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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. 203/2009/TT-BTC
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Hanoi, October 20,
2009
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CIRCULAR
GUIDING
THE REGIME OF MANAGEMENT, USE AND DEPRECIATION OF FIXED ASSETS
THE MINISTRY OF FINANCE
Pursuant to the 2008 Law on Enterprise Income
Tax;
Pursuant to the Government's Decree No. 124/2008/ND-CP of December 11, 2009,
detailing and guiding the implementation of a number of articles of the Law on
Enterprise Income Tax;
Pursuant to the Government's Decree No. 118/2008/ND- CP of November 27, 2008,
defining the functions, duties, powers and organizational structure of the
Ministry of Finance;
The Ministry of Finance guides the regime of management, use and depreciation
of fixed assets of enterprises as follows:
Part A
GENERAL
PROVISIONS
Article 1. Subjects
and scope of application:
1. This Circular applies to enterprises
established and operating in Vietnam in accordance with law.
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2. The depreciation and calculation of
depreciation costs stipulated in this Circular shall be applied to each fixed
asset of enterprises
Article 2. Terms
used in this Circular are interpreted as follows:
1. Tangible fixed assets means of production
mainly in material forms 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, means of transport, etc.
2. Intangible fixed assets means assets
without material form which represent an invested amount of value and meet the
standards of intangible fixed assets and are engaged in many business cycles
such as certain expenses directly related to land use. issuance right, patent,
copyright, etc.
3. Financial leasing fixed assets means fixed
assets that an enterprise leases from a financial leasing company. Upon
termination of the leasing term, the lessee may choose to purchase the leased
assets or continue to lease the assets under the conditions agreed in the
financial leasing contract. The total rent paid for an asset stated in the
financial leasing contract must be at least equivalent to the value of such
asset at the time the contract is signed.
All leased fixed assets which fail to meet
the above regulations shall be considered operation leasing fixed assets.
4. Similar fixed assets means fixed assets
with a similar utility in the same business line and of an equivalent value.
5. Historical cost of fixed asset:
- Historical cost of a tangible fixed asset
means the total expenses that an enterprise has to incur to acquire such asset,
calculated up to the time when the tangible fixed asset is made ready for use.
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6. Reasonable value of fixed asset means the
value of an asset which can be exchanged between parties with full knowledge in
an equal value exchange.
7. Useful life of fixed asset means the
duration for which an enterprise expects to use a fixed asset in business and
production activities, or the duration which, according to current regulations,
is determined on the basis of the quantity or volume of products expected to be
produced from the use of such fixed asset in normal conditions in line with
economic-technical parameters of the fixed asset and with other factors related
to the operation of the fixed asset.
8. Wear and tear of fixed asset means the
gradual devaluation of a fixed asset due to its involvement in business and
production activities, natural corrosion, technical advancement, etc., in the
course of operation of the fixed asset.
9. Value of accumulated wear and tear of
fixed asset means the total value of wear and tear of a fixed asset up to the
time of reporting.
10. Depreciation of fixed asset means the
calculation and systematic allocation of the historical cost of a fixed asset
to business and production expenses during the period of using such fixed
asset.
11. Accumulated depreciation of fixed asset
means the total amount of depreciation costs of a fixed asset which have been
included in production and business expenses over the business period of the
fixed asset, calculated up to the time of reporting.
12. Residual value of fixed asset means the
difference between the historical cost of a fixed asset and the accumulated
depreciation cost (or the value of accumulated wear and tear) of the fixed
asset, calculated up to the time of reporting.
13. Repair of fixed asset means the
renovation, maintenance and repair of a fixed asset when it is broken down in
the course of operation in order to recover its operation capacity back to the
initial standard operation conditions of fixed assets.
14. Upgrading of fixed asset means the
reformation, construction and installation of, and provision of additional equipment
to. a fixed asset in order to improve its capacity, the quality of its
products, utility and performance as against its initial capacity, or to extend
the useful life of the fixed asset; or the application of new technological
processes which decrease operation expenses of the fixed asset compared with
previous expenses.
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PROVISIONS
ON MANAGEMENT OF FIXED ASSETS
Article 3. Standards
and identification of fixed assets:
1. Means of production which are tangible
assets with an independent structure or a system of separate asset parts which
are linked together to perform one or a number of particular functions and
which could not operate properly if any part of the system is missing, shall be
considered fixed assets if they concurrently satisfy three standards below:
a/ Future economic interests shall certainly
be obtained from the use of such assets:
b/ Their useful life exceeds one year;
c/ Their historical cost must be determined
reliably and equal to VND 10,000,000 (ten million) or more.
In case a system consisting of many separate
asset parts linked together in which each part has a different useful life and
the system could still perform its main operating function in case of absence
of a certain part 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 three standards of fixed assets.
For animals working and/or generating
products, each animal shall be considered a tangible fixed asset if it
concurrently satisfies three standards of fixed assets.
For gardens of perennial trees, each garden
or each tree shall be considered a tangible fixed asset if it concurrently
satisfies three standards of fixed assets.
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Any actual cost incurred by an enterprise
which satisfies concurrently three standards specified at Point 1 of this
Article and does not form a tangible fixed asset shall be considered an
intangible fixed asset.
Expenses which do not concurrently satisfy
three standards specified at Point I, Article 3 of this Circular shall be
directly included in or gradually allocated to business expenses of the
enterprise.
