Circular No. 01/1998/TT-BTC guides the implementation of service costs and brokerage commissions in state-owned enterprises.

CIRCULAR

ISSUED BY THE MINISTRY OF FINANCE DECREE NO. 01/1998/TT-BTC ON JANUARY 3, 1998 GUIDING THE IMPLEMENTATION OF SERVICE FEES AND COMMISSIONS IN STATE ENTERPRISES

Pursuant to Article 29 of Decree No. 59/CP dated October 3, 1996 of the Government on the Financial Management and Business Accounting Regulations for State Enterprises; the Ministry of Finance guides the implementation of service fees and commissions in state enterprises as follows:

I. GENERAL PROVISIONS

1. The following terms are understood as:

1.1. "Commission" refers to the amount of money paid to intermediaries for business activities of the enterprise.

1.2. "Service cost creating employment" refers to the amount of money paid to service providers whose services create additional jobs for the enterprise, hereinafter referred to as service costs.

This Circular does not apply to insurance companies, insurance brokerage organizations, and insurance agents permitted to operate in Vietnam.

Commissions paid to agents are not within the scope of this Circular.

2. Commissions and service costs can only be incurred when intermediaries and service providers actually provide intermediary activities and create additional jobs for the enterprise to enhance the effectiveness of its business operations.

3. The level of commission and service costs must be based on the economic efficiency of each intermediary activity or service provided.

II. SPECIFIC PROVISIONS

1. Establishing regulations on commission and service costs to be implemented in the enterprise:

Each state enterprise shall establish regulations on commission and service costs based on its specific conditions and characteristics, to be uniformly and publicly applied within the enterprise. The Board of Directors (for enterprises with a Board of Directors) or the General Director (for enterprises without a Board of Directors) shall approve these regulations and submit them to the financial authority (capital management agency, tax authority) for supervision.

Based on the approved regulations, the General Director of the enterprise shall decide on the payment of commissions for each intermediary activity or service costs according to the business transactions or service provision arising from the enterprise's operations.

2. Basic contents that must be reflected in the enterprise's regulations:

a. Applicability:

The recipients of commission and service costs are organizations and individuals (domestic and foreign) who provide intermediary services or services creating employment for the enterprise.

Commission payments do not apply to the following entities as stipulated in Decree No. 59/CP dated October 3, 1996 of the Government:

+ Agents of goods under agency contracts or designated customers of the enterprise according to goods specified in purchase and sale contracts with the enterprise.

+ Management positions in the enterprise.

+ Enterprise employees responsible for supplying or consuming materials and products for the enterprise.

b. Contracts or certificates regarding intermediary activities and service activities:

For economic organizations and individuals engaged in professional intermediary and service activities registered for business, the payment of commissions and service costs must be based on Contracts or Certificates between the enterprise and such organizations and individuals.

For economic organizations and individuals engaged in non-professional intermediary and service activities, spontaneous intermediary or service activities, or infrequent activities, or expenses below VND 50,000 per person per transaction, the payment must be based on Contracts or Certificates between the enterprise and the intermediary or service provider clearly stating the name and address of the recipient.

Contracts or Certificates must include at least the following contents:

+ Content of intermediary and service activities.

+ Amount of payment.

+ Payment method.

+ Time of commencement and completion.

+ Responsibilities of the parties.

When intermediary or service activities conclude, the enterprise must settle the contract or issue a certificate of conclusion of intermediary or service activities with the intermediary or service provider unit (or individual). Based on the settlement of the contract or the certificate of conclusion of intermediary or service activities, the enterprise records the actual expenditure in its business operation costs.

3. Provisions on the level of commission and service costs:

- The payment of commissions and service costs must be based on the effectiveness of intermediary and service activities.

- The effectiveness of intermediary activities is demonstrated by one of the following indicators:

+ Facilitating the sale of products and goods, especially those in stock, deteriorating quality, or difficult to sell.

+ Increasing production volume or value of products and goods sold compared to the absence of intermediary and service activities.

+ Enabling the enterprise to purchase materials and goods of good quality at prices lower than market prices.

- The effectiveness of service activities is creating additional jobs for the enterprise.

- The level of commission or service costs may be a fixed amount, calculated as a percentage of revenue, or based on the increase in added value due to intermediary and service activities.

The specific level of payment is decided by the General Director of the enterprise. In cases where the enterprise acts as an authorized agent for the principal, the level of payment is decided by the principal.

The level of commission and service costs is limited to no more than 3% of revenue if the intermediary or service activities cannot be quantified in absolute monetary terms; or no more than 30% of the absolute increase in value, if the absolute increase in value can be determined. However, the total level of service costs, commissions, and other transaction-related hospitality and external affairs expenses must remain within the limits set by current regulations. In special cases, enterprises primarily engaged in intermediary, service, marketing, and external affairs activities requiring higher levels of expenditure must prepare a report for the Ministry of Finance to consider and decide.

4. Provisions on payment vouchers:

Payment vouchers for service costs and commissions must ensure all elements of payment vouchers as prescribed by current accounting regulations.

In principle, all payment vouchers must ensure the signature of the recipient. In cases where the recipient's signature cannot be obtained, their name and address must be clearly recorded.

When payments are made through bank transfers, they must also ensure that all elements such as the payment content, amount, and name of the receiving unit or individual are complete. Responsibilities of state-owned enterprises in implementing service fees and brokerage commissions:

In all cases, the person proposing the payment and the person deciding on the payment of brokerage commissions and service fees shall be responsible for their decisions. If the system is abused to make improper payments or payments to incorrect recipients, the person making the payment decision shall bear legal responsibility.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days from the date of signing. During implementation, if there are any difficulties, units and individuals are requested to promptly report them to the Ministry of Finance for study and resolution.