks,…
b. Intangible fixed assets such as land use
right, issuance right, patent, trademark,…
2. Fixed assets used for welfare,
administration, national security and defence mean fixed assets owned by enterprises
and used for purposes of welfare, administration, national security and defence
within enterprises. Those fixed assets are also classified in accordance with
the provisions of clause 1 of this Article.
3. Fixed assets which are maintained, kept or
stored on behalf of the State mean fixed assets that the enterprise maintains
or keeps on behalf of other units or the State in accordance with the
provisions of the authorised State body.
Based on the management requirements of each
enterprise, the enterprise itself shall make a detailed classification of fixed
assets in each category accordingly.
Article 7: Upgrading
and repairing fixed assets:
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2. Costs for repair of fixed assets shall be
regarded as costs and directly charged or gradually allocated to business
expenses of the period of no more than 3 years.
With respect to a number of industries whose
repair costs are large and incurred unequally over periods or years, the
enterprise is allowed to advance costs for repair of fixed assets into its
business expenses in the period provided that after making such advance the
enterprise still get profits in its business activities. The enterprise is
required to make out a plan for advancing repair costs and notify it to the
relevant tax office.
The enterprise must reconcile the actual
repair costs with the advanced repair costs. If the actual repair costs are
larger than the advanced amount, the difference shall be totally charged or
gradually allocated to expenses of the period of no more than 3 years. If the
actual repair costs are smaller than the advanced amount, the difference shall
be recorded as a decrease in business expenses of the period.
3. Costs in relation to the intangible fixed
asset arising after the initial recognition, which are valuated certainly as
increasing the economic interests of the intangible fixed asset compared with
its initial economic interests, shall be added to the historical cost of the
fixed asset. Other expenses in relation to the intangible fixed asset arising
after the initial recognition shall be charged to business expenses.
Article 8: Leasing,
mortgage, pledge, sale or disposal of fixed assets:
1. All activities of leasing, mortgage,
pledge, sale and disposal of fixed assets must comply with the current
regulations of the law.
2. In respect of operating lease fixed assets:
- The lessee shall have responsibility to
manage and use fixed assets in accordance with the provisions stated ion the
lease contract. The fixed asset rent shall be included in business expenses of
the period.
- The lessor as an owner of the fixed asset
shall be required to monitor and manage the leased fixed assets.
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- The lessee must monitor, manage and use the
leased fixed asset in the same manner as its own fixed asset, and fulfil all
obligations committed in the financial lease contract.
- The lessor as an investor must monitor and
carry out properly all terms and conditions in the financial lease contract.
4. In respect of the sale and sublease of
fixed assets:
- Where an enterprise sells or subleases an
operating lease fixed asset, the enterprise is required to carry out the same
responsibilities as regulated for the lessee of the operating lease fixed
asset. The difference arising when the agreed sale price or the sublease amount
of fixed asset is lower or higher than the reasonable value shall be promptly
charged to the enterprise’s income in the period or gradually allocated to its
expenses as regulated.
- Where an enterprise sells and subleases a
financial lease fixed asset, the enterprise is required to carry out the same
responsibilities as regulated for the lessee of the financial lease fixed
asset. The difference between the revenue from sale of the asset and the net
book value of the asset shall be charged to the enterprise’s income as regulated.
5. The fixed asset handover and reception
council, the fixed asset liquidation council, the fixed asset sale council of
the enterprise shall be established according to the decision of the enterprise
and shall include mandatory members who are director and chief accountant of
the enterprise, a technical expert who has good knowledge of the fixed asset
(the expert within or out of the enterprise), a representative of the party
handing over the asset (if any) and other members decided by the enterprise. In
special cases or according to the current regulations on financial management,
the enterprise shall invite representatives of the financial body directly
managing the enterprise and the agency managing technical-economic industries
(if any) to participate in these councils.
Section III.
PROVISIONS ON DEPRECIATION AND USE OF DEPRECIATION FUND
Article 9: Rules
on calculation of depreciation costs of fixed assets:
1. All fixed assets of the enterprise related
to its business activities must be depreciated. The depreciation costs of fixed
assets shall be charged to business expenses in the period.
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In respect of fixed assets which have not
been fully depreciated and are damaged, the enterprise must determine the
causes and require the compensatory payments from responsible persons, and
include the damaged fixed assets in other expenses.
