Circular No. 01 TC/HCVX TEMPORARILY REGULATES THE FINANCIAL MANAGEMENT SYSTEM FOR ADMINISTRATIVE AND PUBLIC SERVICE UNITS (HCSN) ENGAGING IN ACTIVITIES WITH REVENUE, INCLUDING PROVISIONS ON SOURCES OF FUNDS, SALARIES, PLANNING, ACCOUNTING, SETTLEMENT, DISTRIBUTION OF INCOME AND EXPENSE DIFFERENCES, AND OBLIGATIONS TO PAY INTO THE STATE BUDGET. THIS CIRCULAR APPLIES TO HCSN UNITS THAT HAVE BEEN FUNDED FROM THE STATE BUDGET BUT STILL ENGAGE IN BUSINESS OPERATIONS WITH REVENUE.

CIRCULAR

PROVISIONS ON TEMPORARY FINANCIAL MANAGEMENT REGIME FOR ADMINISTRATIVE ORGANIZATIONS, PUBLIC SERVICE UNITS, ASSOCIATIONS, AND POPULAR ORGANIZATIONS THAT CONDUCT ACTIVITIES WITH INCOME

Currently, some administrative organizations, public service units, associations, and popular organizations (hereinafter referred to as HCSN units) have been provided with state budget funds or financial support to perform their assigned functions and tasks, but they still organize production, business, and services (referred to as income-generating activities) in order to utilize existing technical facilities to generate additional income, support the living standards of workers and staff, and supplement operating expenses. The management, accounting, distribution, and utilization of the surplus between income and expenditure for these income-generating activities are still applied differently and inconsistently.

Decree No. 25/CP dated May 23, 1993 of the Government "Provisional Regulations on New Salary System for Workers and Staff of HCSN Units and Armed Forces" has tasked the Ministry of Finance with reviewing and rectifying unreasonable non-salary income items (point 5, Article 14 of Decree No. 25/CP).

To improve financial management for HCSN units conducting income-generating activities, the Ministry of Finance provides provisional guidelines on financial management for such activities of HCSN units as follows:

1- Combating counterfeit goods is the responsibility of all ministries, sectors, People's Committees at all levels, political and social organizations, enterprises, business households, and the entire population.

1. HCSN units must reorganize staffing according to Decision No. 111/HĐBT dated April 12, 1991 and Resolution No. 109/HĐBT dated April 12, 1991 of the Council of Ministers (now the Government) to meet requirements for streamlined organization and staffing, and take positive measures to address excess labor.

For income-generating organizations that meet the conditions to switch to independent economic accounting or convert to various types of enterprises as stipulated in Decree No. 388/HĐBT dated November 20, 1991 of the Government and Decision No. 196/CT dated June 5, 1992 of the Prime Minister, they must promptly complete the necessary procedures and report to competent authorities for examination and decision.

2. Administrative and public service units permitted to conduct income-generating activities must have material resources and initial capital to register for production, business, and service activities in accordance with current regulations of the State.

HCSN units conducting income-generating activities must register to pay taxes with local tax authorities, comply with the issuance of invoices and vouchers when buying and selling goods and providing services for payment in accordance with current regulations and guidance from tax authorities, organize separate accounting work to track and account for income and expenditures; implement the system of preparing financial revenue and expenditure plans quarterly and annually; comply with the management of materials, assets, and capital, inventory, accounting, and financial settlement reports, and tax payments according to current State regulations.

3. Before organizing income-generating activities, HCSN units must review activity plans, cost consumption plans for products and services, ensure self-funding for operations, cover costs, and achieve profitability; they may not use state budget funds allocated to the unit or funds derived from the state budget to cover losses from income-generating activities.

II - SPECIFIC PROVISIONS

1. Income-generating activities of HCSN units include the following four types::

a) Public service economic units currently receiving state budget funding to operate according to assigned functions and tasks while organizing income-generating production and service activities.

b) Guesthouse, hotel, convalescent home, reception station, and guest reception activities (collectively referred to as guesthouses and hotels) of agencies and units.

c) Administrative and public service units engaged in fee collection activities such as arbitration fees, passport issuance fees, etc.

d) Administrative and public service units utilizing existing facilities and excess labor to organize income-generating production, business, and service activities.

2. Sources of operating capital

The sources of operating capital for HCSN units conducting income-generating activities include:

- Capital raised through contributions from workers and staff in the form of share capital, private loans, collective loans, state-owned enterprises, and non-state-owned enterprises in accordance with the law.