In particular, costs incurred in the
development stage shall be recognized as intangible fixed assets generated from
internal activities of enterprises if they concurrently satisfy the following
seven conditions:
a/ The enterprise has a technical feasibility
study ensuring the completion of intangible fixed assets for putting 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;
e/ The enterprise has sufficient technical
and financial resources and other resources to complete the stages of
development, sale or use of such intangible fixed assets:
f/ 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 an enterprise,
training of employees or advertisement incurred before the establishment of the
enterprise, expenses in the research stage, expenses for relocation to another
place and commercial goodwill are not intangible fixed assets and shall be
gradually allocated to business expenses over a maximum period of 3 years from
the time when the enterprise commences operation.
Article 4. Determination
of historical costs of fixed assets:
1. Determination of historical costs of
tangible fixed assets:
a/ Tangible fixed assets purchased:
The historical cost of a purchased tangible
fixed asset (brand-new or used) consists of the actual purchase price payable
plus (+) taxes (excluding taxes to be refunded) and relevant expenses
calculated up to the time when such fixed asset is made ready for use such as
interest on loans invested in the fixed asset; freight and stevedoring
expenses; expenses for upgrading the fixed asset: expenses for installation and
trial operation of the fixed asset; registration fee and other directly related
expenses.
In case a tangible fixed asset is purchased
on the basis of deferred payment or installments.
the historical cost of the purchased fixed
asset includes 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 up to the time when such fixed asset is made ready for use
such as freight and stevedoring expenses; expenses for upgrading the fixed asset;
expenses for installation and trial operation of the fixed asset; and registration
fee (if any).
In case of purchasing tangible fixed assets
being houses and architectural structures attached with land use rights, the
value of land use rights shall be separately determined and recognized as
intangible fixed asset, while the historical costs of tangible fixed assets
being houses and architectural structures are the actually paid purchase price
plus (+) expenses directly related to the putting of the tangible fixed assets
into use.
If after purchasing tangible fixed assets
being houses and architectural structures attached with land use rights, an
enterprise dismantles or destroys them for constructing new ones, the value of
land use rights shall be separately determined and recognized as intangible
fixed asset; the historical costs of newly constructed fixed assets are the
finalized prices of the constructed works in accordance to the current
Regulation on management of investment and construction. Dismantled or
destroyed assets shall be handled and accounted in accordance with the current
regulations on liquidation of fixed assets.
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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 is 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
directly related expenses calculated up to the time when such fixed asset is
made ready for use such as freight and stevedoring expenses; expenses for
upgrading the fixed asset; expenses for installation or trial operation; and
registration fee (if any).
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 residual value of the exchanged tangible fixed asset.
c/ Tangible fixed assets constructed or
produced by an enterprise itself:
The historical cost of a tangible fixed asset
which is constructed by an enterprise itself is the finalized price of the
construction work when it is put into use. If the fixed asset has been put into
use but its price has not yet been finalized, the enterprise shall account the
asset's historical cost using the temporarily calculated price and adjust this
price after the price of the construction work is finalized.
The historical cost of a tangible fixed asset
is the actual production cost of the fixed asset plus (+) expenses for
installation and trial operation and other directly related expenses calculated
up to the time when such fixed asset is put into a ready-for-use state (except
for internal profits. the value of recovered products in the process of trial
operation, unreasonable expenses such as wasted materials, labor costs or other
expenses in excess of the prescribed norms of expenses regulated for the
construction or production).
d/ Historical cost of a tangible fixed asset
formed from construction investment:
The historical cost of a tangible fixed asset
formed from capital construction under the mode of tendering is the finalized
price of the construction work in accordance with the current Regulation on
management of investment and construction plus (+) registration fee and other
directly related expenses. If the fixed asset formed from construction
investment has been put into use but its price has not yet been finalized, the
enterprise shall account the asset's historical cost using the temporarily
calculated price and adjust it after the price of the construction work is
finalized.
For fixed assets which are animals working
and/or generating products, or gardens of perennial trees, the historical cost
includes all actual expenses paid for the animals or gardens of perennial trees
from the time when they are formed to the time when they are put into use.
e/ Tangible fixed assets donated, presented
as gifts or discovered as excessive payment:
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f/ Tangible fixed assets allocated or
transferred from elsewhere:
The historical cost of a tangible fixed asset
which is allocated or transferred from elsewhere includes the residual value of
such fixed asset stated in the accounting books of the allocating or
transferring unit, or the value according to the actual assessment of a
professional valuation organization in accordance with law plus (+) directly
related expenses incurred by the recipient of the asset, calculated up to the
time when such fixed asset is put into a ready-for-use state such as expenses
for hiring the valuation organization, expenses for fixed asset upgrading,
installation and trial operation, etc.
g/ Tangible fixed assets received as capital
contribution or returned from contributed capital:
The historical cost of a tangible fixed asset
which is received as capital contribution or returned from contributed capital
is the value unanimously approved by founding members and shareholders; or
agreed upon by the enterprise and capital contributor; or determined by a
professional valuation organization in accordance with law and approved by
founding members and shareholders.
2. Determination of historical cost of
intangible fixed assets:
a/ Intangible fixed assets purchased:
The historical cost of a purchased intangible
fixed asset is the actual purchase price payable plus (+) taxes (excluding
taxes to be refunded) and directly related expenses calculated up to the time
when such intangible fixed asset is put into use.
