Decision 166/1999/QD-BTC

DECISION No. 166/1999/QD-BTC OF DECEMBER 30, 1999 PROMULGATING THE REGULATION OF MANAGEMENT, USE AND DEDUCTION OF FIXED ASSET DEPRECIATION THE FINANCE MINISTER Pursuant to the Government�s Decree No.15/CP of March 2, 1993 defining the tasks, powers and State management responsibilities of the ministries and the ministerial-level agencies; Pursuant to the Government�s Decree No.178/CP of October 28, 1994 defining the tasks, powers and organizational apparatus of the Finance Ministry; Pursuant to the Government�s Decree No.59/CP of October 3, 1996 promulgating the Regulation on financial management and business accounting for State enterprises; Pursuant to the Government�s Decree No. 27/1999/ND-CP of April 20, 1999 amending and supple-menting the Regulation on financial management and business accounting for State enterprises; Pursuant to the Government�s Decree No.30/1998/ND-CP of May 13, 1998 detailing the imple-mentation of the Law on Enterprise Income Tax; In order to enhance the management, use and deduction of fixed asset depreciation in enterprises; create conditions for enterprises to accurately calculate and fully deduct the fixed asset depreciation amounts into the business costs; replace and renew machinery and equipment along the direction of application of advanced technologies and modern techniques suitable to the business requirements of enterprises and the economy; At the proposal of the director of the Department for Financial Policies; DECIDES: Article 1.- To promulgate together with this Decision the Regulation on management, use and deduction of fixed asset depreciation. This Regulation shall apply to all State enterprises. Enterprises of other economic sectors are compelled to apply only the provisions relating to the determination of expenses for tax calculation and are encouraged to apply other provisions. Article 2.- This Decision takes effect as from January 1st, 2000. This Decision shall replace Decision No.1062 TC/QD-CSTC of November 14, 1996 of the Finance Minister promulgating the Regulation on management, use and deduction of fixed asset depreciation. Other stipulations on management, use and deduction of fixed asset depreciation contrary to this Decision shall all be annulled. Article 3.- The director of the Department for Financial Policies, the director of the Ministry�s Office, the director of the Department for Finance of Enterprises, the general director of Tax and the heads of units of or attached to the Finance Ministry shall, within the ambit of their respective functions and powers, have to organize, guide and inspect the implementation of this Decision. The Managing Boards, general directors and directors of enterprises shall have to implement this Decision. Minister of Finance NGUYEN SINH HUNG REGULATION ON MANAGEMENT, USE AND DEDUCTION OF FIXED ASSET DEPRECIATION (issued together with Decision No. 166/1999/QD-BTC of December 30, 1999 of the Finance Minister) Section I. GENERAL PROVISIONS Article 1.- Objects and scope of application: This Regulation shall apply to the State enterprises, including corporations, member companies of corporations, independent enterprises; For enterprises of other economic sectors such as limited liability companies, joint stock companies, partnership companies, private enterprises, foreign-invested enterprises�, they shall only be compelled to apply the provisions relating to the determination of expenses for tax calculation, and encouraged to apply other provisions in this Regulation; Enterprises shall effect the management, use and depreciation deduction to each fixed asset managed and used by enterprises. Article 2.- Terms used in this Regulation shall be construed as follows: 1. Tangible fixed assets are major labor means having material shapes (each asset unit is structured independently or in a system consisting of various asset components linked together for the performance of one or several certain functions), having great values and long use duration, involved in many business cycles but still retaining their initial material shapes such as houses, architectural objects, machinery, equipment� 2. Intangible fixed assets are fixed assets which have no material shapes and demonstrate a volume of already invested value related directly to many business cycles of enterprises such as expenses for establishment of enterprises; expenses for used land; expenses for invention patents, licenses, copyrights�. 3. The financial leasing fixed assets are the fixed assets rented by enterprises from financial leasing companies if the leasing contracts satisfy at least one of the four following conditions: a/ At the end of the contractual leasing term, the lessee may transfer the ownership right over the leased assets or continue to lease them according to the mutual agreement between the two parties; b/ The leasing contract contains the stipulation: At the end of the leasing term, the lessee may choose to buy the leased assets at nominal prices lower than their actual value at the time of repurchase; c/ The leasing term of a type of asset must be at least equal to 60% of the time needed for leased asset depreciation; d/ The total rent for a type of asset prescribed in the leasing contract must be at least equal to such asset�s price on the market at the time of signing the contract. If any fixed asset leasing contract fails to satisfy any of the four conditions mentioned above, such assets shall be considered assets leased for operation. 4. The original price of a fixed asset means the entire actual expenses for acquiring the fixed asset until it is put into normal operation such as the actual purchase price of the fixed asset; the transportation, loading and unloading expense, the installation and test-run expense; the interests on investment loan for the fixed asset before it is not yet handed over and put into use; taxes and registration fee (if any)� 5. The fixed asset using duration means the time the enterprise is expected to use the fixed asset for business activities under normal conditions, in conformity with techno-economic parameters of the fixed asset and other factors related to the operation of the fixed asset. 6. The fixed asset wear means the gradual reduction of the use value and the value of the fixed asset due to its participation in the business activities as the result of natural abrasion, technical advance� in the course of operation of the fixed asset. 7. The fixed asset depreciation means the systematic calculation and distribution of the original prices of the fixed assets into the business costs throughout the use duration of the fixed assets. 