2. Depreciation costs shall not be calculated
in respect of fixed assets not engaged in business activities, including:
- Fixed assets being State reserves which are
allotted to the enterprise for the latter to manage and keep them on behalf of
the State.
- Fixed assets serving welfare of the
enterprise such as nursery, club, traditional house, canteen, …invested from
the welfare fund.
- Fixed assets serving general needs of the
whole society and not merely serving business activities of the enterprise such
as dams, bridges, roads, … which the State allots to the enterprise for the
latter to manage them.
- Other fixed assets not engaged in business
activities.
The enterprise shall manage and monitor the
above fixed assets in the same manner as it does in respect of fixed assets
used for business, and calculate the wear and tear level of these fixed assets
(if any). The wear and tear level shall be determined by dividing the
historical cost of fixed assets by their useful life which is provided for in
Appendix 1 issued together with Decision 206/2003/QD-BTC dated 12 December 2003
of the Minister of Finance.
If these fixed assets are engaged in business
activities, the enterprise shall charge depreciation costs to its business
expenses during the period for which the fixed assets are engaged in business
activities.
3. The enterprise which leases operating
fixed assets must calculate depreciation costs in respect of the leased fixed
assets.
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5. The calculation of depreciation costs or
stoppage of calculation of depreciation costs in respect of fixed assets shall
be commenced from the date (in accordance with the ordinal number of day of the
month) on which fixed assets increase, decrease or stop to be engaged in
business activities.
6. The long-term land use right is a special
intangible fixed asset, the enterprise shall recognise it as an intangible
fixed asset at its historical cost but shall not be allowed to calculate its
depreciation costs.
Article 10: Determination of useful life of tangible fixed assets:
1. With respect to brand-new fixed assets
(unused fixed assets), the enterprise must base on the frame of useful life of
fixed assets stipulated in Appendix 1 issued together with Decision
206/2003/QD-BTC stated 12 December 2003 of the Minister of Finance to determine
the useful life of fixed assets.
2. With respect to fixed assets which have
been used, the useful life of fixed assets shall be determined as follows:
Useful life of
fixed asset
=
Reasonable value of
fixed asset
x
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Sale price of the
brand-new fixed asset of the same type (or of a similar fixed asset in the
market)
in which:
The reasonable value of fixed asset shall be
the actual purchase price or actual exchange price (in case of purchase or
exchange), the remaining value of fixed asset (in case where the fixed asset is
granted or transferred), the value according to the assessment of the fixed
asset handover and reception council (in case where the fixed asset is given,
donated or received as a capital contribution).
3. In cases where an enterprise wishes to
determine the useful life of fixed assets differently from the frame of useful
life as provided for in Appendix 1 issued together with Decision
206/2003/QD-BTC dated 12 December 2003 of the Minister of Finance, the
enterprise is required to make out a report, explaining clearly the bases for
determining the useful life of that fixed asset and submit it to the Ministry
of Finance for consideration and decision based on the three following
standards:
- Technical life of fixed assets as designed;
- Current conditions of fixed assets (used
time of fixed assets, generation of fixed assets, actual conditions of fixed
assets…);
- Economic life of fixed assets.
4. In case where there are a number of
impacting factors (e.g. upgrading or removing one or some parts of the fixed
asset…) with a view to extending or shortening the determined useful life of
fixed assets, the enterprise shall re-determine the useful life of fixed assets
based on 3 standards provided for in clause 3 of this Article, concurrently
shall draw up a minutes clearly stating the bases which lead to the change in
the useful life of fixed assets.
Article 11: Determination of useful life of intangible fixed assets:
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Article 12: Determination of useful life of fixed assets in a number of
special cases;
- With respect to investment projects in the
form of Build – Operate – Transfer (BOT), the useful life of fixed assets shall
be determined from the time when the fixed assets are put into use until the
end of such projects.
- With respect to a business cooperation
contract (BCC) with the participation by foreign parties, after termination of
the contract the foreign parties shall transfer the project to the State of
Vietnam without compensation, the useful life of the fixed assets to be
transferred shall be determined from the time when such fixed assets are put
into use until the end of the project.
Article 13: Depreciation methods in respect of fixed assets:
1. The contents of the straight line method;
the reducing balance method with adjustment; the depreciation method based on
quantity or volume of products are stipulated in Appendix 2 issued together
with Decision 206/2003/QD-BTC dated 12 December 2003 of the Minister of
Finance.
