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THE GOVERNMENT
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SOCIALIST REPUBLIC OF
VIET NAM
Independence - Freedom – Happiness
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No: 27/1999/ND-CP
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Hanoi, April 20, 1999
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DECREE
AMENDING AND
SUPPLEMENTING THE REGULATION ON FINANCIAL MANAGEMENT AND BUSINESS
COST-ACCOUNTING AT STATE ENTERPRISES, ISSUED TOGETHER WITH THE GOVERNMENT’S
DECREE No.59/CP OF OCTOBER 3, 1996
THE GOVERNMENT
Pursuant to the Law on Organization of the
Government of September 30, 1992;
Pursuant to the Law on State Enterprises of April 20, 1995;
At the proposal of the Minister of Finance,
DECREES:
Article 1.- To amend and supplement a
number of Articles or Clauses of the "Regulation on Financial Management
and Business Cost-Accounting at State Enterprises", issued together with
Decree No.59/CP of October 3, 1996 as follows:
1. Article 4 is amended as follows:
"Article 4.- During the business
course, when necessary, the State may consider and allocate additional
investment capital to an enterprise.
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In addition to its charter capital, the
enterprise shall have to mobilize by itself more capital for the development of
its business and take self-responsibility for such capital mobilization. The
enterprise is obliged to receive, manage and efficiently use the capital and
resources assigned by the State, constantly raise its business efficiency,
preserve and develop the capital. The enterprise shall take limited civil
liability for its business activities before law within the amount of its
capital, including the State allocated capital."
2. To amend and supplement Clauses 1 and 2 of
Article 7 as follows:
"1. Enterprises shall be allocated by the
State with capital under the State ownership and available at such enterprises,
including the State budget allocated capital, capital originating from the
State budget and the capital accumulated by enterprises themselves (if any).
2. With regard to independent enterprises that
admit newly merged enterprise(s) or are re-established on the basis of
consolidation with or separation from other enterprise(s), before they are
allocated capital, all their remaining financial problems, the causes thereof
and the relevant persons’ responsibilities must be clearly determined for
handling in accordance with the current regulations. For financial problems
brought about by the implementation of the State policies, the enterprises
shall request the competent State agency to handle them. The re-established
enterprises and enterprises admitting newly merged enterprises may inherit all
interests and perform all obligations of the pre-merged, -consolidated or
-split State enterprises."
3. Article 11 is amended as follows:
"Article 11.- Apart from the
State-invested capital, a State enterprise shall be entitled to mobilize
capital in various forms: issuing bonds and/or shares, borrowing capital,
receiving capital contributions, and other forms. The capital mobilization must
comply with the provisions of law, and must not alter the form of ownership of
the enterprise. Where bonds and/or shares are issued for capital mobilization,
the current provisions of law must be abided by."
4. Article 13 is amended as follows:
"Article 13.- A State enterprise
shall have to preserve the State-allocated capital in accordance with the
following regulations:
1. Strictly complying with the State regime on
the management and use of capital and property;
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3. Being allowed to account the following risk
reserves into the business expenditure or expenditure for other activities:
a/ The reserve for unsold goods price cut
meaning the amount of unsold goods and/or supplies price reduction that may
occur in the subsequent business cycle;
b/ The reserve for bad debts: meaning the debts
projected as unrecoverable in the subsequent business cycle because the debtors
are unable to repay;
c/ The reserve for the securities devaluation in
financial activities;
d/ The reserve for the devaluation of Vietnamese
currency against foreign currencies.
The Ministry of Finance shall guide the setting
up and use of the reserves mentioned in Clause 3, Article 13 of this
Regulation".
5. Article 14 is amended as follows:
"Article 14.-
1. A State enterprise shall re-appraise its
assets in the following cases:
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b/ Conducting equitization, diversifying its
ownership form or transferring its ownership;
c/ Using its assets to enter into joint venture
or contribute shares (when the assets are contributed as capital or returned).
2. The inventory and re-appraisal of assets must
comply with the State’s regulations. Any increase or decrease in the value of
the enterprise’s assets as a result of the re-appraisal shall be accounted for
State capital increase or decrease at the enterprise".