- Joint venture capital with production, business, and service establishments in accordance with legal provisions.

- Advance capital from customers for processing and orders under contracts signed between both parties in compliance with the Law on Economic Contracts.

- Capital extracted from the unit's fund and from the results of production, business, and service activities.

- Bank loans from specialized banks in accordance with the regulations of the State Bank of Vietnam.

Specifically, for units operating under the income-expenditure offsetting method and already provided with working capital according to standards for operation, they can retain the working capital provided for operation but must pay tax on capital according to current regulations.

State budget funds allocated to HCSN units may not be used as capital for production, business, and service activities. In cases where it is necessary to use assets such as buildings, cars, machinery, and equipment of HCSN units for production, business, and service activities, permission from the head of the HCSN unit is required, but depreciation charges must be paid to the state budget in accordance with current regulations.

3. Regarding wages.

For profitable production, business, and service activities (confirmed by the finance authority and tax authority), the wage system, allowances, and subsidies for cadres, workers, and staff directly involved in production, business, and service activities shall be implemented in accordance with Decree No. 26/CP dated May 23, 1993 of the Government.

4. On planning

Annually and quarterly, HCSN units must prepare financial plans for production, business, and service activities including:

- Production, business, and service plans reflecting all income-generating activities (similar to the production, business, and service plans of state-owned enterprises).

- Cost plans reflecting all costs for production, business, and service activities based on economic and technical standards and current financial expenditure regulations.

- Plans for distributing surplus income (profit) and setting aside funds.

- Tax payment plans including various taxes, depreciation of fixed assets used for production, business, and service activities, payment for capital usage, and various fees and levies.

These plans must be submitted together with the quarterly and annual budget estimates of the unit to the finance authority or superior management body (if applicable) for review, consolidation, and submission to the finance authority.

5. Accounting and settlement organization

a) A public service unit operating with revenue must organize accounting, open accounting books to separately track each production, business, and service activity, including income, expenses, and revenue-expenditure differences. Implement the accounting record-keeping system and accounting reports according to Decision No. 257/TC/CĐKT dated June 1, 1990, issued by the Ministry of Finance; use invoices and vouchers when buying, selling goods, and providing services as stipulated in Circular No. 61 TC/TCT dated July 22, 1993, issued by the Ministry of Finance.

b) Quarterly and annually, public service units must prepare final accounts reports for their production, business, and service activities to be submitted to the financial authority or to the superior management body (if any) for consolidation and submission to the financial authority along with the final accounts report on state budget funds allocated; simultaneously submit to the tax authority where the production, business, and service facility is registered for tax payment, the final accounts report on production, business, and service activities, including:

- The business results statement (model 04/BCKT issued according to Decision No. 257 TC/CĐKT dated June 1, 1990, issued by the Ministry of Finance), consisting of two parts:

+ Income and income distribution.

+ Implementation of obligations to the State Budget.

- An explanatory note on production, business, and service results, which includes sections explaining expense items, income items, and the use of revenue-expenditure differences (profit) if any.

6/ Provisions on fulfilling obligations to the State Budget and distributing revenue-expenditure differences

All administrative agencies and public service units with revenue must fulfill their obligations to the State Budget according to current regulations of the State. They must comply with tax collection inspection by the tax authority, and adhere to accounting systems, vouchers, invoices... as guided by the tax authority.

To align with the operational conditions of production, business, and service activities of public service units, the Ministry of Finance has established regulations on State Budget payments and remaining income distribution as follows:

a) For public service economic units currently receiving state budget funding for operations according to assigned functions and tasks while also organizing service activities with revenue but not yet having sufficient conditions to switch to independent economic accounting, they temporarily operate under the form of revenue assignment, cost offsetting, or revenue and expenditure balance. If revenue exceeds expenditures, they must pay to the State Budget; if revenue is less than expenditures, they will receive supplementary funding from the State Budget based on approved budgets and final accounts of revenues and expenditures according to current financial expenditure regulations.

b) Regarding guesthouse and hotel activities of agencies and units:

- Guesthouses and hotels that meet the conditions to switch to independent economic accounting should promptly complete necessary procedures and report to competent authorities for consideration and decision to convert them into enterprises according to current regulations and must pay all types of taxes as prescribed.