2. Based on the ability to meet the
conditions stipulated for each depreciation method in respect fixed assets, the
enterprise shall be allowed to select depreciation methods suitable for each
kind of its fixed assets.
- Straight line method:
Fixed assets engaged in business activities
shall be depreciated in accordance with the straight line method.
Enterprises operating and gaining high
economic efficiency shall be allowed to conduct a rapid depreciation of their
fixed assets in order to quickly renew technologies, however the rapid
depreciation rate shall not exceed two times the depreciation rate provided for
in accordance with the straight line method. Fixed assets engaged in business
activities and entitled to a rapid depreciation shall include machinery,
equipment; measuring and experimental instruments; equipment and means of transport;
tools used for management; livestock, gardens of perennial trees. When
conducting the rapid depreciation, enterprises must ensure that they get
profits in their business.
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Fixed assets engaged in business activities
and depreciated in accordance with the reducing balance method with adjustment
must concurrently meet the following conditions:
+ Being brand-new fixed assets (unused
assets);
+ Being machinery, equipment; measuring and
experimental instruments;
The reducing balance method with adjustment
shall apply to enterprises with technologies required to be rapidly replaced or
developed.
- Depreciation method based on quantity or
volume of products:
Fixed assets engaged in business activities
and depreciated in accordance with this method shall include machinery and
equipment which concurrently meet the following methods:
+ Directly relating to the production of
products;
+ The total quantity or volume of products
turned out on the basis of the
designed capacity of fixed assets can be
determined.
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lower than the designed capacity.
3. The enterprise is required to register
with the relevant tax office the depreciation method that it has selected
before applying such depreciation method. Where the depreciation method
selected by the enterprise is not consistent with the regulated conditions, the
tax office shall have responsibility to notify this to the enterprise for the
latter to change its depreciation method accordingly.
4. The depreciation method selected and
registered by the enterprise to apply to each fixed asset must be applied
consistently during the course of using such fixed asset.
Article 14: Use of the amount from depreciation of fixed assets:
The enterprise must use the amount from
depreciation of fixed assets in accordance with the current regulations of the
law.
Section IV.
ORGANISATION OF THE IMPLEMENTATION
Article 15: These Regulations shall apply as from the financial year
2004 onward.
Article 16: Fixed assets put into use prior to 1 January 2004 shall be
depreciated in accordance with the new provisions in Appendix 2 issued together
with Decision 206/2003/QD0-BTC dated 12 December 2003 of the Minister of Finance.
Fixed assets depreciated in accordance with
the provisions of Decision 2000/QD-BTC dated 31 December 2002 of the Ministry
of Finance on pilot application of the depreciation regime in accordance with
the reducing balance method with adjustment shall continue to be depreciated in
accordance with that method provided for in these Regulations.
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Article 17: Units belonging to and under the control of the Ministry of
Finance shall, within their respective functions and duties, be responsible for
implementing, and guiding enterprises to properly implement, these Regulations.
APPENDIX
I
FRAME
OF USEFUL LIFE OF FIXED ASSETS
(issued together with Decision No. 206/2003/QD-BTC dated 12 December 2003 of
the Minister of Finance)
No.
List of categories
of fixed assets
Maximum useful life
(years)
Minimum useful life
(years)
A.
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1
Motive force generating machinery
8
10
2
Generators
7
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3
Transformers and electric devices
7
10
4
Other motive machinery and equipment
6
10
B.
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1
Machine tools
7
10
2
Mining and construction machinery
5
...
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3
Tractors
6
8
4
Machinery used in agriculture and forestry
6
8
5
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6
8
6
Metallurgical equipment, equipment for
coating the metal surface with anti-rust and anti-corrosion substances
7
10
7
Specialised equipment for production of
chemicals
6
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8
Specialised machinery and equipment for
production of construction materials, ceramics and glass
6
8
9
Specialised equipment for production of
electronic and optical components and precise mechanical devices
5
12
10
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7
10
11
Machinery and equipment used in the textile
industry
10
15
12
Machinery and equipment used in the garment
industry
5
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13
Machinery and equipment used in the paper
industry
5
15
14
Machinery and equipment used for production
and processing of food and foodstuffs
7
12
15
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6
12
16
Machinery and equipment used in
telecommunication, information, electronic, informatic and television
industries
3
15
17
Machinery and equipment for production of
pharmaceutical products
6
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18
Other working machinery and equipment
5
12
C.