6. Article 15 is amended as follows:
"Article 15.- When damage is caused
to its assets, an enterprise shall have to determine the value of the damage,
the causes thereof as well as the responsibility therefor and handle it as
follows:
1. If the damage is caused due to subjective
reasons by the collective or individual(s), the damage causer shall have to
compensate for it as prescribed by law. The enterprise�s Managing Board or director (for enterprises without
managing boards) shall decide the compensation level and take responsibility
for its/his/her decision.
2. If the damage is caused to the already
insured property, it shall be dealt with according to the insurance contract.
3. If the damage value remains insufficient even
after the compensation by individual(s), collective or insurance organization,
it shall be made up for by the enterprise’s financial reserve fund. Where the
financial reserve fund is not enough therefor, the deficit it shall be accounted
into the irregular expenditure in the period.
4. Where serious losses are caused to the
enterprise due to natural calamities or objective causes, which the enterprise
cannot overcome by itself, the Managing Board or the director (for enterprises
without managing boards) shall draw up a plan to deal with the losses and
submit it to the financial agency. After consulting the agency that has decided
the establishment of the enterprise, the financial agency shall decide the
handling of the losses or report it to the Prime Minister for decision."
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"3. When an enterprise leases, mortgages or
pledges assets which constitute its entire main technological line as specified
by the economic-technical specialized management agency, a written consent from
the agency that has decided the establishment of such enterprise is
required."
8. To amend Clause 1, Article 18 as follows:
"1. An enterprise shall be entitled to take
the initiative in selling its assets to retrieve capital and use it for more
effective business purposes. The sale of assets constituting its entire main
technological line as specified by the economic-technical specialized
management agency, must be agreed upon in writing by the agency that has
decided its establishment."
9. To amend Clause 1, Article 19 as follows:
"1. An enterprise shall be entitled to
liquidate assets of poor or deteriorating quality, and assets which are
irreparably damaged, technically obsolete, unusable or inefficiently used,
which cannot be sold in their status quo. With regard to assets constituting
the entire main technological line of the enterprise as specified by the
economic-technical specialized management agency, the liquidation thereof must
be ratified by the agency that has decided the establishment of the
enterprise."
10. To amend, supplement Point h (Clause 1) and
Clause 2 of Article 23 as follows:
"h/ Other expenditures:
- Deductions for the establishment of the
reserves as prescribed at Points a and b, Clause 3, Article 13 of this
Regulation;
- Severance allowance for laborers as prescribed
by the Government’s Decree No.198/CP of December 31, 1994 detailing and guiding
the implementation of a number of Articles of the Labor Code on labor
contracts, and other legal documents of the Government;
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- Expenses for scientific research,
technological renovation studies, innovation and modification; training of
laborers, raising their professional or managerial skills; educational support
(if any) and health care for the enterprise’s laborers as prescribed by law;
- Expenses for environmental protection work. If
the spending amount is large and useful for many years, it shall be split up
for subsequent years;
- Expenses for female laborers as prescribed by
law;
- Expenses for product warranty. For products
with long production time or which require the warranty for many years, such as
construction or shipbuilding projects, the enterprise shall be entitled to make
advance deductions from the annual expenditure;
- Expenses for fines due to the violation(s) of
economic contract(s);
- Advance deductions already agreed upon in
writing by the financial agency."
"2. Expenses for other activities of the
enterprise shall include:
- Expenses for the trading in bonds and/or
shares; expenses for the reserve for the devaluation of securities; asset
hiring expenses; expenses for asset sale and liquidation (including the
remaining value of assets and the sale and liquidation expenses); expenses for
activities related to joint venture, cooperation and stock contribution;
expenses for the retrieval of the forgiven debts; expenses for fine collection;
asset losses remaining after being made up for by sources prescribed in Clause
3, Article 5 of this Decree;
- Expenses and reserve for foreign exchange rate
difference as prescribed by the current financial regime;
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11. Article 24 is amended as follows:
"Article 24.- An enterprise shall
not be allowed to account into its business operational costs and the costs of
other activities the following:
1. Fines for violations of the provisions of
law. The collectives and/or individuals breaching law shall have to pay these
fines according to regulations;
2. Expenses that are not related to business
activities of the enterprise such as difficulty allowances for laborers of the
enterprise, expenses in support of localities, mass organizations or agencies,
etc;
3. Expenses for overseas mission-trips, which
exceed the prescribed level;
4. Expenses covered by other funding
sources".