In case an intangible fixed asset is
purchased on the basis of deferred payment or installments, the historical cost
of the intangible fixed asset is the purchase price paid on the basis of a
prompt payment at the time of purchase (excluding interests on deferred
payments).
b/ Intangible fixed assets purchased in the
form of an exchange:
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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 is the residual value of the exchanged intangible fixed
asset.
c/ Intangible fixed assets granted, donated
or presented as gifts or transferred from elsewhere:
The historical cost of an intangible fixed
asset which is granted, donated or presented as gift or transferred from
elsewhere is the initial reasonable value plus (+) directly related expenses
calculated up to the time when the asset is put into use.
The historical cost of an intangible fixed
asset which is transferred from elsewhere is the historical cost recorded in
the accounting books of the transferring enterprise. The receiving enterprise
shall account the historical cost, value of wear and tear and residual value of
the asset according to regulations.
d/ Intangible fixed assets generated from
internal activities of enterprises:
The historical cost of an intangible fixed
asset generated from internal activities of an enterprise is expenses directly
related to the 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, issuance
right, list of customers; expenses arising in the research stage and similar
items which fail to satisfy the standards of intangible fixed assets and are
not so recognized shall be accounted as business expenses in the period.
e/ Intangible fixed assets being land use
rights:
- For an enterprise that is allocated land
with land use levy payment: The historical cost of a fixed asset which is the
assigned land use rights is the whole payment made to obtain the lawful land
use rights plus (+) compensated amounts for ground clearance, expenses for
leveling the ground, registration fee (excluding expenses paid for the
construction of works on the land); or the value of land use rights contributed
as capital.
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+ If the enterprise leases land and pays the
land rent in lump sum for the whole lease term, the land rent shall be
gradually allocated to its business expenses according to the number of years
of the lease.
+ If the enterprise leases land and pays the
land rent on an annual basis, the land rent amount paid annually shall be
accounted as business expenses in the period.
f/ Historical cost of intangible fixed assets
being copyright, industrial property rights or rights to plant varieties as
prescribed in the Law on Intellectual Property is the total of actual expenses
incurred by the enterprise to obtain such copyright, industrial property rights
or rights to plant varieties under the law on intellectual property.
g/ Historical of fixed assets being computer
software:
The historical cost of a fixed asset being
computer software is the total of expenses incurred by the enterprise to obtain
the computer software in case the software is a component which can be
separated from the relevant hardware or the layout design of semiconductor
integrated circuits under the law on intellectual property.
3. Financial leasing fixed assets:
The historical cost of a financial leasing
fixed asset recorded at the lessee is the value of the leased asset at the time
when the lease of such asset commences or the current value of the minimum rent
payment (if the value of the leased asset is higher than the current value of
the minimum rent payment) plus (+) initial expenses arising in direct relation
to the financial leasing.
4. The historical costs of fixed assets of enterprises
may only be changed in the following cases:
a/ Revaluation of fixed assets in the
following cases:
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- Reorganization of the enterprise, change of
ownership of the enterprise, transformation of the enterprise: separation,
splitting, merger, consolidation, equitization, sale, contracting, lease,
transformation of limited liability company into joint-stock company and vice
versa.
- Use of assets for outward investment.
b/ Upgrading of fixed assets.
c/ Removal of one or a number of parts of the
fixed asset which is/are managed according to the standards of a tangible fixed
asset;
Upon change of the historical cost of a fixed
asset, the enterprise shall make a minutes clearly stating the bases for such
change and re-determine the items on historical cost, residual book value,
accumulated depreciation of the fixed asset and the useful life of the fixed
asset, and practice the accounting in accordance with current regulations.
Article 5. Principles
on management of fixed assets:
1. Each fixed asset of an enterprise must
have a separate set of file (including a written record of handover and receipt
of the fixed asset, contract, invoice for purchase of the fixed asset and other
relevant documents). Each fixed asset must be classified, numbered and given a
separate card, and be monitored in detail according to its category, and shown
in the logbook of fixed assets.
2. Each fixed asset must be managed in terms of
its historical cost, accumulated depreciation cost and residual book value:
Residual book value of fixed asset =
Historical cost of fixed asset - Accumulated depreciation of fixed asset
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4. An enterprise shall manage fixed assets
which have been fully depreciated but are still engaged in business activities
in the same manner as normal fixed assets.
Article 6. Classification
of fixed assets in enterprises:
Based on the use purposes of fixed assets,
enterprises shall classify fixed assets according to the following criteria:
1. Fixed assets used for business include
those managed and used by the enterprise for its business purposes.
a/ Tangible fixed assets shall be classified
as follows:
Category I: Buildings and architectural
structures include fixed assets of an enterprise which are formed after a
construction process such as offices, warehouses, fences, water towers, ground
yards, decorative works associated with buildings, roads, bridges, railways,
airport runways, piers, harbors and quays.
Category 2: Machinery and equipment include
all kinds of machinery and equipment used for business activities of an
enterprise such as specialized machinery, working equipment, petroleum drilling
rigs, cranes, technological lines and individual machinery.
Category 3: Means of transport and equipment
for transmission include all kinds of means of transport, including means of
transport for railway, waterway, road and airway, pipelines and equipment for
transmission such as information system, electricity system, water pipeline and
conveyor belts.
Category 4: Equipment and instruments for
management include equipment and instruments used for management of business
activities of an enterprise such as computers for administration, electronic
equipment, equipment and tools for measurement, quality control equipment,
dehumidifiers. vacuum cleaners, termite and woodworm killers.
