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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:
22/2002/TT-BTC
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Hanoi,
March 11, 2002
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CIRCULAR
GUIDING THE
HANDLING OF FINANCIAL MATTERS AND ACCOUNTING BY VIETNAMESE STATE ENTERPRISES
WHICH HAVE CONTRIBUTED CAPITAL FOR SETTING UP JOINT-VENTURE ENTERPRISES UNDER
THE LAW ON FOREIGN INVESTMENT IN VIETNAM WHEN THESE JOINT-VENTURE ENTERPRISES
TERMINATE OPERATION
Pursuant to the November 12, 1996 Law on
Foreign Investment in Vietnam and the June 9, 2002 Law Amending and
Supplementing a Number of Articles of the Law on Foreign Investment in Vietnam;
Pursuant to the Government’s Decree No. 24/2000/ND-CP of July 31, 2000
detailing the implementation of the Law on Foreign Investment in Vietnam;
Pursuant to the Government’s Decree No. 04/2000/ND-CP of February 11, 2000
detailing the implementation of the Law Amending and Supplementing a Number of
Articles of the Land Law;
The Ministry of Finance hereby guides the handling of financial matters and
accounting by Vietnamese State enterprises which have contributed capital for
setting up joint-venture enterprises under the Law on Foreign Investment in
Vietnam when these joint-venture enterprises terminate operation as follows:
I. GENERAL PROVISIONS
1. Subjects and scope of application:
This Circular prescribes the handling of
financial matters and accounting related to:
1.1. The portions of assets and capital of State
enterprises, which are divided from joint ventures when the latter terminate
operation in the following cases:
- At the expiry of the term defined in the
investment license;
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- By decisions of the agencies in charge of
State management over foreign investment, due to serious violations of law or
stipulations of the investment license;
- Being declared bankrupt.
1.2. State enterprises which transfer or
re-purchase the capital portions contributed to joint ventures.
2. When joint-venture enterprises terminate
operation, the joint-venture capital contributors shall have to set up
liquidation boards to carry out the liquidation, implement the asset and
capital division and disposal plans according to the joint-venture charters and
contracts, ensuring fairness and law observance (except for cases where joint
ventures are declared bankrupt, the settlement procedures shall comply with the
Enterprise Bankruptcy Law).
3. Enterprises being Vietnamese partners shall,
on the basis of the asset and capital division results of the joint-venture
enterprise liquidation boards (or the court decisions), have to receive the
assets divided from the joint ventures, financially handle and account them
according to the provisions in Parts II and III of this Circular.
Enterprises being Vietnamese partners include:
- Corporations, independent cost-accounting
practicing enterprises belonging to corporations, independent enterprises of
the ministries, the People’s Committees of the provinces and centrally-run
cities, which previously made joint-venture capital contribution with an
enterprise component or part of their assets and capital;
- Where State enterprises previously contributed
the whole of their values for setting up joint ventures, thus their legal
entities no longer existed:
+ If the enterprises are members of State
corporations, the representatives of the Vietnamese partners shall be State
corporations.
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4. General principles for handling financial
matters and accounting when joint-venture enterprises terminate operation
include:
Where the asset and capital value received from
the liquidation of the joint-venture enterprises is bigger than the value of
the capital contributed thereto, the enterprises being Vietnamese partners may
account it as an increase in their business capital source. Where it is smaller
than the value of the capital contributed to joint ventures, the enterprises
may offset the deficit with the financial reserve funds; if the financial
reserve funds are not enough, the enterprises may account the deficit into
their financial operation expenses.
Where the enterprises suffer from prolonged
losses, thus financially incapable of offsetting the deficit themselves, they
shall report such to the Ministry of Finance (for central enterprises) or the
People’s Committees of the provinces and centrally-run cities (for local
enterprises) for consideration and permission to reduce their business capital.