12. Article 25 is amended as follows:
"Article 25.- Determination of the
production cost of products and services:
1. The production cost of products and services
shall include:
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b/ Cost of direct labor, including salaries,
wages and deductions for the payment of social and medical insurance for
workers who directly create products and services as stipulated by the State;
c/ General production cost meaning the expenses
for production and/or processing activities of workshops (or business units)
that directly create products and services such as the cost of materials, small
working tools, depreciation of fixed assets of the workshops (business units);
salaries and prescribed deductions for social and medical insurance for
personnel of the workshops (business units), cost of services procured from
outside, and other pecuniary costs arising in the workshops (business units).
2. The total cost of products and services
already consumed shall include:
a/ Production cost of products and services
already consumed;
b/ Sale cost i.e. all expenses related to the
sale of products and services, including the expenses for product warranty;
c/ The enterprise’s managerial cost meaning the
expenses for the enterprise’s executive and managerial apparatus, the expenses
related to the business operations of the enterprise such as the cost of small
working tools, depreciation of fixed assets in service of the enterprise’s
executive and managerial apparatus: salaries and prescribed deductions for the
corporation management fund; the cost of services procured from outside; and
other pecuniary expenses such as expenses for reception and public and external
relation activities, severance allowances for laborers as prescribed by Decree
No.198/CP of December 31, 1994 of the Government detailing and guiding the
implementation of a number of Articles of the Labor Code; the reserves for
unsaleable goods price cut and for bad debts as prescribed in Points a and b,
Clause 3, Article 13 of this Regulation; expenses for scientific research,
technological renovation studies, innovations, training and education and
health care for the laborers of the enterprise, environmental protection
expenses and expenses for female laborers as prescribed."
13. Article 28 is amended as follows:
"Article 28.-
1. An enterprise shall be entitled to spend on
advertisement, marketing and sale promotion for its business activities as well
as on transactions, reception, external relations and meetings. The enterprise
shall have to elaborate a regulation for the management and publicization of
the above-said expenses. The enterprise’s director shall decide such expenses
and be answerable to the State for his/her decision. These expenses must not
exceed 7% of the total actual expenditure in the period. The Ministry of
Finance shall provide detailed guidance for a number of specific business
lines;
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3. The member enterprises of a corporation shall
make deductions for the corporation management fund according to the general
director’s decision and on the basis of the plan already ratified by the
corporation’s Managing Board and reflected in its annual financial plan. If the
corporation does not use up its mobilized management fund, it can carry forward
the left-over to the subsequent year for spending and reducing the mobilization
level in the subsequent year. If the mobilized fund amount is smaller than the
actual spending, the corporation shall be entitled to mobilize more fund in the
subsequent year. The Managing Board shall approve this additional mobilization
level".
14. Article 32 is amended as follows:
"Article 32.- The actual
profit gained in a year by an enterprise after it has paid the enterprise
income tax, shall be distributed as follows:
1. To offset the losses of the preceding years,
which cannot be accounted into the pre-tax profit;
2. To pay a fee for the use of the State-budget
capital;
3. To pay fines for violations of law that come
under the enterprise�s
responsibility;
4. The profit remaining after the amounts
defined in Clauses 1, 2 and 3 of this Article have been deducted shall be
distributed according to the following regulations:
a/ 10%- for the financial reserve fund; when the
fund balance is equal to 25% of the charter capital of the enterprise, the
deduction shall be no longer required;
b/ 50%- for the development investment fund;
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d/ For a number of specific branches where the
establishment of special funds with the after-tax profit is allowed by law, the
enterprise shall be entitled to establish such funds according to such law
provisions;
e/ For stock dividends in case of issuing
shares;
f/ The profit amount left after the deductions
prescribed in Clauses a, b, c, d and e have been made shall be used for the
establishment of two funds: the welfare fund and the reward fund. The maximum
deduction level for both funds shall be as follows, based on the profit
proportion (against the State capital):
- The actual 3-month salary amount, if the
profit proportion of the current year is not lower than that of the preceding
year. In cases where the enterprise invests in technological renovation or
business expansion during the period of enterprise income tax exemption under
the Law on Domestic Investment Promotion, if its profit proportion is lower
than that of the pre-investment year, it shall also be entitled to make a
deduction equal to the actual 3-month salary amount at most.
