What are the revenues of the credit institutions in Vietnam? What are the regulations on costs associated with recovery of bad debts by credit institutions?
What are the revenues of the credit institutions in Vietnam?
Pursuant to Article 4 of Circular 16/2018/TT-BTC stipulating revenue of credit institutions as follows:
Revenues of the credit institutions and foreign bank branches include the revenues provided for in Article 16 of Decree 93/2017/ND-CP. Certain revenues of a credit institution or branch of foreign bank are specified in the following guidelines:
- Revenues earned from other services: Revenue earned from assets preservation service, safe deposit box rental, money brokerage; and revenue earned from other services.
- Revenues earned from other services as per the law, including revenue earned from asset rental less proceeds from lease of property with lien for debt settlement as prescribed in Clause 3 Article 132 of the Law on credit institutions for the purpose of debt recovery.
- Other revenues:
+ Revenue earned from liabilities whose creditors cease to exist or are not identifiable as per the law which is accounted for as an increase in income;
+ Revenue from fines paid by customers, money paid for compensation by customers due to breach of contract, which is accounted for as income;
+ Revenue earned from insurance proceeds, which is accounted for as income after deducting insurance contribution;
+ Other revenues as prescribed by law.
What are the revenues of the credit institutions in Vietnam? What are the regulations on costs associated with recovery of bad debts by credit institutions?
What are the regulations on costs associated with recovery of bad debts by credit institutions in Vietnam?
Pursuant to Article 6 of Circular 16/2018/TT-BTC stipulating expenses as follows:
Expenses of the credit institutions and foreign bank branches include the expenses specified in Article 17 of Decree 93/2017/ND-CP.
Certain expenses of the credit institutions and branches of foreign banks are specified in the following guidelines:
Other expenses prescribed in Point n Clause 2 Article 17 of Decree 93/2017/ND-CP, in which:
+ Fees contributed to professional associations which credit institutions or branches of foreign banks join.
+ Expenditure on recovery of written off debts, costs associated with recovery of bad debts which are expenses associated with debt recovery, including debt collection fees paid to debt collection organizations in accordance with the law provisions.
- Other expenses, including:
+ Expenditure on liabilities whose creditors cease to exist and be accounted for as income but then creditors is identified;
+ Expenditure on fines and damages compensation for breach of economic contract under responsibilities of the credit institutions and foreign bank branches;
+ Expenditure on fines for administrative violations less fines those individuals must pay under the provisions of the law;
+ Expenditure on court fees, fees for judgment enforcement;
+ Other expenses as prescribed by law.
What are the principles of expense recognition for credit institutions in Vietnam?
Pursuant to Article 7 of Circular 16/2018/TT-BTC stipulating the principles of recording expenses as follows:
- Expenses of a branch of foreign bank or credit institution are the expenses actually incurred on the business of the branch of foreign bank or credit institution; in compliance with the matching principle between revenue and expense with valid and sufficient invoices and documents as prescribed by law. The credit institution or branch of foreign bank shall not record expenditures covered by other funding sources as expense.
The determination and accounting for expense shall be made in accordance with Vietnamese accounting standards and relevant law provisions.
- The expense determined for the purpose of calculation of corporate income tax shall be done in accordance with the Law on Enterprise income tax and its guiding documents.
- Credit institutions whose 100% of charter capital is held by the state and credit institutions whose over 50% of charter capital is held by the state may solely record deductible expenses as business expense in accordance with regulations of law on corporate income tax.
With regard to expenditure on amount of loan loss provision in excess of statutory amount which is deductible, upon calculation of corporate income tax, due to difference in regulations on loan loss provision between law on corporate income tax and the State bank of Vietnam (if any); expenditure on fees contributed to overseas professional associations that credit institutions join and fines for administrative violations (except for fines for administrative violations that individuals must pay as per the law), the credit institutions whose 100% of charter capital is held by the state and credit institutions whose over 50% of charter capital is held by the state are entitled to cover above-mentioned expenditures using profit after corporate income tax.
Thus, the determination of the cost of bad debt recovery does not have a limit rate. The credit institution must balance the costs to perform, and must ensure the conditions on invoices and documents to be recorded according to the principles of the law on corporate income tax.
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