Is there Circular No. 23/2023/TT-BTC guiding depreciation of fixed assets in Vietnam to replace Circular No. 45/2018/TT-BTC?
Circular No. 23/2023/TT-BTC replaces Circular No. 45/2018/TT-BTC on depreciation of fixed assets in Vietnam?
On April 25, 2023, the Minister of Finance of Vietnam issued Circular No. 23/2023/TT-BTC on guidance on regime for management and calculation of depreciation of fixed assets of agencies, organizations or units and fixed assets handed to enterprises by the State without caculation of the state capital portion of such enterprises.
According to that, Circular No. 23/2023/TT-BTC guides the identification of fixed assets in Article 3 of Circular No. 23/2023/TT-BTC as follows:
Standards of fixed assets
1. Identification of assets:
a) An independent asset is an asset.
b) If a system composed of multiple separate parts which are connected to perform one or certain functions, lacks any of these parts making it unable to operate, such system is identified as an asset.
c) If a system composed of multiple separate parts linked together of which the useful life cycle is different remains able to perform its main functions in case of lack of any of such part, but it and its parts need to be separately managed, each part is identified as an asset.
d) Each drought animal and/or each producing animal is identified as an asset.
dd) Each independent and perennial garden or each perennial plant is identified as an asset.
e) Land use right for each land plot or the area assigned to an agency, organization or unit in each land plot is identified as an asset.
g) Intellectual property right registered and established according to each copyright registration certificate, copyright-related right registration certificate, protection title for industrial property, or plant varieties patent is identified as an asset.
h) Each software is an asset.
i) Brand of each public service provider is an asset.
2. Assets specified in Clause 1 of this Article (except for assets specified in Clause 3 of this Article) shall be identified as fixed assets if they meet 02 standards below:
a) The useful life is 01 (one) year or more.
b) The historical cost is 10.000.000 VND (ten million VND) or higher.
3. Assets specified in Clause 1 of this Article of public service providers that have guaranteed recurrent expenditure and investment expenses, assets of public service providers which require its depreciation to be included in the service price according to the law and assets of public service providers used in business, lease, joint venture and association without establishment of new legal entity according to the law shall be identified as fixed assets when they meet 02 standards below:
a) The useful life is 01 (one) year or more.
b) They meet standards of historical costs of fixed assets according to regulations applicable to enterprises.
Thus, according to the above regulations, assets shall be identified as fixed assets if they meet 02 standards below:
- The useful life is 01 (one) year or more.
- The historical cost is 10.000.000 VND (ten million VND) or higher.
However, for assets of public service providers, they can only be identified as fixed assets when they meet 02 standards below:
- The useful life is 01 (one) year or more.
- They meet standards of historical costs of fixed assets according to regulations applicable to enterprises.
Is there Circular No. 23/2023/TT-BTC guiding depreciation of fixed assets in Vietnam to replace Circular No. 45/2018/TT-BTC?
What are the assets not required to calculate the depreciation?
Pursuant to Clause 3, Article 11 of Circular No. 23/2023/TT-BTC stipulating the scope of depreciation calculation of fixed assets as follows:
Scope of depreciation calculation of fixed assets
1. The current fixed assets of agencies, organizations and units and the fixed assets provided to the enterprises by the State without calculation of the state capital portion shall be calculated for their depreciation, except for cases specified in Clause 2, 3 and 4 of this Article.
2. Fixed assets of public service providers shall be depreciated, including:
a) Fixed assets of public service providers that have guaranteed recurrent expenditure and investment expenses.
b) Fixed assets of public service providers which require its depreciation to be included in the service price according to the law.
c) Fixed assets of public service providers which are not specified in points a and b of this Clause shall be used in business, lease, joint venture and association without establishment of new legal entity according to regulations of law.
3. It is not required to calculate the depreciation of the following assets:
a) Fixed assets are the land use rights which must be determined to be included in the value of such assets as specified in Article 100 of the Decree No. 151/2017/ND-CP.
b) Special fixed assets specified in Point c, Clause 1 Article 5 hereof.
c) Fixed assets that are still usable after their depreciation is being fully calculated or their costs are being completely depreciated (including fixed assets that public service providers can receive after expiration of the duration of joint venture or association).
d) Fixed assets that are not usable though their depreciation is not fully calculated and their costs are not completely depreciated.