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Category 6: Other kinds of fixed assets
include all other fixed assets which are not listed in the above five types,
such as pictures, paintings and artworks.
b/ Intangible fixed assets: land use rights;
issuance right: patent; literary, artistic and scientific works: products or
results of performances: phonograms, video recordings, broadcast, encrypted
program-carrying satellite signals; industrial designs, layout designs of
semiconductor integrated circuits, trade secrets, marks, trade names,
geographical indications, plant varieties and propagating materials.
2. Fixed assets used for welfare,
non-business activities, national security and defense include fixed assets
managed and used by an enterprise for purposes of welfare, administration,
national security and defense within the enterprise. Those fixed assets are
also classified under Clause 1 above.
3. Fixed assets which are maintained, kept or
stored for others means fixed assets that an enterprise maintains or keeps for
other units or the State under regulations of competent state agencies.
4. Based on the management requirements of
each enterprise, an enterprise itself shall make a detailed classification of
its fixed assets in each category as appropriate.
Article 7. Upgrading
and repair of fixed assets:
1. Costs incurred by an enterprise to upgrade
a fixed asset shall be added to the historical cost of that fixed asset: the
enterprise may not include these costs in its business expenses in the period.
2. Costs for repair of a fixed asset shall
not be added to the historical cost of the fixed asset but may be directly
included in or gradually allocated to business expenses for a maximum of 3
years.
For a number of fixed assets whose repair
costs arc incurred on a cyclic basis, an enterprise may advance costs for
repair of fixed assets into its annual business expenses. If the actual repair
costs are larger than the advanced amount, the difference may be added to
reasonable expenses. If the actual repair costs are smaller than the advanced
amount, the difference may be accounted as a decrease in business expenses of
the period.
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Article 8. Lease,
pledge, mortgage, sale or liquidation of fixed assets:
1. All activities of lease, pledge, mortgage,
sale and liquidation of fixed assets must comply with the current provisions of
law.
2. For leased fixed assets:
a/ Operating lease fixed assets:
- The lessee shall manage and use fixed
assets in accordance with the terms of the lease contract. The fixed asset rent
shall be included in business expenses of the period.
- The lesser as an owner of the fixed assets
shall monitor and manage the leased fixed assets.
b/ Financial lease fixed assets:
- The lessee shall monitor, manage and use
the leased fixed assets in the same manner as its own fixed assets, and fulfill
all obligations committed in the lease contract.
- The lesser as an investor shall monitor and
properly comply with the terms of the financial lease contract.
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4. For the sale and sublease of fixed assets:
- If an enterprise sells or subleases an
operating lease fixed asset, it shall perform the same responsibilities as
prescribed for the lessee of the operating lease fixed asset. Any difference
arising when the agreed sale price or the sublease amount of the fixed asset is
lower or higher than the reasonable value shall be promptly included in the
enterprise's income in the period or gradually allocated to its expenses
according to regulations.
- If an enterprise sells or subleases a
financial lease fixed asset, it shall perform the same responsibilities as
prescribed for the lessee of the financial lease fixed asset. The difference
between the income from the sale of the asset and the residual book value of
the asset shall be included in the enterprise's income according to
regulations.
Part C
PROVISIONS
ON DEPRECIATION OF FIXED ASSETS
Article 9. Principles
on depreciation of fixed assets:
1. All fixed assets of an enterprise must be depreciated,
excluding the following:
- Fixed assets which have been fully
depreciated but are still used in production and business activities.
- Lost fixed assets which have not yet been
fully depreciated.
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- Fixed assets which are not managed,
monitored and included in the enterprise's accounting books.
- Fixed assets used in welfare activities
serving the enterprise's laborers (excluding fixed assets serving laborers
working in the enterprise, such as mid-shift rest houses, mid-shift
refectories, change houses, toilets, clean water tanks, garages, healthcare
rooms or clinics, vehicles transporting laborers to and from work, job training
establishments, laborers' houses built by the enterprise itself)-
- Fixed assets which are houses and
residential land in case the enterprise purchases houses and residential land
for which land use rights have been allocated by the State to the enterprise
for long-term use; depreciation costs are not required to be calculated for the
value of such land use rights.
- Fixed assets formed from non-refundable aid
transferred by competent agencies to the enterprise for scientific research
purposes.
- Intangible fixed assets being land use
rights.
2. Depreciation costs of fixed assets
specified at Point 2.2, Section IV, Part C of the Ministry of Finance's
Circular No. 130/2008/TT-BTC of December 26, 2008, guiding the implementation
of a number of articles of Law No. 14/2008/QH12 on Enterprise Income Tax, and
guiding the implementation of the Government's Decree No. 124/2008/ND-CP of
December 11, 2008, detailing the implementation of a number of articles of the
Law on Enterprise Income Tax, are not allowed to be included in reasonable
expenses when calculating enterprise income tax.
3. If the fixed assets used in welfare
activities serving the enterprise's laborers specified in Clause 1. Article 9
of this Circular are engaged in production and business activities, the enterprise
shall base itself on the time and use of these fixed assets to calculate and
include depreciation costs in its expenses and notify it to the managing tax
agency for monitoring and management.
