Circular No. 03/2000/TT-BTC guides the management and use of advertising revenue for the television industry

CIRCULAR

Guidelines for managing and using advertising revenue in the television industry

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Pursuant to Decision No. 605/TTg dated August 31, 1996 of the Prime Minister regarding permission for the Television Industry to use advertising revenue for development;

Pursuant to Circular No. 314/VPCP dated January 23, 1999 of the Government Office on implementing Decision No. 605/TTg dated August 31, 1996 of the Prime Minister concerning the Television Industry's use of advertising revenue;

The Ministry of Finance hereby provides guidelines for managing and using advertising revenue from television as follows:

A. GENERAL PROVISIONS

1. After deducting all related expenses for advertising activities, the remaining advertising revenue of Vietnam Television and local Radio-Television Stations (hereinafter referred to as Television Stations) must be submitted to the state budget including:

- Value Added Tax (VAT) calculated on the amount of television advertising revenue at the applicable tax rate under the Law on Value Added Tax.

- Corporate Income Tax calculated on taxable income at the applicable tax rate under the Law on Corporate Income Tax.

- Post-tax income.

2. All advertising revenue submitted to the state budget shall be returned to invest in the Television Industry according to the current mechanism of decentralized state budget management based on approved investment projects:

- Advertising revenue belonging to the Central Budget shall be returned to invest in Vietnam Television, regional Radio-Television Stations, and television development projects in mountainous areas, remote regions, and border areas.

- Advertising revenue belonging to the Local Budget shall be returned to invest in local Radio-Television Stations.

3. If Television Stations pay more VAT and Corporate Income Tax than their initial budget, they will be allowed to reinvest 50% of the actual excess tax paid to increase investment in development.

B/ SPECIFIC PROVISIONS

I. CONTENT OF ADVERTISING INCOME AND EXPENSES

1. Regarding advertising income:

Revenue from television advertising services is the income of Television Stations permitted by the Government for the Television Industry to manage and use for investment and development.

Television advertising revenue is calculated based on the duration of advertising broadcasts multiplied by the advertising rate.

The level of advertising revenue: Vietnam Television collaborates with the State Price Board, the Ministry of Finance, to guide the framework of advertising prices in each region based on proposals from local Radio-Television Stations. Local Radio-Television Stations must comply with the prescribed advertising revenue levels and may not arbitrarily reduce prices without approval from the competent authority. In cases where commission fees have been received, advertising prices cannot be reduced.

2. Expenses related to advertising activities:

2.1 Direct costs for advertising programs:

- Production of advertising programs.

- Purchase of television programs for broadcast to serve advertising.

- Advertising promotion: costs for printing posters, promotional materials, and advertising billboards.

- Commissions to customers: implemented according to Circular No. 99/1998/TT-BTC dated July 14, 1998 of the Ministry of Finance guiding the implementation of Decree No. 30/1998/NĐ-CP dated May 13, 1998 of the Government detailing the implementation of the Law on Corporate Income Tax, with a maximum expenditure of 3% of total regular expenses (excluding employee incentives if any).

- Procurement of spare parts, assets, and minor repairs: costs for purchasing components, materials, films, tapes, small machinery and equipment, repairs, and maintenance of equipment serving the production of advertising programs on television. Such procurement and minor repairs shall be carried out in accordance with the current regulations of the State.

- Renting premises for installation and repair of broadcasting equipment to serve dark and noisy areas.

- Management costs: costs for administrative management of advertising program operations.

2.2 Costs to improve the quality of television programs to attract advertising:

- Purchase of machinery and equipment.

- Satellite rental.

- Broadcasting fees.

- Training and short-term technical training costs to enhance the professional skills of staff involved in producing television programs.

- Costs for employees who implement improvements to the quality of television programs to attract advertising. Support costs range from half to one month of the average actual salary per person per month.