Measuring and experimental instruments
1
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5
10
2
Optical equipment and spectrometers
6
10
3
Electric and electronic equipment
5
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4
Equipment for measurement and analysis of
physical and chemical elements
6
10
5
Equipment and instruments for measurement
of radioactive elements
6
10
6
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5
8
7
Other measuring and experimental equipment
6
10
8
Moulds used in moulding industry
2
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D.
Equipment and means of transport
1
Means of transport for roads
6
10
2
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7
15
3
Means of transport for waterway
7
15
4
Means of transport for airway
8
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5
Transportation equipment being pipelines
10
30
6
Means of stevedoring and lifting goods
6
10
7
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6
10
E.
Instruments used for management
1
Computing and measuring equipment
5
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2
Informatic or electronic machinery and
equipment and computer software serving management
3
8
3
Other means and instruments used for
management
5
10
F.
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1
Strong buildings (1)
25
50
2
Other buildings (1)
6
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3
Storehouses, containers; bridges, roads,
parking lots, drying ground…
5
20
4
Dikes, dams, canals, drains, ports, docks…
6
30
5
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5
10
G.
Livestock and gardens of perennial trees
1
All kinds of livestock
4
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2
Gardens of industrial trees, orchards,
gardens of perennial trees
6
40
3
Carpets of grass, carpets of green trees
2
8
H.
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4
25
Notes:
(1) Strong buildings mean residential houses,
working offices, office buildings, hotels, etc … determined as having the
durability of category I or II. Other buildings mean residential houses,
working offices, office buildings, etc … determined as having the durability of
category III or IV in accordance with the provisions of the Ministry of
Construction.
APPENDIX
II
METHODS
OF CALCULATION OF DEPRECIATION OF FIXED ASSETS
(issued together with Decision 206/2003/QD-BTC dated 12 December 2003 of the
Minister of Finance)
I. STRAIGHT LINE METHOD:
1. Contents of the method:
1) Fixed assets of enterprises shall be
depreciated in accordance with the straight line method as follows:
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- The enterprise shall calculate the average
yearly depreciation rate of fixed assets in accordance with the formula set out
below:
Average yearly
depreciation rate of fixed asset
=
Historical cost of
fixed asset
Useful life of
fixed asset
- The average monthly depreciation rate shall
be equal to the depreciation cost of the whole year divided by 12 months.
2) Where there is a change in the useful life
or historical cost of a fixed asset, the enterprise is required to re-determine
the average depreciation rate of the fixed asset by dividing (:) the net book
value of the fixed asset by its re-determined useful life (determined as the
difference between the registered useful life minus the used time).
3) The depreciation cost of a fixed asset in
the last depreciation year shall be determined as the difference between the
historical cost of the fixed asset and the accumulated depreciation cost
calculated to the year prior to the last depreciation year of that asset.
2. Example of the calculation of depreciation
of fixed assets:
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1) Knowing that the fixed asset has a
technical life of 12 years and an expected useful life of 10 years (in
accordance with the provisions in Appendix 1 issued together with Decision
No.206/2003/QD-BTC), and the asset is put into use on 1 January 2004.
Historical cost of the fixed asset = 119
million – 5 million + 3 million + 3 million = 120 million.
The average yearly depreciation rate = 120
million : 10 years = 12 million dong/year
The average monthly depreciation rate = 12
million dong : 12 months = 1 million dong/month.
Every year, the enterprise shall charge a
depreciation cost of 12 million dong for that fixed asset to its business
expenses.
2) After 5 years of using the asset, the
enterprise upgrades the fixed asset and incurs a total cost of 30 million dong.
The useful life of the fixed asset is re-determined to be 6 years (1 year
increased as against the initially registered useful life), the date on which
the upgrading is completed and the fixed asset is put into use is 1 January
2009.
Historical cost of the fixed asset = 120
million dong + 30 million dong = 150 million dong.
The accumulated depreciation cost charged =
12 million dong x 5 years = 60 million dong.
The net book value of the fixed asset = 150
million dong – 60 million dong = 90 million dong.
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The average monthly depreciation rate = 15
million dong : 12 Months = 1,250,000 dong/month.
From 2009 onward, every month the enterprise
shall charge to its business expenses a depreciation cost of 1,250,000 dong in
respect of the fixed asset which has just been upgraded.
