Vietnam: Instructions for enterprises to handle the allocation of costs for purchasing tools that are not eligible to be identified as fixed assets?
- Which standard to determine fixed assets according to current Vietnamese regulations?
- How to allocate the cost of purchasing assets that do not qualify as fixed assets according to Vietnamese regulations?
- What is the guidance on the handling of assets being tools and tools that do not satisfy the conditions for a determination as fixed assets according to Vietnamese regulations?
Which standard to determine fixed assets according to current Vietnamese regulations?
Pursuant to Article 3 of Circular 45/2013/TT-BTC of Vietnam stipulating:
"Article 3. Standards and identification of fixed assets:
1. Means of labor are the tangible assets with independent structure, or a system of many individual parts of assets linked to perform one or a certain number of functions and without any part, the system can not work, and if meet the following three criteria they shall be regarded as fixed assets:
a) It is certain to gain economic benefit in the future from the use of such asset;
b) Having the utilization time of over 01 year.
c) Primary price of assets must be determined reliably, and is valued at 30,000,000 (thirty million) dong or more.
In case a system includes many individual components of assets linked together, in which each component has different utilization time and without any component the entire system still perform its main operating function its main activity but due to requirements on management and use of fixed asset requiring separately managed asset division, each asset division if simultaneously satisfying three criteria of fixed assets shall be regarded as independent tangible fixed assets.
For animals working and / or giving products, then each of the animals simultaneously satisfying three criteria of fixed assets is regarded as tangible fixed.
For perennial orchards, each piece of garden, or trees simultaneously satisfying three criteria shall be regarded as a fixed tangible asset.
...
4. For Joint-Stock companies converted from state-owned companies under the provisions of the Government’s Decrees issued before Decree No. 59/2011/ND-CP dated July 18, 2011 of the Government on the conversion of enterprises with 100% state capital into joint-stock companies, having business advantage included in the enterprise value when determining enterprise value for equitization by the method of assets and approved by the competent authority as prescribed, they shall perform the allocation of value of business advantage under provisions in Circular No. 138/2012/TT-BTC dated August 20, 2012 of the Ministry of Finance guiding the allocation of value of business advantage for Joint-Stock companies converted from state-owned companies."
Accordingly, the determination of fixed assets is made in accordance with the above provisions in Vietnam.
How should fixed assets not meet the criteria for the historical cost of fixed assets according to Vietnamese regulations?
Pursuant to Clause 11 Article 9 of Circular 45/2013/TT-BTC (corrected by Article 1 of Decision 1173/QD-BTC in 2013) stipulates:
“Article 9. Principles of depreciation of fixed assets:
...
11. For fixed assets, which enterprises are monitoring, managing and depreciating according to Circular No. 203/2009/TT-BTC, now they do not meet the criteria for historical cost of fixed assets as prescribed in Article 3. of this Circular, the residual value of these assets shall be allocated to the enterprise's production and business expenses, the allocation period shall not exceed 3 years from the effective date of this Circular."
Accordingly, the depreciation of fixed assets that enterprises are monitoring, managing, and depreciating but not meeting the criteria for the historical cost of fixed assets shall be handled according to the above provisions.
Vietnam: Instructions for enterprises to handle the allocation of costs for purchasing tools that are not eligible to be identified as fixed assets?
How to allocate the cost of purchasing assets that do not qualify as fixed assets according to Vietnamese regulations?
Pursuant to Point 2.2, Clause 2, Article 4 of Circular 96/2015/TT-BTC stipulates:
"2. Expenses that are not deductible when determining taxable income include:
....
2.2. Depreciation of fixed assets in one of the following cases:
...
d) Depreciation in excess of current regulations of the Ministry of Finance on management, use and depreciation of fixed assets.
…
For assets being tools, instruments, circulating packaging, etc., which do not satisfy the conditions for determination as fixed assets as prescribed, the cost of purchasing the above-mentioned assets shall be gradually amortized into expenses of business activities in the period but not exceeding 3 years.”
Accordingly, for assets that do not satisfy the conditions for a determination as fixed assets, the allocation of asset purchase costs shall comply with the above provisions in Vietnam.
What is the guidance on the handling of assets being tools and tools that do not satisfy the conditions for a determination as fixed assets according to Vietnamese regulations?
Based on Official Dispatch 30589/CTHN-TTHT in 2022, the Hanoi Tax Department of Vietnam has directed:
“Based on the above provisions, in case the Company has assets that are tools and instruments that do not meet the criteria for a determination as fixed assets as prescribed, the cost of purchasing assets is gradually amortized into expenses. production and business activities during the period but for a maximum of 3 years as prescribed in Clause 2, Article 4 of Circular No. 96/2015/TT-BTC of the Ministry of Finance of Vietnam. The Company is requested to base on the actual operation situation at the unit to make the allocation to expenses in accordance with the provisions of law.
In the process of implementing tax policy, in case there are still problems, the Company can refer to the guiding documents of the Hanoi Tax Department posted on the website http://hanoi.gdt.gov.vn or contact Contact the Department of Inspection - Check No. 9 for assistance in solving."
Accordingly, the company needs to base on its actual operation situation to allocate the cost of purchasing assets that are instruments that do not meet the conditions for determining fixed assets according to the people's direction mentioned above.
LawNet