8. The accumulative depreciation amount of fixed assets means the total depreciation already deducted into the business costs through various business periods of the fixed assets up to a definite time. 9. The remaining value of a fixed asset on the accounting books means the remaining value of the fixed asset reflected on the accounting books, which is determined by the difference between the original price of the fixed asset and its accumulative depreciation amount by the definite time. 10. Fixed asset repair means the renovation, maintenance or repair of damage arising in the course of operation in order to restore the normal working capacity of the fixed asset. 11. Fixed asset upgrading means activities aimed to prolong the use duration, raise the capacity as well as operating properties of the fixed asset such as renovation, construction and installation, additional equipment for the fixed asset. Article 3.- Annually, the enterprises may take initiative in determining the use duration of fixed assets according to the provisions in Article 15 of this Regulation and their production and business situation. Section II. PROVISIONS ON FIXED ASSET MANAGEMENT AND USE Article 4.- Criteria and identification of fixed assets 1. Criteria and identification of tangible fixed assets: All labor means being tangible fixed assets structured independently or in a system with separate asset parts lying adjacent to each other in order to perform one or several certain functions and the lack of any part therein will make the whole system unable to operate shall be considered fixed assets if they simultaneously satisfy the two following criteria: a/ Having the use duration of 1 year or more; b/ Having the value of 5,000,000 (five million) dong or more; In cases where a system consists of many separate asset parts joined together, in which each component part has its own use duration and if without any part therein the system is still able to perform its major function while the fixed asset management and use demand the separate management of each asset part, such separate asset parts shall be considered independent tangible fixed assets (for example seats, frame and engine� in an airplane). For draught and/or product-yielding animals, each of such animals shall be considered a tangible fixed asset. For perennial tree gardens, each of them shall be considered a tangible fixed asset. 2. Criteria and identification of intangible fixed assets All actual expenses made by enterprises which simultaneously satisfy two conditions prescribed in Clause 1, this Article, and do not formulate tangible fixed assets shall be considered intangible fixed assets. If such expenses do not simultaneously satisfy the two criteria mentioned above, they shall be accounted directly or distributed gradually into the business costs of enterprises. Article 5.- Determining the original prices of fixed assets: 1. Determining the original prices of tangible fixed assets: a/ The procured fixed assets: The original price of a procured fixed asset (both brand-new and used one) shall include the actually paid price; the interest of loan for investment in the fixed asset when it is not yet put into use; the expenses for transportation, loading and unloading; the expenses for repair, renovation before the fixed asset is put into use; the expenses for installation, test-run, taxes and registration fee (if any)� b/ Fixed assets of construction investment type: The original price of the construction investment fixed asset (both self-made and hired from outside) is the price of the final settlement of the construction work as provided for in the current Investment and Construction Management Regulation, other relevant expenses and registration fee (if any). For fixed assets being draught and/or product-yielding animals or perennial tree gardens, the original price shall be all the actual expenses for such animals or gardens from the time they are formulated to the time they are put into exploitation and use as stipulated in the current Investment and Construction Management Regulation, other relevant expenses and registration fees (if any). c/ Fixed assets which have been supplied or transferred from other places� The original price of a supplied or transferred� fixed asset shall include its remaining value on the accounting books of the supplying or transferring� unit or value actually determined by the Delivery and Receipt Council and expenses for renovation, repair, transportation, loading and unloading, test-run; registration fee (if any)�, paid by the asset-receiving party before putting the fixed asset into use. Particularly the original price of fixed asset transferred among member units with dependent accounting of an enterprise shall be the original price reflected at the transferring unit in compatibility with the dossiers of such fixed asset. The fixed asset- receiving unit shall base itself on the original price, the accumulative depreciation amount, the remaining value on the accounting books and the dossier set of such fixed asset to determine the original price, the accumulative depreciation amount and the remaining value on the accounting book of the fixed asset and reflect them into the accounting book. All expenses related to the transfer of fixed asset among member units with dependent cost-accounting shall not be accounted in the increase of the original price of the fixed asset but into the business cost in the period. d/ Fixed assets which are given, donated, presented, received as capital contribution to joint ventures or as contributed capital reimbursement, detected as surplus� The original price of a fixed asset given, donated, presented as gift, received as capital contribution to joint ventures, received as contributed capital reimbursement, detected as surplus� shall include its value actually evaluated by the Delivery and Receipt Council; the expenses for renovation, repair of fixed asset; the expenses for transportation, loading and unloading, test-run, registration fee (if any)� paid by the recipient before putting the fixed asset into use. 2. Determining the original prices of intangible fixed assets: a/ The expense for the used land means the total actual expenses directly related to the used land, including the expense for the land use right, the ground clearance compensation, the expense for ground leveling and fill-up, the registration fee (if any)� (excluding expenses for the construction of works on land). Where an enterprise pays the land rent annually or periodically, these expenses shall be gradually distributed into the business costs in the period(s), not