4. For fixed assets which have not been fully
depreciated and are irreparably damaged, the enterprise shall identify causes
and compensation responsibilities of collectives or individuals at fault. Any
difference between the residual value of the assets and the compensated sum of
money and the recovered value (if any) shall be covered by the enterprise with
its financial provisions. If its financial provisions are insufficient, the
enterprise may include the deficit in its reasonable expenses when determining
enterprise income tax.
5. An enterprise which leases operating fixed
assets shall calculate depreciation costs of the leased fixed assets.
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7. In case of re-valuating a fully
depreciated fixed asset for contribution as capital or transfer to another
enterprise upon separation, splitting, consolidation, merger or transformation
of enterprise, these fixed assets shall be valued by a professional valuation
organization and their assessed value must not be lower than 20% of their
historical cost. The time of starting to calculate depreciation costs of these
assets is the time when the enterprises officially receive the assets for
putting into use and the depreciation period is between 3 and 5 years. Specific
time shall be decided by the enterprise but must be registered with a tax agency
before implementation.
8. For enterprises with 100% state capital
that determine their value for equitization according to the discount cash flow
method, any positive difference in the state capital between the actual value
and book value shall not be recognized as intangible fixed asset and shall be
gradually allocated to production and business expenses of the period not
exceeding 10 years. The time of stalling to allocate it to expenses is the time
an enterprise is officially transformed into a jointstock company (obtaining a
business registration certificate).
9. The calculation of depreciation costs or
stoppage of calculation of depreciation costs of fixed assets shall be
commenced from the date (according to the number of days of the month) on which
fixed assets increase or decrease. Enterprises shall account fixed asset
increase or decrease under the current regulations on business accounting.
Article 10. Determination of useful life of tangible fixed assets:
1. For brand-new fixed assets (unused fixed
assets), the enterprise shall base itself on the frame of useful life of fixed
assets provided in Appendix I lo this Circular to determine the useful life of
fixed assets.
2. For used fixed assets, their useful life
shall be determined as follows:
Useful life of fixed asset = Reasonable value
of fixed asset / Sale price of the brand-new fixed asset of the same type (or
of equivalent type on the market) x Useful life of the brand-new fixed asset of
the same type determined in accordance with Appendix 1 to this Circular.
In which:
The reasonable value of fixed asset is the
actual purchase price or actual exchange price (in case of purchase or
exchange), the residual value of fixed asset or the value assessed by a
professional valuation organization (in case the fixed asset is donated,
presented as gift, allocated or transferred from elsewhere) and other cases.
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a/ In case an enterprise wishes to determine
the useful life of a fixed asset, brand-new or used, differently from the frame
of useful life provided in Appendix 1 to this Circular, the enterprise shall
make a plan on the change of the useful life of a fixed asset, clearly
explaining the three following matters:
- Technical life of the fixed asset as
designed;
- Current conditions of the fixed asset (used
time, generation and actual conditions of the assets);
- Impacts of the increase or decrease in
depreciation costs of the fixed asset on production and business results and
payment of debts to credit institutions.
b/ Competence to approve plans on change of
useful life of fixed assets:
- The Ministry of Finance is competent to
approve plans of state companies, including parents companies of state economic
groups and corporations; subsidiary companies with 100% state-owned charter
capital; joini stock companies with 51% or more of charter capital owned by the
State within state economic groups and corporations.
- Provincial-level Finance Departments are
competent to approve plans of independent state companies attached to
ministries or provincial-level People's Committees and enterprises of other
economic sectors headquartered in their localities.
Within 20 days after their plans on change of
useful life of fixed assets are approved, enterprises shall register them with
managing tax agencies for monitoring and management.
c/ Enterprises may change the useful life of
each fixed asset only once. The prolonged useful life of a fixed asset must
neither exceed its technical life nor change business results of an enterprise
from profit into loss or vice versa in the year of decision on the change. When
an enterprise changes the useful life of a fixed asset in contravention of
regulations, the Ministry of Finance or the managing tax agency of the
enterprise shall request it to comply with regulations.
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Article 11. Determination of useful life of intangible fixed assets:
1. The useful life of intangible fixed assets
shall be determined by enterprises themselves, however the maximum useful life
must not exceed 20 years.
2. The useful life of intangible fixed assets
being fixed-term land use rights is the duration during which the use of land
is permitted according to regulations.
3. The useful life of intangible fixed assets
being copyright, intellectual property rights arid rights to plant varieties is
the period of protection indicated in protection titles according to
regulations (excluding the extended time of protection).
Article 12: Determination of useful life of fixed assets in a number of
special cases:
1. For investment projects in the form of
Build - Operate - Transfer (BOT), the useful life of their fixed assets shall
be determined to start from the time when the fixed assets are put into use to
the time of termination of such projects.
2. For a business cooperation contract (BCC)
with the participation of a foreign party, under which the foreign party shall
transfer the project to the State of Vietnam without compensation upon
termination of the contract, the useful life of the fixed assets to be
transferred shall be determined to start from the time when such fixed assets
are put into use to the time of termination of the project.
3. For a production line of military nature
and directly serving national defense or security tasks in defense or security
firms, pursuant to this Circular, the Ministry of National Defense or the
Ministry of Public Security shall decide on the frame of useful life of these
assets.
Article 13. Methods of depreciation of fixed assets:
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2. Based on the ability to meet the
conditions stipulated for each fixed asset depreciation method, enterprises are
allowed to select depreciation methods suitable for each kind of its fixed
assets.
a/ Straight line method:
Fixed assets engaged in business activities
may be depreciated according to the straight line method.
