General principles of the cost-based method for goods and services priced by the State in Vietnam

General principles of the cost-based method for goods and services priced by the State in Vietnam (Image from the Internet)

On July 1, 2024, the Minister of Finance (Hanoi, Vietnam) issued Circular 45/2024/TT-BTC on the common pricing methods for goods or services.

The general principles of the cost-based method for goods and services priced by the State in Vietnam

According to Article 5 of Circular 45/2024/TT-BTC, the general principles of the cost-based method for goods and services priced by the State in Vietnam, effective July 1, 2024, are specified as follows:

- During the production process, if there are any additional revenues generated, they must be deducted proportionately from the cost of the main product; if the by-products are recovered for sale or for further use as raw materials to produce other products, the cost must be allocated to deduct from the production cost of the main product. If the by-products cannot be recovered for sale or use, no cost allocation is required.

- For costs and price factors related to various goods and services that cannot be separately identified, they should be aggregated and allocated based on suitable criteria such as revenue, expenses, quantity, volume, time, and other criteria appropriate to the industry, field, and related legal regulations of the goods and services.

In cases where costs and price factors have a useful life for production and business over multiple periods or years, they should be gradually allocated into production and business costs. If costs and price factors arise over multiple periods or years, data should be collected for multiple periods or years for allocation.

- For any cost items included in the economic-technical norms, cost standards issued by competent state agencies, policies of the State, prices set by the State, legal provisions (on taxes, accounting, statistics, and related laws), internal expenditure regulations of the unit as per legal requirements, they shall be calculated according to those regulations.

Units are responsible for regularly reviewing their internal expenditure regulations to ensure savings, efficiency, compliance with policies, laws of the State, and are accountable to the law for their internal expenditure regulations.

State agencies are responsible for regularly reviewing the economic-technical norms and cost standards they issue to amend and supplement them in accordance with the law.

- In case there is market information on the costs of materials, outsourcing costs, labor costs, sales costs, and management costs, determination can be made based on the pricing information and pricing levels specified in Articles 13, 14, and 15 of Circular 45/2024/TT-BTC.

- Necessary costs for producing and conducting business of goods and services specific to each industry or field as regulated (if available) shall be included in the price, such as: costs for organizing drafts, composing, creating, staging, performing, testing, inspecting, calibrating; royalties, author's remuneration; editing, proofreading, designing, typesetting; appraisal costs; teaching experimental costs; training costs for using books; publishing management costs; anti-counterfeit label costs, electronic teaching materials; sample book printing costs; logistics costs; provisional housing and operational costs; machinery and construction equipment costs; maintenance costs for logistics facilities and provisional housing; repair design costs; construction supervision costs; safety assurance organization costs for construction; project management fees; consultancy fees; construction insurance costs; management and operation costs to ensure traffic in the period when traffic infrastructure assets are suspended under the decision of the competent authority and other expenses.

- Depreciation expenses for fixed assets shall be carried out following the regulations of the Ministry of Finance on policies for managing, using, and depreciating fixed assets.

- For cases subject to value-added tax (VAT) according to the deduction method, the cost of materials and input factors does not include VAT. For cases not subject to VAT or subject to VAT according to the direct method, the cost of materials and input factors includes VAT.

- Costs that cannot be included in reasonable, legitimate costs for pricing goods and services:

+ Costs that cannot be included in reasonable, legitimate costs for pricing goods and services are implemented according to legal regulations on non-deductible expenses when determining taxable income for corporate income tax under tax law and related documents;

+ Costs already covered by the state budget; costs already included in the pricing of goods and services to be priced; costs already included in the price of other goods and services of the organization or individual.

More details can be found in Circular 45/2024/TT-BTC, which comes into force in Vietnam from July 1, 2024.

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