- The actual 2-month salary amount if the profit
proportion of the current year is lower than that of the preceding year.
The enterprise�s
Managing Board or the director (for enterprises without managing boards) shall,
after consulting the trade union, decide the deduction level applicable to each
fund.
The profit amount left after deductions have
been made for the establishment of the reward fund and the welfare fund as
mentioned above shall be fully added to the development investment fund".
15. To amend, supplement Clause 1 of Article 33
as follows:
"1. The development investment fund: shall
be used to supplement business capital of the enterprise; and make deductions
for the establishment of the Corporation’s development investment fund
according to the rate decided by the Corporation’s Managing Board.
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16. To add Article 40 (new) and convert Article
40 (old) into Article 41.
"Article 40.-
1. The financial management-reward and
discipline regime for managing boards, general directors and directors of State
enterprises:
a/ If for 3 consecutive years an enterprise
fulfills its tax payment obligation as prescribed by law, gains profit or
reduces losses and has its profit proportion calculated on the State capital of
the subsequent year higher than that of the preceding year, preserves and
develops the State assigned capital, the members of the Managing Board, the
general director and director of the enterprise shall enjoy the higher reward
level and be considered for having their wages raised ahead of time.
b/ If an enterprise suffers from business
losses, the general director or director shall report the situation to the
Managing Board (for enterprises with managing boards). The Managing Board (for
enterprises with managing boards) or the general director, director (for
enterprises without managing boards) shall further report it to the Finance
Ministry and the agency that has decided the establishment of the enterprise on
the amount of losses, its causes as well as the responsibilities of the
Managing Board, the general director and director therefor, and work out plan
to overcome it.
Depending on the loss amount, the number of
years suffering from losses, the losses’ subjective causes and the concrete
responsibilities therefor, the chairman and members of the Managing Board, the
general director and director of the enterprise shall be disciplined in one of
the following forms: reduction or cut of reward money, not having their wages
raised (is the time is due), having their wages reduced, reprimand, warning or
dismissal from the current posts.
c/ Where the implementation of an investment
project fails to bring about economic efficiency, leading to the incapability
of recovering the State capital or repaying debts according to the loan
contract or capital-borrowing contract, for losses caused by subjective
reasons, depending on the nature and seriousness of the violations and within
their responsibilities specified in Article 38 and Article 39 of this
Regulation, the Managing Board, the general director and director of the
enterprise shall be administratively handled and have to pay material
compensation as prescribed by law. Those members of the Managing Board who
reserve opinions other than the ratified project shall not be subject to the
above-mentioned forms of discipline.
d/ If failing to observe the financial reporting
regime; publicizing untruthful financial reports; failing to observe or violating
this Regulation, the Managing Board, the general director and director of the
enterprise shall, within the ambit of their responsibilities specified in
Articles 38 and 39 of this Regulation and depending on the nature and
seriousness of their violations, be administratively handled; and if causing
material losses, they shall have to pay compensation therefor in accordance
with the provisions of law.
Where the above-said violations contain signs of
crimes, the violators shall be examined for penal liability.
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2. State management agencies with functions,
tasks and powers prescribed by law for the management of State enterprises, if
making wrong decision, delaying the handling of work or abusing their powers,
thus causing losses to State enterprises, shall have to clearly define
responsibilities of individuals and/or collectives who, depending on the
seriousness of the violations, shall be disciplined; if there are signs of
crimes, they shall be examined for penal liability as prescribed by law".
Article 2.- This Decree takes effect 15
days after its signing. The earlier stipulations of the Government, ministries,
ministerial-level agencies and agencies attached to the Government, which are
contrary to the contents of this Regulation are all now annulled.
Article 3.- The Minister of Finance shall
have to guide and inspect the implementation of this Decree.
The ministers, the heads of the
ministerial-level agencies, the heads of the agencies attached to the
Government, the presidents of the People’s Committee of the provinces and
centrally-run cities, the managing boards, the general directors and directors
of State enterprises engaged in business activities shall have to implement
this Decree.
THE GOVERNMENT
Nguyen Tan Dung