Enterprises operating and gaining high economic
efficiency are allowed to conduct rapid depreciation of their fixed assets in
order to quickly renew technologies. Fixed assets engaged in business
activities and eligible for rapid depreciation include machinery, equipment;
measuring and experimental instruments: equipment and means of transport; tools
used for management: and working animals and gardens of perennial trees. When
conducting rapid depreciation, enterprises shall ensure that they get profits
in their business. In case enterprise conduct rapid depreciation over two times
the prescribed frame of use life of fixed assets provided in Appendix I to this
Circular, the depreciation cost exceeding the rapid depreciation level (over
two times) may not be included in their reasonable expenses upon calculating
enterprise income tax of the period.
- Declining balance method:
The declining balance method applies to
enterprises with technologies requiring rapid renewal and development.
- Fixed assets engaged in business activities
and depreciated according to the declining balance method must concurrently
meet the following conditions:
+ Being brand-new (unused);
+ Being machinery and equipment; measuring
and experimental instruments:
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Fixed assets engaged in business activities
and depreciated according to this method include machinery and equipment which
concurrently meet the following conditions:
- They are directly related to the production
of products;
- The total quantity or volume of products
turned out on the basis of the designed capacity of fixed assets is
determinable;
- The average actual use capacity during the
months of the fiscal year is not lower than 50% of the designed capacity.
3. An enterprise shall register with its
managing tax agency the fixed asset depreciation method that it has selected
before applying such depreciation method. In case the depreciation method
selected by the enterprise fails to meet the prescribed conditions, the tax
agency shall, within 30 days after receiving the enterprise's registration of
the fixed asset depreciation method (counted based on the postmark), notify
this in writing to the enterprise for the latter to change its depreciation
method as appropriate.
4. The depreciation method selected and
registered by the enterprise to apply to eacli fixed asset must be applied
consistently in the course of using such fixed asset, except when there is a
change in the method of using it for generating more benefits to the enterprise
or there is a significant change in the method of estimating economic benefits
generated for the enterprise.
In special cases requiring change of the
depreciation method, the enterprise shall clearly explain the change of the
method of using the fixed asset or estimating economic benefits generated for
the enterprise with respect to the fixed asset for which the depreciation needs
to be changed and it may not change the depreciation method for each fixed
asset for more than twice during the course of using it and shall send a
written report thereon to its managing tax agency.
Part D
ORGANIZATION
OF IMPLEMENTATION
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Article 15. Business individuals with fixed assets who fully comply
with this Circular's provisions on management of fixed assets may depreciate
their fixed assets in order to determine deductible reasonable expenses upon
calculating personal income tax.
Article 16. Units under the Ministry of Finance shall, within the ambit
of their functions and duties, implement and guide enterprises in properly
implementing, this Circular.
FOR THE MINISTER OF
FINANCE
DEPUTY MINISTER
Tran Van Hieu
APPENDIX
1
FRAME
OF USEFUL LIFE OF FIXED ASSETS
(To the Ministry of
Finance's Circular No. 203/2009/TT-BTC of October 20, 2009)
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Minimum useful life
(year)
Maximum useful life
(year)
A. Motive machinery and equipment
1. Motive force generating machinery
8
10
2. Generators
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10
3. Transformers and electric source devices
7
10
4. Other motive machinery and equipment
6
10
B. Working machinery and equipment
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1. Machine tools
7
10
2. Mining machinery and equipment
5
10
3. Tractors
6
8
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6
8
5. Water and fuel pumps
6
8
6. Metallurgical equipment, equipment for
coating the metal surface with anti-rust and anti-corrosion substances
7
10
7. Specialized equipment for production of
chemicals
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10
8. Specialized machinery and equipment for
production of construction materials, ceramics, porcelains and glass
10
20
9. Specialized equipment for production of
electronic and optical components and precise mechanical devices
5
12
10. Machinery and equipment used for
producing leather, printing stationery and cultural products.
7
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11. Machinery and equipment used in the
textile industry
10
15
12. Machinery and equipment used in the
garment industry
5
7
13. Machinery and equipment used in the
paper industry
5
15
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7
12
15. Machinery and equipment used in the
cinema and health care
6
12
16. Machinery and equipment used in telecommunications,
information, electronic, informatic and television industries
3
15
17. Machinery and equipment for production
of pharmaceuticals
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10
18. Other working machinery and equipment
5
12
19. Machinery and equipment used in the
petrochemical refining industry
10
20
20. Machinery and equipment used in oil and
gas exploration and exploitation
7
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21. Machinery and equipment used in
construction
8
12
22. Cranes
10
20
C. Measuring and experimental instruments
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5
10
2. Optical equipment and spectrometers
6
10
3. Electric and electronic equipment
5
8
4. Equipment for measurement and analysis
of physical and chemical elements
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10
5. Equipment and instruments for
measurement of radioactive elements
6
10
6. Specialized equipment used for special
purposes
5
8
7. Other measuring and experimental
equipment
6
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8. Moulds used in molding industry
2
5
D. Equipment and means of transport
1. Means of transport for road
6
10
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7
15
3. Means of transport for waterway
7
15
4. Means of transport for airway
8
20
5. Transportation equipment being pipelines
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30
6. Means of stevedoring and lifting goods
6
10
7. Other equipment and means of transport
6
10
E. Instruments used for management
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1. Computing and measuring equipment
5
8
2. Informatic or electronic machinery and
equipment and computer software serving management
3
8
3. Other means and instruments used for
management
5
10
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1. Permanent buildings (1)
25
50
2. Mid-shift rest houses, mid-shift
refectories, toilets, change rooms, garages
6
25
3. Other buildings (2)
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25
4. Storehouses, storing tanks; bridges,
roads, airport runways, parking lots, drying ground...