accounted into the original price of the fixed asset. b/ The expense for establishment of an enterprise means the actual expenses related directly to the preparation for the emergence of the enterprise considered by its founding members part of the contributed capital of each person and recorded in the enterprise�s charter capital, including expenses for studies, exploration and elaboration of the investment project for the establishment of the enterprise; the expense for project evaluation; founding meetings� c/ The research and development expense means all the actual expenses of an enterprise for the implementation of the work of research, exploration, elaboration of long-term investment plans� with a view to bringing about long-term interests for the enterprise. d/ The expense for invention patents, licenses, copyrights, the copyright purchase, technological transfer� means all the actual expenses of an enterprise for research projects (including expenses for trial production, examination, pre-acceptance test by the State) which have been granted invention patents, licenses, copyright certificates, or expenses for the purchase of the copyright, trademarks by the enterprise, expenses for the technological transfer from organizations and individuals�, and all these expenses have the effect of direct service of the enterprise�s business activities. e/ The expense for business advantages means the expense for the difference additionally paid by the enterprise (the additionally paid difference = the purchase price - the value of assets according to the actual evaluation) besides the value of assets according to the actual evaluation (immovable and movables�) when the enterprise buys, merges or consolidates another enterprise. This advantage is formulated by the advantages in business location, reputation and prestige with customers, the professional skills of the contingent of laborers, and the managerial and organizational skills of such enterprise�s management board. 3. Determining the original prices of financial leasing fixed assets: The original price of a financial leasing fixed asset, which is reflected at the renting unit as the unit owning the asset shall include the actual purchase price; the expenses for transportation, loading and unloading; the expenses for repair, renovation before putting the fixed asset into use; the expenses for installation, test-run, taxes and registration fee (if any)�. The difference between the fixed asset rental payable to the leasing unit and the original price of such fixed asset shall be accounted into the business costs in conformity with the duration of the financial leasing contract. Article 6.- Expenses for upgrading fixed assets, reflected as the increase in the original prices of such fixed assets, must not be accounted into the business costs in the period. The fixed asset repair expenses shall be considered losses and accounted separately or distributed gradually into the business expenses in the period. For a number of particular branches where the fixed asset repair expenses arise unevenly between periods, years, if enterprises wish to deduct in advance the fixed asset repair expenses into the business expenses, they shall have to draw up plans therefor and submit them to the Finance Ministry for consideration and decision; after getting the written consents of the Finance Ministry, the enterprises shall have to notify their directly managing tax bodies thereof. Enterprises shall have to make the final settlement of the actually arising repair expenses with those deducted in advance; if the actual repair expense is larger than the deducted repair expense, their difference shall be accounted separately or distributed gradually into the expenses in the period; if the actual repair expense is smaller than the deducted amount, the difference shall be accounted into other revenues. Enterprises of particular branches, even if having applied the method of distribution of fixed asset repair expenses into subsequent business periods, shall also have to draw up plans for distribution of fixed asset repair expenses and notify their direct managing tax offices thereof. Article 7.- All fixed assets in enterprise must have their respective dossier sets (each include the record on fixed asset delivery and receipt, contract, fixed asset purchase invoice and other relevant vouchers), be monitored, managed, used and depreciated in strict accordance with the provisions of this Regulation. Fixed assets must be classified, inventoried, numbered with separate cards, overseen in details according to each subject recording the fixed assets and be reflected in the fixed asset monitoring books. Enterprises shall have to manage and use the fixed assets which have been fully depreciated but still involved in business activities like ordinary fixed assets. Periodically at the end of each fiscal year, enterprises shall have to inventory the fixed assets. All cases of surplus or deficit of fixed assets must be recorded in minutes, with their causes sought and handling measures taken. Article 8.- Classification of fixed assets in enterprises: Depending on the properties of their fixed assets, enterprises shall classify them according to the following norms: 1. The fixed assets used for business purposes are those used by the enterprises for their business purposes. a/ Intangible fixed assets: Establishment expense, research and development expense, concession rights, exploitation rights, patents, trade labels,� b/ Tangible fixed assets: To be classified by enterprises into the following classes: Class 1: Houses, architectural objects: are fixed assets of enterprises, which have been formulated after the construction process such as working offices, warehouses, fences, water towers, yards, houses� decorative works, roads, bridges and sluices, railways, gangways, quays� Class 2: Machinery and equipment: are all kinds of machines and equipment used in business activities of enterprises such as special-use machinery, working equipment, technological chains, single machines�. Class 3: Transport means, transmission equipment are different kinds of transport means, including railway, waterway, land and air transport means, pipe lines and transmission equipment such as communication systems, electricity supply systems, water pipe lines, conveyer belts�. Class 4: Control equipment and devices are those used for the management of business activities of enterprises such as computers in service of management, electronic equipment, equipment and device for measurement and quality control, dehumidifiers, vacuum cleaners, termite and wood-worm kil