Circular No. 07/2006/TT-NHNN guiding on the activities of purchasing and leasing out under financial leasing as prescribed in Decree No. 16/2001/NĐ-CP dated May 2, 2001 and Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government.

CIRCULAR

Guidelines on purchasing and reselling activities under financial leasing as stipulated in Decree No. 16/2001/NĐ-CP dated May 2, 2001 and Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government.

in accordance with the provisions of Government Decree No. 16/2001/NĐ-CP dated May 2, 2001

and Government Decree No. 65/2005/NĐ-CP dated May 19, 2005

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Pursuant to Article 42 of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies, and Article 3 of Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government amending and supplementing certain provisions of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies, the State Bank of Vietnam guides certain contents regarding purchasing and reselling activities under financial leasing as stipulated in these Decrees as follows:

1. Explanation of terms:

In this Circular, the following terms are understood as follows:

1.1. "Purchasing and reselling under financial leasing" (hereinafter referred to as purchasing and reselling) is the activity where a financial leasing company purchases assets owned by the lessee and leases back the same assets to the lessee under financial leasing terms for the lessee to continue using them for their operations. In the purchasing and reselling transaction, the lessee is simultaneously the supplier of the leased asset.

1.2. "The purchaser and lessor" (hereinafter referred to as the lessor) are financial leasing companies permitted to be established and operate in Vietnam.

1.3. "The seller and lessee" (hereinafter referred to as the lessee) are organizations and individuals specified in Point 1.1 Clause 1 of Circular No. 06/2005/TT-NHNN dated October 12, 2005 of the Governor of the State Bank of Vietnam guiding the implementation of certain contents in Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies and Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government amending and supplementing certain provisions of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies. The lessee directly sells the asset to the financial leasing company and leases it back under financial leasing terms to continue using it for their operations.

1.4. "Leased asset purchased and resold" (hereinafter referred to as the leased asset) is machinery, equipment, means of transportation, and other chattels sold by the lessee to the lessor and subsequently leased back under financial leasing terms to continue using them for their operations.

1.5. "Purchase price of the leased asset" is the amount the lessor must pay to the lessee when purchasing the leased asset. The purchase price of the leased asset is determined in accordance with the laws governing the sale and purchase of assets.

1.6. "Purchase asset contract" is a written agreement between the lessor and the lessee regarding the sale and purchase of the leased asset.

2. Principles of purchasing and reselling

2.1. The purchasing and reselling transaction must be carried out through a purchase asset contract and a financial leasing contract between the lessor and the lessee. The purchase asset contract becomes effective from the time the financial leasing contract becomes effective.

2.2. In the purchasing and reselling transaction, the lessor holds ownership of the leased asset and leases it back to the lessee under financial leasing terms in compliance with the laws on financial leasing. The transfer of ownership of the leased asset from the lessee to the lessor is carried out in accordance with the laws. Registration of ownership of the leased asset is conducted in accordance with Clause 7, Article 7 of Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government Amending and Supplementing Certain Provisions of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the Organization and Operation of Financial Leasing Companies.

2.3. The lessor selects the leased asset and the lessee with the ability to repay debts to ensure safe and efficient purchasing and reselling transactions.

3. Conditions of the leased asset:

3.1. Legally owned by the lessee;

3.2. Not being used to secure the performance of other obligations;

3.3. Not involved in disputes related to the asset;

3.4. Currently operating normally.

4. Purchase asset contract and financial leasing contract

4.1. The purchase asset contract must include the following main contents: names and addresses of the parties; purpose of purchasing the asset; description of the asset; purchase price of the asset; payment method; term, place, and method of performing the contract; rights and obligations of the parties; liability for breach of contract; penalty for breach of contract.

Additionally, the parties may agree on other contents in accordance with the laws governing the sale and purchase of assets.

4.2. The financial leasing contract is implemented in accordance with Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies, Decree No. 65/2005/NĐ-CP dated May 19, 2005 of the Government amending and supplementing certain provisions of Decree No. 16/2001/NĐ-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies, and other relevant legal documents.

5. Currency used in purchasing and reselling transactions

The currency used in purchasing and reselling transactions is the Vietnamese Dong. For purchasing and reselling transactions conducted in foreign currencies, the lessor and lessee must comply with the guidelines of the State Bank of Vietnam and current regulations on foreign exchange.

6. Rights and obligations of the lessor and lessee

6.1. Rights and obligations of the lessor:

a) Request the lessee to provide complete information and documents related to the leased asset.

b) Request the lessee to issue a valid sales invoice, deliver all original documents concerning ownership and other invoices, certificates related to the rights and interests of the leased asset.

c) Request the lessee to compensate for losses arising from disputes related to the ownership of the leased asset.

d) Pay the lessee the agreed amount in the purchase asset contract.

e) Fulfill all terms and conditions agreed upon in the purchase asset contract and the financial leasing contract.

6.2. Rights and obligations of the lessee:

a) Receive the proceeds from selling the asset paid by the lessor according to the agreed price in the purchase asset contract.

b) Provide complete, accurate, and truthful all information, documents, reports as requested by the lessor.

c) Issue lawful sales invoices, deliver all original ownership documents and other invoices and certificates related to the rights and interests of the leased property as requested by the lessor.

d) Compensate for damages arising from disputes related to the ownership of the leased property.

e) Fulfill all terms and conditions agreed upon in the purchase asset contract and the financial leasing contract.

6.3. In addition to the rights and obligations stipulated in points 6.1 and 6.2 of this clause, the lessor and lessee shall also comply with the rights and obligations prescribed in the Law on Credit Institutions, Decree No. 16/2001/ND-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies, Decree No. 65/2005/ND-CP dated May 19, 2005 of the Government amending and supplementing certain articles of Decree No. 16/2001/ND-CP dated May 2, 2001 of the Government on the organization and operation of Financial Leasing Companies, and other relevant laws.

7. Taxation for purchase and re-leasing transactions:

Taxation for purchase and re-leasing transactions shall be carried out in accordance with the guidelines of the Ministry of Finance.

8. Handling of violations:

Organizations and individuals who violate this Circular shall be subject to handling according to the provisions of the law depending on the nature and severity of the violation.

9. Implementation:

9.1. Financial leasing companies shall issue internal regulations on implementing purchase and re-leasing transactions based on this Circular and current laws.

9.2. The State Bank of Vietnam Inspectorate shall organize inspections and supervision of the implementation of purchase and re-leasing transactions; handle within its authority and recommend the Governor of the State Bank of Vietnam to handle cases of violation of this Circular.

10. This Circular takes effect fifteen days from the date of publication in the Official Gazette.

11. The Director of the Office, Heads of the Department of Banks and Non-Bank Credit Institutions, Heads of units under the State Bank of Vietnam, Governors of the State Bank of Vietnam Branches in provinces and centrally governed cities, Chairmen of Management Boards, General Directors (Directors) of financial leasing companies are responsible for implementing this Circular./.