5
20
5. Dikes, dams, sewers, canals, drains,
ports, docks...
6
30
6. Other architectural structures
5
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G. Animals and gardens of perennial trees
1. All kinds of animals
4
15
2. Gardens of industrial trees, orchards,
gardens of perennial trees
6
40
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2
8
H. Other kinds of tangible fixed assets not
included in the above categories
4
25
Notes:
(1)Permanent buildings are houses, working
offices, office buildings, hotels, etc, determined as having a durability of
category I or II.
(2) Other buildings are houses, working
offices, office buildings, etc. determined as having a durability of category
III or IV according to regulations of the Ministry of Construction.
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METHODS
OF DEPRECIATION OF FIXED ASSETS
(To the Ministry of
Finance's Circular No. 203/2009/TT-BTC of October 20, 2009)
I. Straight line method:
1. Contents of the method:
Fixed assets of an enterprise shall be
depreciated according to the straight line method as follows:
- The average yearly depreciation rate of a
fixed asset shall be determined according to the formula below:
Average yearly
depreciation rate of fixed asset
=
Historical cost of
fixed asset
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-The average monthly depreciation rate is
equal to the depreciation cost of the whole year divided by 12 months.
2. In case 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 residual book value of the fixed asset by its re-determined useful life or
remaining useful life (determined as the difference between the registered
useful life and the used time).
3. The depreciation cost of a fixed asset in
the last year of depreciation 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.
4. Example of the calculation of depreciation
of fixed assets:
Example: Company A purchases a fixed asset
(brand-new) at the price of VND 119 million shown on the invoice. Company A is
given a discount of VND 5 million. The transportation freight is VND 3 million
and the cost of installation and trial operation is VND 3 million.
a/ Knowing that the fixed asset has a
technical life of 12 years and an expected useful life of 10 years (in
accordance with Appendix 1 to Circular No. 203/2009/TT-BTC), and it is put into
use on January 1, 2009.
Historical cost of the fixed asset = VND 119
million - VND 5 million + VND 3 million + VND 3 million = VND 120 million.
The average yearly depreciation rate = VND
120 million : 10 years = VND 12 million/year.
The average monthly depreciation rate = VND
12 million : 12 months = VND 1 million/month.
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
2. After 5 years of using the asset, the
enterprise upgrades the fixed asset and incurs a total cost of VND 30 million.
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 January 1,
2014.
Historical cost of the fixed asset = VND 120
million + VND 30 million = VND 150 million.
The accumulated depreciation cost = VND 12
million x 5 years = VND 60 million.
The residual book value of the fixed asset =
VND 150 million - VND 60 million = VND 90 million.
The average yearly depreciation rate = VND 90
million : 6 years = VND 15 million/year.
The average monthly depreciation rate = VND
15 million : 12 months = VND 1,250,000/month.
From 2014 onward, every month the enterprise
shall include in its business expenses a depreciation cost of VND 1,250,000 for
the newly upgraded fixed asset.
5. Determination of the depreciation rate for
fixed assets put into use prior to January 1, 2009:
a/ The way of determining the depreciation
rate:
...
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...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
- The enterprise shall determine the
remaining useful life of the fixed asset according to the formula below:
In which:
T : residual useful life of the fixed asset.
T1: useful life of the fixed asset
determined in accordance with Appendix 1 to Circular No. 203/ 2009AT-BTC.
T2: useful life of the fixed asset
determined in accordance with Appendix 1 to Circular No. 203/ 2009HT-BTC.
t1: actual period for which the
fixed asset has been depreciated.
- The yearly depreciation rate (for the
remaining useful life of the fixed asset) shall be calculated
as follows:
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
=
Residual book value
of the fixed asset
Remaining useful
life of the fixed asset
- The average monthly depreciation rate is
equal to the depreciation cost for the whole year divided by 12 months.
b/ Example of the calculation of depreciation
of fixed assets:
Example: An enterprise has used a loom with a
historical cost of VND 600 million since January 1, 2007. The useful life of
the loom is determined to be 10 years in accordance with Appendix 1 to Circular
No. 203/2009nT-BTC. The used time of the loom calculated through December 31,
2008, is 2 years. The accumulated depreciation cost is VND 120 million.
- The residual book value of the loom is VND
480 million.
- The enterprise determines the useful life
of the loom to be 5 years in accordance with Appendix 1 to Circular No.
203/2009/TT-BTC.
- The enterprise shall determine the
remaining useful life of the loom as follows:
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
=
5 year x (1 -
2 years
) = 4 years
10 years
- The average yearly depreciation rate = VND
480 million : 4 years = VND 120 million/year (in accordance with Circular No.
203/2009/QD-BTC).
- The average monthly depreciation rate = VND
120 million : 12 months = VND 10 million/ month.
From January 1, 2009, through December 31,
2012, the enterprise shall include a depreciation cost of VND 10 million for
the loom in its monthly business expenses.