2.3 Limitation on expenses related to advertising activities:
Based on current regulations and actual expenses, the Ministry of Finance stipulates the limitation on expenses related to advertising activities as a percentage of advertising service revenue (excluding VAT), applicable to all Television Stations nationwide within the following maximum expenditure limits:

1- Revenue up to 100 million VND 50%

2- Over 100 million VND to 300 million VND 48%

3- Over 300 million VND to 500 million VND 46%

4- Over 500 million VND to 1 billion VND 44%

5- Over 1 billion VND to 5 billion VND 42%

6- Over 5 billion VND to 25 billion VND 40%

7- Over 25 billion VND to 70 billion VND 38%

8- Over 70 billion VND to 100 billion VND 36%

9- Over 100 billion VND 34%

3. After paying taxes as required by law, the remaining portion can be allocated to an employee incentive fund. The maximum allocation is three months of the actual average basic salary.

4. Example:

Provincial Radio and Television Station A has the following figures for one year:

- Advertising revenue (excluding VAT) is 10,000 million VND.

- Actual average monthly basic salary is 80 million VND.

Based on the provisions of this Circular and current regulations, the maximum allowable expenses, corporate income tax, and post-tax income that the unit must submit are as follows:

- Maximum allowable expenses for the Station are 4,000 million VND.

(10,000 million VND x 40%)

- Taxable income is 6,000 million VND.

(10,000 million VND - 4,000 million VND)

Therefore, corporate income tax is 1,920 million VND.

(6,000 million VND x 32%)

- The Station can allocate up to 240 million VND for employee incentives.

(80 million VND/month x 3 months)

Thus, the Station submits 3,840 million VND in post-tax income to the state budget [(6,000 million VND - 1,920 million VND) - 240 million VND].

5. Annually, together with the preparation of the state budget revenue and expenditure plan, television stations prepare plans for advertising revenue and expenses to submit to the same-level financial authorities for consolidation and reporting to the competent authority for approval. Based on the approved expenditure budget, the General Director of Vietnam Television and the directors of local radio and television stations shall be responsible for implementing expenditures in accordance with current financial regulations, with valid supporting documents as required, but not exceeding the maximum control limit.

II- FINANCIAL MANAGEMENT WORK

The work of preparing budgets, allocating funds, and settling accounts for advertising revenues and expenditures shall be carried out in accordance with Circular No. 103/1998/TT-BTC dated July 18, 1998, issued by the Ministry of Finance, guiding the decentralization, preparation, implementation, and settlement of the state budget, and other current documents. This circular provides additional guidance on the following matters:

1. Establishment of budget projections:

1.1 At the local level: Radio and Television Stations of provinces and centrally-administered cities shall prepare annual revenue and expenditure budgets, explaining the sources of advertising revenue and the contents of investment projects for development, as well as the effectiveness of using advertising revenue.

1.2 At the central level: Vietnam Television shall prepare its own revenue and expenditure budgets and be responsible for consolidating the advertising revenue and expenditure budgets for the entire industry, clearly explaining investment projects from advertising revenue according to the development plans of the unit and the entire industry. Analyze the effectiveness of using advertising revenue throughout the industry.

2. Allocation of Funds:

Based on the advertising revenue and expenditure budgets and the actual amounts remitted to the state budget from advertising activities of television stations, after confirmation by the State Treasury, the Ministry of Finance will allocate funds to Vietnam Television, and the Provincial Departments of Finance and Prices will allocate funds to Radio and Television Stations of provinces and centrally-administered cities.

3. Accounting and Settlement:

3.1 Television stations shall organize accounting and settlement of advertising revenue and expenditure in accordance with Decision No. 999-TC/QĐ/CĐKT dated November 2, 1996, issued by the Ministry of Finance, establishing the System of Accounting Regulations for Administrative and Public Institutions, and other current documents.

3.2 For construction investment projects funded by advertising revenue, accounting and settlement shall be conducted in accordance with the current regulations of the Investment Construction Management Charter.

4. Financial Inspection and Supervision Work:

Television stations shall cooperate with the Ministry of Finance, Provincial Departments of Finance and Prices, and tax authorities at all levels to inspect the collection and remittance of state budget revenues and the expenditure of television stations.

C/ IMPLEMENTATION ORGANIZATION

This Circular takes effect from 1999 and replaces Circular No. 81-TC/HCSN dated December 23, 1996, issued by the Ministry of Finance. Any difficulties encountered during implementation should be reported to the Ministry of Finance for study and appropriate amendments.