Guidelines for determination of illegal benefits from trade in counterfeit goods in Vietnam

Guidelines for determination of illegal benefits from trade in counterfeit goods in Vietnam (Internet image)

Circular 65/2022/TT-BTC of the Ministry of Finance of Vietnam issued on August 26, 2022 detailing Clause 2, Article 91 of Decree 98/2020/ND-CP.

According to Circular 65/2022/TT-BTC, the illegal benefits from trade in counterfeit goods are as follows:

1. Illegal benefits

In Article 4 of Circular 65/2022/TT-BTC, the illegal benefits are as follows:

The illegal benefits obtained from administrative violations as prescribed in Article 37 of the Law on penalties for administrative violations, Point e Clause 3 Article 4 of the Decree 98/2020/ND-CP, and Clause 2 Article 3 of the Decree 17/2022/ND-CP are:

Objects, money, financial instruments or other assets that violating entities obtain from the violations against regulations on commerce, production and trade in counterfeit and prohibited goods, and protection of consumer rights.

2. Determination of illegal benefits from trade in counterfeit goods in Vietnam

2.1. Determination of illegal monetary benefits

Pursuant to Article 5 of Circular 65/2022/TT-BTC, the determination of illegal monetary benefits as follows:

- The amount of illegal monetary benefits obtained from a violation is total amount of money obtained by the violating entity from that violation and equals the proceeds earned from the illegal transfer, sale or provision of goods or services after deducting direct costs of such goods or services which are determined according to documents and records provided by the violating entity to prove the legitimacy and validity of such costs.

- The amount of money obtained by the violating entity from the violation equals:

(*) The quantity of goods or volume of services transferred, sold or provided shall be determined on the basis of declaration by the violating entity and inspection and verification by the officer competent to impose penalties;

(**) The unit price of goods or services shall be determined on the basis of documents and records provided by the violating entity. If such documents and records are not available, the unit price shall be determined according to the market price of similar goods or services applied at the time of detection of the violation.

(***) Direct expenses constituting goods or services must have sufficient records and documents to prove the legitimacy and validity of such expenses.

In case the quantity, volume and unit price cannot be determined, the amount of illegal benefits is total amount of money earned by the violating entity from the illegal transfer, sale, destroy or provision of goods or services.

- In case an entity that commits a violation against regulations on origin of imported/exported goods when processing goods for a foreign trader is required to return all illegal benefits obtained from the violation to state budget:

The amount of illegal benefits obtained from the goods processing is total amount of money earned by the violating entity from its provision of processing services (service charges, processing fees) minus (-) direct costs of such processing services (if the violating entity has provided adequate documents and records to prove the legitimacy and validity of such costs).

- In case the violating entity has illegally transferred, sold or destroyed processed goods:

The amount of illegal benefits to be transferred to state budget is total amount mentioned above plus (+) the amount equivalent to the value of the exhibits of the violation illegally transferred, sold or destroyed.

- In case of transfer or selling of prohibited, counterfeit or smuggled goods or provision of services classified as conditional business lines, the amount of illegal benefits is total amount earned by the violating entity from such transfer, selling or provision of such goods or services.

2.2. Determination of illegal benefits being financial instruments in Vietnam 

According to Article 6 of Circular 65/2022/TT-BTC, the determination of illegal benefits being financial instruments is as follows:

- The obtained illegal benefits being financial instruments are all types of financial instruments obtained by the violating entity from the violation.

- The financial instruments specified in Clause 1 of Article 6 of Circular 65/2022/TT-BTC are those defined in the Civil Code and other types of financial instruments as prescribed in specialized laws.

(Compared to Circular 149/2014/TT-BTC, no longer listing financial instruments; removing formula for calculating total value of financial instruments)

- If the financial instruments have been transferred, the amount of illegal benefits obtained shall be total proceeds actually received at the time of transfer.

- If the financial instruments have been illegally hidden or destroyed, the amount of illegal benefits shall be determined according to the book value recorded by issuers of such financial instruments.

2.3. Determination of illegal benefits being objects or other assets in Vietnam 

Determination of illegal benefits being objects or other assets is specified in Article 7 of Circular 65/2022/TT-BTC as follows:

-  The illegal benefits being objects or other assets obtained from the violation are other assets defined in the Civil Code.

- The objects specified in Clause 1 of Article 7 of Circular 65/2022/TT-BTC shall be determined according to Articles 110 through 114 of the Civil Code.

(Compared to Circular 149/2014/TT-BTC, regulations on objects are specified in Articles 176, Article 177, Article 178, Article 179, and Article 180 of the Civil Code)

- Other assets specified in Clause 1 of Article 7 of Circular 65/2022/TT-BTC shall be determined according to Articles 105, 107, 109 and 115 of the Civil Code.

(Compared to Circular 149/2014/TT-BTC, regulations on assets are specified in 163, Article 174, Article 175 and Article 181 of the Civil Code)

- If the objects or other assets which are not prohibited, counterfeit or smuggled goods have been illegally transferred, sold or destroyed:

The illegal benefits shall be determined according to the market value of similar assets or the book value of assets (if the market value is not available) or the total amount of assets specified in import/export declarations (if assets are imported/exported goods) after deducting direct costs of such goods whose legitimacy and validity must be proved by adequate documents and records.

(Compared to Circular 149/2014/TT-BTC, there is no longer a regulation that destroys the assets before the competent person issues a decision to handle, illegal profits)

- If the objects or other assets which are prohibited, counterfeit or smuggled goods have been illegally transferred, sold or destroyed:

The amount of illegal benefits shall be total amount earned by the violating entity from such transfer.

2.4. Determination of amounts payable in case of illegally sold, liquidated or destroyed exhibits and instrumentalities in Vietnam

In Article 8 of Circular 65/2022/TT-BTC stipulating the determination of amounts payable in case of illegally sold, liquidated or destroyed exhibits and instrumentalities as follows:

In case the exhibits/instrumentalities of an administrative violation have been sold, liquidated or destroyed against regulations of law:

The violating entity shall be required to transfer to state budget an amount equivalent to the value of such exhibits/instrumentalities.

(Compared to Circular 149/2014/TT-BTC regulating the implementation of Decree 29/2014/ND-CP)

Circular 65/2022/TT-BTC takes effect from January 1, 2023.

Ngoc Nhi

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