II. The declining balance method:
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...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
The depreciation rate of fixed assets
according to the declining balance method shall be determined as follows:
- Determination of the useful life of fixed
assets:
The enterprise shall determine the useful
life of fixed assets under Circular No. 203/2009/TT-BTC of the Ministry of
Finance.
- The enterprise shall determine the
depreciation rate of fixed assets in the initial years according to the formula
below:
Yearly depreciation
rate of the fixed asset
=
Residual book value
of the fixed asset
x
Rapid depreciation
rate
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
The rapid depreciation rate is determined
according to the formula below:
Rapid depreciation
rate (%)
=
Depreciation rate
of the fixed asset according to the straight line method
x
Adjustment
coefficient
The depreciation rate of fixed assets
according to the straight line method is determined as follows:
Depreciation rate of
the fixed asset according to the straight line method (%)
=
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
x
100
Useful life of the
fixed asset
The adjustment coefficient shall be
determined according to the useful life of fixed assets in the following table:
Useful life of fixed assets
Adjustment
coefficient (times)
Up to 4 years (t < 4 years)
1.5
Over 4 years to 6 years (4 years < t
< 6 years)
...
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...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
Over 6 years (t > 6 years)
2.5
In the last years, when the yearly
depreciation rate calculated according to the declining balance method mentioned
above is equal to (or lower than) the average depreciation rate calculated by
dividing the residual book value of the fixed asset by its remaining useful
life, from that year onward the depreciation rate is equal to the residual book
value of the fixed asset divided by its remaining useful life.
- The monthly depreciation rate is 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 a historical cost of VND 10 million for the production of
electronic components. The useful life of the fixed asset determined in
accordance with Appendix I (to Circular No. 203/2009/TT-BTC) is 5 years.
The yearly depreciation rate shall be
determined as follows:
- The yearly depreciation rate of the fixed
asset according to the straight line method is 20%.
- The rapid depreciation rate according to
the declining balance method is equal to 20% x 2 (adjustment coefficient) =
40%.
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
Unit of calculation: VND
Year No.
Residual book value
of the fixed asset
Method of
calculating the yearly depreciation rate of the fixed asset
Yearly depreciation
rate
Monthly
depreciation rate
Accumulated
depreciation cost at year end
1
10,000,000
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
4,000,000
333,333
4.000,000
2
6,000,000
6,000,000 x 40%
2,400,000
200,000
6,400,000
...
...
...
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Mọi chi tiết xin liên hệ:
ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
3,600,000
3,600,000 x 40%
1,440,000
120,000
7,840,000
4
2,160,000
2,160,000:2
1,080,000
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
8,920,000
5
2,160,000
2,160,000: 2
1,080,000
90,000
10,000,000
In which:
+ The depreciation rate of the fixed asset
from the first year to the end of the third year is equal to the residual book
value of the fixed asset multiplied by the rapid depreciation rate (40%).
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
III. The units-of-production depreciation
method:
1. Contents of the method:
Fixed assets of an enterprise shall be
depreciated according to the units-of-production depreciation method 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 according to the designed capacity of the fixed asset,
referred to as designed capacity-based output.
- 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 enterprise shall determine the monthly
depreciation rate of the fixed asset according to the formula below:
Monthly
depreciation rate of the fixed asset
=
Quantity of
products turned out in the month
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
Average
depreciation rate for a unit of product
In which:
Average
depreciation rate for a unit of product
=
Historical cost of
the fixed asset
Designed
capacity-based output
- The yearly depreciation rate of the fixed
asset is equal to the total depreciation rate of 12 months in the year, or
shall be calculated according to the formula below:
Yearly depreciation
rate of the fixed asset
=
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
x
Average
depreciation rate for each unit of product
In case there is a change in the designed
capacity or historical cost of the fixed asset, the enterprise shall
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 a historical cost of VND 450 million. The designed capacity of
the bulldozer is 30 m3/hour. The designed capacity-based output 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)
Month
Volume of products
completed (m3)
...
...
...
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Mọi chi tiết xin liên hệ:
ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
14,000
July
15.000
February
15,000
August
14.000
March
18,000
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
16,000
April
16,000
October
16,000
May
15,000
November
18.000
...
...
...
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Mọi chi tiết xin liên hệ:
ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
14,000
December
18.000
The depreciation rate according to the
units-of-production depreciation method for this fixed asset shall be
determined as follows:
- The average depreciation rate for 1 m3
of land bulldozed = VND 450 million : 2.400.000 m3= VND 187.5/ m3.
- The depreciation rate of the bulldozer is
calculated in the following table:
Month
Monthly actual
output (m3)
Monthly
depreciation cost (VND)
...
...
...
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Mọi chi tiết xin liên hệ:
ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
14,000
14,000 x 187.5 =
2,625,000
February
15,000
15,000 x 187.5 =
2,812,500
March
18,000
18,000 x 187.5 =
3,375,000
April
...
...
...
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ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
16,000 x 187.5 =
3,000,000
May
15,000
15,000 x 187.5 =
2,812,500
June
14,000
14,000 x 187.5 =
2,625,000
July
15,000
...
...
...
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Mọi chi tiết xin liên hệ:
ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
August
14,000
14,000 x 187.5 =
2,625,000
September
16,000
16,000 x 187.5 =
3,000,000
October
16,000
16,000 x 187.5 =
3,000,000
...
...
...
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Mọi chi tiết xin liên hệ:
ĐT: (028) 3930 3279 DĐ: 0906 22 99 66
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
35,437,500