- In cases where guesthouses and hotels do not yet have sufficient conditions to switch to enterprise forms and mainly serve internal guests or rest and recuperation for staff within the industry, they shall fulfill their obligations to the State Budget as stipulated in Circular No. 1033 TC/TCT dated August 6, 1991, issued by the Ministry of Finance regarding tax collection for guesthouses and hotels. Specifically, for trade union guesthouses under the system managed by various levels and sectors, they shall follow Circular No. 1366 TC/TCT dated September 27, 1991, issued by the Ministry of Finance regarding tax on trade union guesthouses.

For guesthouses and hotels (including trade union guesthouses) to be considered for tax exemption on internal service revenue, they must meet the following conditions:

+ Service fees must be charged at internal rates sufficient to cover costs and management expenses of the guesthouse or hotel.

+ Separate accounting must be maintained, and separate records must be kept for internal service revenue.

+ All legitimate and valid vouchers must be retained to prove sufficient internal service revenue (contracts, payment receipts, temporary residence registration...).

c) For public service units collecting various fees and charges: The Ministry of Finance will jointly issue specific guidelines for each type of collection with public service units collecting fees and charges according to Decision No. 276/CT dated July 28, 1992, issued by the Council of Ministers. In the meantime, for those fees and charges for which the Ministry of Finance or Joint Ministries have not yet specified detailed collection amounts, they shall implement according to Circular No. 48 TC/TCT dated September 28, 1992, issued by the Ministry of Finance on unified management of various fees and charges.

d) For administrative public service units utilizing existing assets and surplus labor to organize production, business, and service activities with revenue, including: producing or collaborating to produce products for internal use or sale such as pharmaceuticals, serum, vaccines... by health service units like hospitals, rehabilitation centers, and epidemiological institutes under the Health sector; manufacturing prosthetics, artificial eyes, orthopedic equipment by service units under the Veterans and Social Affairs sector; organizing production linked to teaching and learning in the Education and Training sector, research and application of science and technology, or linked to the professional activities of scientific research and technical implementation agencies, mass organizations, and people's associations. Contracting processing orders with enterprises, administrative public service units, and non-state economic organizations.

Business and services: catering, conference hall rental, video tape sales, film screening, video viewing, audio equipment rental, advertising on radio, newspapers, magazines, out-of-hours medical examination and treatment, film production services (including television series) and other technical services.

For the above production, business, and service activities that are not directly related to the specialized functions and tasks of the unit, after paying all types of taxes as prescribed by current laws, and using the assets and facilities of administrative public service units... If there is a significant revenue surplus over expenditures, it will be distributed as follows:

- Allocate 35% to supplement the operating funds of the public service unit through recording revenue and expenditure through the State Budget at each corresponding level.

- 65% to allocate to reward and welfare funds. The distribution ratio for the two funds is decided by the head of the unit and the chairman of the unit's trade union. The maximum amount for rewards is capped at three times the basic salary.

In cases where production, business, and service activities are linked to specialized functions and tasks, they must, in principle, pay all types of taxes as prescribed by current regulations. However, due to the inability to account for common expenses such as depreciation of assets, salaries, rent, electricity and water costs, etc., to simplify the calculation of revenue contributions to the state budget, it is now stipulated that a fixed percentage based on turnover shall be paid as follows:

+ For the manufacturing sector, the entity must pay five percent of its turnover to the State Budget.

+ For the service sector, the entity must pay ten percent of its turnover to the State Budget.

+ For the trade sector, the entity must pay fifteen percent of its turnover to the State Budget.

- The remainder may be used as a reward fund for individuals with outstanding achievements, but not exceeding three months' basic salary corresponding to their rank or position. Any remaining amount after the rewards have been deducted (if applicable) will be supplemented to the entity's operating funds.

7/ Other provisions:

a) Entities under self-financing must report all other income (if any), such as fees, tuition, hospital charges, grants, donations, and contributions, in quarterly and annual settlements according to the current regulations of the Ministry of Finance.

b) Financial authorities at all levels are responsible for coordinating with supervisory agencies to regularly monitor and inspect the financial system of self-financing entities, particularly in production, business, and service activities, to ensure these activities are conducted in accordance with their intended purposes and are effective.

III/ IMPLEMENTATION PROVISIONS

This Circular takes effect from the date of signature, and all previous regulations contrary to this Circular are hereby abolished.

During the implementation of this Circular, if there are difficulties or obstacles, they should be promptly reported to the Ministry of Finance for study and appropriate amendments.