3. Determination of the depreciation rate in
respect of fixed assets put into use prior to 1 January 2004:
a. The way of determining the depreciation
rate:
- The enterprise shall base on figures shown
on the accounting books and record of the fixed asset to determine the net book
value of the fixed asset.
- The enterprise shall determine the
remaining useful life of the fixed asset in accordance with the following
formula:
T
=
T2 ( 1 -
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)
T1
in which:
T : the remaining useful life of the fixed
asset.
T1: the useful life of the fixed asset
determined in accordance with the provisions of
Appendix 1 issued together with Decision
No.166/1999/QD-BTC.
T2: the useful life of the fixed asset
determined in accordance with the provisions of
Appendix 1 issued together with Decision
No.206/2003/QD-BTC.
t1: the actual period for which the fixed
asset has been depreciated.
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The average yearly
depreciation rate of the fixed asset
=
The net book value
of the fixed asset
The remaining
useful life of the fixed asset
- The average monthly depreciation rate shall
be equal to the depreciation cost for the whole year divided by 12 months.
b. Example of the calculation of depreciation
of fixed assets:
Example: The enterprise has used a loom with
its historical cost of 600 million dong as from 1 January 2001. The useful life
of the loom is determined to be 10 years in accordance with the provisions in
Appendix 1 issued together with Decision No.166/1999/QD-BTC. The used time of
the loom calculated to the end of 31 December 2003 is 2 years. The accumulated
depreciation cost is 120 million dong.
- The net book value of the loom is 480
million dong.
- The enterprise determines the useful life
of the loom to be 5 years in accordance with the provisions of Appendix 1 issued
together with Decision No.206/2003/QD-BTC.
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Remaining useful
life of the loom
=
= 5 years x ( 1 -
2 years
) = 4 years
10 years
-
The average yearly depreciation rate = 480 million dong : 4 years = 120 million
dong/year (in accordance with Decision 206/2003/QD-BTC).
- The average monthly depreciation rate = 120
million dong : 12 months = 10 million dong/month.
From 1 January 2004 to the end of 31 December
2007, the enterprise shall charge a depreciation cost of 10 million dong for
the loom to its monthly business expenses.
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1. Contents of the method:
The depreciation rate of fixed assets in
accordance with the reducing balance method with adjustment shall be determined
as follows:
- Determination of the useful life of fixed
assets:
The enterprise shall determine the useful
life of fixed assets in accordance with the Regulations on management, use and
depreciation of fixed assets issued together with Decision 206/2003/QD-BTC of
the Ministry of Finance.
- The enterprise shall determine the
depreciation rate of fixed assets in the initial years in accordance with the
following formula:
Yearly depreciation
rate of the fixed asset
=
Net book value of
the fixed asset
x
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in which;
The rapid depreciation rate is determined in
accordance with the following formula:
Rapid depreciation
rate (%)
=
Depreciation rate
of the fixed asset in accordance with the straight line method
x
Adjustment
coefficient
The depreciation rate of fixed assets in
accordance with the straight line method is determined as follows:
Depreciation rate
of the fixed asset in accordance with the straight line method (%)
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1
x
100
Useful life of the
fixed asset
The adjustment coefficient shall be
determined in accordance with the useful life of
fixed assets stipulated in the following
table:
Useful life of
fixed assets
Adjustment
coefficient (times)
Up to 4 years (t ≤
4 years)
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Over 4 years to 6
years (4 years < t ≤ 6 years)
2.0
Over 6 years ( t
> 6 years)
2.5
In
the last years, when the yearly depreciation rate calculated in accordance with
the reducing balance method mentioned above is equal to (or lower than) the
depreciation rate averagely calculated by dividing the net book value of the
fixed asset by its remaining useful life, from that year onward the
depreciation rate shall be equal to the net book value of the fixed asset
divided by its remaining useful life.
- The monthly depreciation rate shall be
equal to the depreciation cost for the whole year divided by 12 months.
2. Example of the calculation of depreciation
of fixed assets:
Example: Company A purchases a brand-new
equipment with the historical cost of 10 million dong for production of
electronic components.
The useful life of the fixed asset determined
in accordance with the provisions in Appendix 1 (issued together with Decision
206/2003/QD-BTC) is 5 years.
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- The yearly depreciation rate of the fixed
asset in accordance with the straight line method is 20%.
- The rapid depreciation rate in accordance
with the reducing balance method shall be equal to 20% x 2 (adjustment
coefficient) = 40%.