4. With regard to a fixed asset which is brand of a public service provider and is used in joint venture and association, the brand value of the public service provider for capital contribution to joint venture or association expense shall be allocated to joint venture or association expense every year according to regulations in Clause 3 Article 15 of this Circular.
Thus, it is not required to calculate the depreciation of the following assets:
- Fixed assets are the land use rights which must be determined to be included in the value of such assets as specified in Article 100 of the Decree No. 151/2017/ND-CP.
- Special fixed assets as specified.
- Fixed assets that are still usable after their depreciation is being fully calculated or their costs are being completely.
- Fixed assets that are not usable though their depreciation is not fully calculated and their costs are not completely depreciated.
What is the depreciation period of fixed assets according to the latest regulations?
The depreciation period of fixed assets shall comply with the provisions of Article 13 of Circular No. 23/2023/TT-BTC, specifically as follows:
Depreciation period and rate of fixed assets
1. The depreciation period and rate of tangible fixed assets shall be determined according to the regulations in Appendix 01 hereto, except for the following cases:
a) If the tangible fixed assets are used in the area where the weather and environmental conditions can affect their depreciation, in necessary cases, the depreciation period and rate of such assets shall be stipulated differently from the regulations in Appendix 01 hereto. Ministers, Heads of central agencies and the People's Committees of provinces shall provide specific regulations on such depreciation period and rate. The depreciation rate shall not be adjusted for more than or less than 20% of the depreciation rate specified in Appendix 01 hereto.
b) In case of a fixed asset whose historical cost is changed and which is upgraded and expanded according to the project approved by a competent agency or person specified at Point b, Clause 1, Article 9 of this Circular, the depreciation period of the fixed asset equals (=) the actual period which the asset is used before change (+) the remaining depreciation period of the fixed asset after upgradation and expansion. The remaining depreciation period of the fixed asset after upgradation and expansion shall be determined according to the following formula:
Remaining depreciation period of the fixed asset after upgradation and expansion equals (=) (the historical cost of the fixed asset after change minus (-) the accumulated depreciation, the depreciation deducted of the fixed asset calculated as at December 31 of the year in which the historical cost is changed) divided by (:) the annual depreciation expense of the fixed asset from the year in which the historical cost is changed, which is determined according to regulations in Point a, Clause 6 Article 14 of this Circular.
c) In case of a fixed asset whose historical cost is changed and which is partially lost or seriously damaged due to natural disasters, force majeure events or other unexpected impacts specified at Point dd, Clause 1, Article 9 of this Circular, the depreciation period of the fixed asset equals (=) the actual period which the asset is used before change (+) the remaining depreciation period of the fixed asset according to revaluation.
d) Regarding a fixed asset whose historical cost is adjusted or changed according to regulations in Points a and d Clause 2 Article 6 and Points c and d Clause 1 Article 9 of this Circular:
d.1) If the historical cost of the fixed asset is adjusted or changed before it is fully depreciated, this fixed asset shall be depreciated until the year in which its residual value by December 31 of the preceding year is smaller than or equal to the annual depreciation expense.
d.2) If the historical cost of the fixed asset is adjusted or changed after the asset has been fully depreciated, 01 year (the year in which the historical cost of the fixed asset is adjusted or changed) shall be added to the depreciation period in order to settle any increase or decrease in asset's value due to change or adjustment of the historical cost.
2. Ministers, heads of central agencies and the People's Committees of provinces shall elaborate the list, the depreciation period and rate of intangible fixed assets (except for brands of public service providers) under management by ministries, central agencies and localities (according to Form No. 01 specified in Appendix 02 issued with this Circular).
The depreciation period of an intangible fixed asset shall not be less than 04 years and more than 50 years.
In necessary cases where the depreciation period of an intangible fixed asset shall be specified as less than 04 years, Ministers, Heads of central agencies and the People's Committee of province shall provide specific regulations after receiving the agreement from the related Administrative Ministry.
...
Thus, according to the above regulations, from June 10, 2023, the depreciation period and rate of tangible fixed assets shall be determined according to the regulations in Appendix 01 enclosed with Circular No. 23/2023/TT-BTC, except for the certain cases mentioned in Article 13 above).
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