II. SPECIFIC PROVISIONS
1. Where enterprises being Vietnamese partners
receive back or get the value of the right to use land, water surface or sea
surface divided from joint ventures for the time the joint ventures have not
used it up (hereinafter called the remaining value of the land use right):
1.1. If the enterprises being Vietnamese
partners previously contributed to the joint-venture capital with the land use
levy or already accepted the transfer of the lawful land use right but such amounts
do not derive from the State budget, when the joint ventures terminate
operation, the enterprises may continue to use the land for the remaining
duration in which the State has allocated the land without having to pay
remittances for the use of the State budget capital, but shall have to pay the
land use tax (land tax) to the State according to current regulations.
1.2. If the enterprises being Vietnamese
partners previously contributed to the joint-venture capital with the land use
levy or accepted the transfer of the lawful land use right and such amounts
derive from the State budget, or the land has been leased by the Vietnamese
State to these enterprises which can contribute the value of the land use right
(the land rent) to joint ventures with foreign countries and the land rents
have been converted into the State capital invested in the enterprises, when
the joint ventures terminate operation, the enterprises may continue using the
land for the remaining land lease or allocation duration and shall be
responsible for preserving the State capital amount corresponding to the land
rents already assigned by the State for contribution to the joint ventures, pay
remittances for the use of the State budget capital, which are calculated from
the time the land rents are used as joint-venture capital contribution,
according to current regulations.
1.3. Where the joint ventures are dissolved or
go bankrupt and the enterprises being Vietnamese partners get the residual
value of the right to use the land which is not that already contributed to
joint ventures by the enterprises, the residual value of the land use right
shall be regarded as a divided asset. The enterprises may continue using the
land for the remaining land lease or allocation duration. Upon the expiry of
the land use duration, the enterprises shall abide by the current provisions of
the land legislation.
If the divided residual value of the land use
right as prescribed at Point 1 of Part II above sees some increase (or
decrease) as compared with the contributed joint-venture capital, the
enterprises shall account the difference according to the provisions at Point
4, Part I of this Circular.
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3. For payable interests on loans borrowed for
joint-venture capital contribution, which have not yet been accounted by the
enterprises being Vietnamese partners, they shall be accounted into financial
operation expenses.
4. Where enterprises being Vietnamese partners re-purchase
the capital portions of the foreign partners, they shall account them as asset
increase in the corresponding capital source according to current regulations
on asset purchase.
5. Where enterprises being Vietnamese partners
are permitted to transfer their capital contributed to joint-ventures to the
foreign partners or the third partners (regardless of whether the joint
ventures remain operative or have terminated operation):
5.1. If the whole capital amounts contributed to
joint ventures are transferred (including the land use right), the enterprises
shall account them like liquidating a financial investment; the proceeds from
the transfer shall be accounted into financial revenues; the value of the
contributed joint-venture capital and expenses incurred in the transfer shall
be accounted into financial operation expenses. Where profits arise, the
enterprise income tax must be paid thereon according to current regulations.
5.2. If the enterprises transfer only part of
their capital contributed to the joint ventures, or do not transfer but lease
or sub-lease the value of the land use right to the foreign partners or the
third parties, they shall account the proceeds from such transfer as prescribed
at Point 5.1 above. The annual proceeds from the land lease shall be accounted
into financial revenues of the enterprises.
Where losses incur, the difference between the
value of the contributed joint-venture capital and the proceeds from the
capital transfer shall be accounted by the enterprises according to the
provisions at Point 4, Part I of this Circular.
6. Where the land use right value and assets,
when contributed to joint-venture capital, are valued higher than their value
reflected on the accounting books and now the joint ventures terminate operation,
after the enterprises have received the divided assets and accounted them as
prescribed above, if the value of the received assets is higher than the
current prices, the enterprises shall determine the price differences and
report them to the Ministry of Finance (for central State enterprises) or the
People’s Committees of the provinces and centrally-run cities (for local State
enterprises) for consideration and appropriate adjustment of the value of such
assets and capital.