- The yearly depreciation rate of the above
fixed asset shall be specifically calculated in accordance with the following
table:
Unit: dong
Ordinal
number of year
Net
book value of the fixed asset
Method
of calculating the yearly depreciation rate of the fixed asset
The
yearly depreciation rate
The
monthly depreciation rate
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1
10,000,000
10,000,000 x 40%
4,000,000
333,333
4,000,000
2
6,000,000
6,000,000 x 40%
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200,000
6,400,000
3
3,600,000
3,600,000 x 40%
1,440,000
120,000
7,840,000
4
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2,160,000 : 2
1,080,000
90,000
8,920,000
5
2,160,000
2,160,000 : 2
1,080,000
90,000
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In which:
+ The depreciation rate of the fixed asset
from the first year to the end of the third year shall be equal to the net book
value of the fixed asset multiplied by the rapid depreciation rate (40%).
+ From the 4th year onward, the yearly
depreciation rate shall be equal to the net book value of the fixed asset
(early in the 4th year) divided by its remaining useful life (2.160.000 : 2 =
1.080.000). [Because in the 4th year, the depreciation rate in accordance with
the reducing balance method (2,160,000 x 40% = 864,000) is lower than the
depreciation rate averagely calculated by dividing the net book value of the
fixed asset by its remaining useful life (2,160,000 : 2 = 1,080,000)].
III. THE DEPRECIATION METHOD BASED ON
QUANTITY OR VOLUME OF PRODUCTS:
Fixed assets of the enterprise shall be
depreciated in accordance with the depreciation method based on quantity or volume
of products as follows:
- Based on the economic-technical file of the
fixed asset, the enterprise shall determine the total quantity or volume of
products turned out in accordance with the designed capacity of the fixed
asset, referred to as output based on the designed capacity.
- Based on its actual production situation,
the enterprise shall determine the quantity or volume of products actually
turned out every month or every year by that fixed asset.
- The monthly depreciation rate of the fixed
asset shall be determined in accordance with the following formula:
Monthly
depreciation rate of the fixed asset
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Quantity of
products turned out in the month
x
Average
depreciation rate for a unit of product
in which:
Average
depreciation rate for a unit of product
=
Historical cost of
the fixed asset
Output based on the
designed capacity
-
The yearly depreciation rate of the fixed asset shall be equal to the total
depreciation rate of 12 months in the year, or shall be calculated in
accordance with the following formula:
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=
Quantity of
products turned out in the year
x
Average
depreciation rate for each unit of product
Where
there is a change in the designed capacity or historical cost of the fixed
asset, the enterprise is required to re-determine the depreciation rate of the
fixed asset.
3. Example of the calculation of depreciation
of fixed assets:
Example: Company A purchases a bulldozer
(brand-new) with the historical cost of 450 million dong. The designed capacity
of the bulldozer is 30 m3/hour. The output based on the designed capacity of
this bulldozer is 2,400,000 m3. The volume of products gained in the first year
by the bulldozer is:
Month
Volume of products
completed (m3)
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Volume of products
completed (m3)
January
14,000
July
15,000
February
15,000
August
14,000
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18,000
September
16,000
April
16,000
October
16,000
May
15,000
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18,000
June
14,000
December
18,000
The
depreciation rate in accordance with the depreciation method based on quantity
or volume of products turned out by this fixed asset shall be determined as
follows:
- The average depreciation rate for 1 m3 of
land bulldozed = 450 million dong : 2,400,000 m3 = 187.5 dong/m3.
- The depreciation rate of the bulldozer is
calculated in accordance with the following table:
Month
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Monthly
depreciation cost (dong)
January
14,000
14,000 x 187.5 = 2,625,000
February
15,000
15,000 x 187.5 = 1,812,500
March
18,000
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April
16,000
16,000 x 187.5 = 3,000,000
May
15,000
15,000 x 187.5 = 1,812,500
June
14,000
14,000 x 187.5 = 2,625,000
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15,000
15,000 x 187.5 = 1,812,500
August
14,000
14,000 x 187.5 = 2,625,000
September
16,000
16,000 x 187.5 = 3,000,000
October
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16,000 x 187.5 = 3,000,000
November
18,000
18,000 x 187.5 = 3,375,000
December
18,000
18,000 x 187.5 = 3,375,000
Total depreciation cost of the whole year
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