Vietnam: How to distribute profits of microfinance institutions after deducting losses

According to Article 9 of Circular No. 18/2018/TT-BTC of the Ministry of Finance of Vietnam, the profits of a microfinance institution that remain after deducting losses in previous year as regulated by the Law on corporate income and paying corporate income tax shall be distributed in the following order:

- Deduct the expired losses in the previous year from the profits before corporate income tax as regulated.

- The profits that remain after deducting the amount shall be distributed according to the following order:

+ Contribute 5% of the remaining profits to the additional reserve fund of charter capital. The balance of this fund shall not exceed the charter capital of the microfinance institution;

+ Contribute 10% of the remaining profits to the financial reserve fund.

- The profits that remain after deducting the amounts prescribed above shall be distributed as follows:

- The wholly state-owned microfinance institution shall:

+ Contribute not more than 25% of the remaining profits to the investment and development fund;

+ The agency representing the state capital owner in the microfinance institution, pursuant to regulations on evaluation and rating of the wholly state-owned credit institutions, shall review the financial plan and assigned evaluation and rating criteria, and perform the evaluation and rating of the microfinance institution in the same way as those of a wholly state-owned credit institution. Based on the evaluation and rating results, the microfinance institution shall distribute the remaining profits in accordance with regulations on profit distribution applicable to wholly state-owned credit institutions.

- Other microfinance institutions: They shall themselves decide the distribution of remaining profits in conformity with their Charters and relevant laws.

View full text at Circular No. 18/2018/TT-BTC of the Ministry of Finance of Vietnam, effective from March 29, 2018.

Thu Ba

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