III. REGULATIONS ON ACCOUNTING OF SOME MAJOR
OPERATIONS
1. When their joint ventures terminate
operation, the enterprises being Vietnamese partners shall, on the basis of the
value of the received assets (the land use right, fixed assets, tools,
instruments, materials and raw materials, finished products, receivable debts,
cash), which have been decided by the joint-venture liquidation boards (or by
the court), and concurrently determining the difference (increase or decrease)
as compared with the contributed joint-venture capital, make entries as
follows:
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Debit Accounts 111, 112 - (received in cash)
Debit Account 138 - (receivable debts received)
Debit Accounts 152, 155 and 156 (materials and
raw materials, goods received)
Debit Account 211 - Tangible fixed assets (residual
value)
Debit Account 213 - Intangible fixed assets (residual
value of the land use right, other intangible assets received)
Debit Account 415 - The financial reserve fund (the
decreasing difference)
Debit Account 811 - Financial operation expenses
(the residual decreasing difference)
Credit Account 222 - Contributed joint-venture
capital (contributed capital amount).
1.2. Where the value of the received assets is
higher than the contributed joint-venture capital (which is inscribed in
accounting books and has been accepted by joint ventures), the difference shall
be inscribed as an increase in the business capital source, and the enterprises
shall make entries as follows:
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Debit Account 138 - Other receivable debts (receivable
debts received)
Debit Accounts 152, 155 and 156 (materials and
raw materials, goods received)
Debit Account 211 - Tangible fixed assets (residual
value)
Debit Account 213 - Intangible fixed assets (residual
value of the land use right, other intangible assets received)
Credit Account 222 - Contributed joint-venture
capital (contributed capital amount)
Credit Account 411 - Business capital source (the
increasing difference).
2. Cases of transfer of the contributed joint
venture capital:
2.1. Where the transfer price is higher than the
value of the contributed joint-venture capital, entries shall be made as
follows:
Debit Accounts 111, 112 - (actually received
cash amounts)
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Credit Account 711 - Financial operation
revenues (the increasing difference).
2.2. Where the transfer price is lower than the
value of the contributed joint-venture capital, the enterprises shall make
entries as follows:
Debit Accounts 111, 112 - (actually received
cash amounts)
Debit Account 811 - Financial operation expenses
(the decreasing difference)
Credit Account 222 - Contributed joint venture
capital (capital amounts already contributed).
2.3. For the arising transfer expenses (if any),
the enterprises shall make entries as follows:
Debit Account 811 - Financial operation expenses
Credit Account 111, 112.
2.4. Upon settlement of incurred transfer
expenses and transfer revenues (if any), in order to determine the capital
transfer revenues, the enterprises shall make entries as follows:
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Debit Account 911 - Determination of business
results
Credit Account 811 - Financial operation
expenses.
+ Settlement of the revenues from transfer of
contributed joint-venture capital:
Debit Account 711 - Financial operation revenues
Credit Account 911 - Determination of business
results.
3. Handling of other matters related to the
process of receiving back contributed joint-venture capital
3.1. If the enterprises have borrowed capital
for contributing to joint-venture capital but have not yet repaid the principal
or interests thereon, they must determine the payable interests according to
the borrowing commitments and include them in the financial expenses of the
business cycle; and make entries as follows:
Debit Account 811 - Financial operation expenses
Credit Account 335 - Payable expenses
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Debit Account 411 - Business capital source (specified
by capital source)
Credit Account 222- Contributed joint-venture
capital
or
Debit Account 411 - Business capital source (specified
by capital source)
Credit Accounts 211, 213 - (the difference
between the value of assets evaluated when contributed to joint-venture capital
and their value recorded in accounting books)
IV. IMPLEMENTATION PROVISIONS
This Circular shall also apply to business
cooperation contracts which have created assets commonly owned by the involved
parties when they terminate operation.
This Circular takes effect from the date of its
signing. If meeting with any problems, the enterprises should promptly report
them to the Ministry of Finance for study and settlement.
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FOR THE MINISTER OF FINANCE
VICE MINISTER
Tran Van Ta