Circular No. 10-TC/ĐTXD guiding the establishment, management, and utilization of self-owned capital for basic construction investment of production and business organizations under state-owned economic sector (attached with Appendix Basic Depreciation Rate to be Retained by Enterprises)

CIRCULAR

ISSUED BY THE MINISTRY OF FINANCE NUMBER 10-TC/DTXD ON JULY 22, 1986

GUIDELINES FOR THE ESTABLISHMENT, MANAGEMENT AND USE OF OWN CAPITAL FOR BASIC CONSTRUCTION INVESTMENT

OF PRODUCTION AND BUSINESS ORGANIZATIONS

BELONGING TO THE STATE-OWNED ECONOMIC SECTOR.

To implement the Resolution (draft) of the Political Bureau on ensuring the right to self-management in production and business for basic economic units and Decision No. 76-HDBT dated June 26, 1986 of the Council of Ministers regarding temporary regulations on financial autonomy for basic economic units, the Ministry of Finance provides guidelines for the establishment, management, and use of own capital for basic construction investment of production and business organizations (hereinafter referred to as enterprises) belonging to the state-owned economic sector as follows:

I. OBJECTS ELIGIBLE FOR ESTABLISHMENT OF OWN CAPITAL FOR BASIC CONSTRUCTION INVESTMENT

Enterprises (state-owned and public-private joint ventures) in various sectors of the national economy (irrespective of management level) that meet the following conditions shall be eligible for the establishment of own capital for basic construction investment:

1. Possess full legal personality and independently account for economic activities.

2. Have been permitted to implement depreciation and fund establishment systems according to current regulations.

This Circular does not apply to budgetary units, units operating under the take-in-expenditure balance system, or those with sufficient income to cover expenses.

II. SOURCES AND RATES OF ESTABLISHMENT OF OWN CAPITAL FOR INVESTMENT

BASIC CONSTRUCTION.

1. The sources for establishing annual own capital for basic construction investment of enterprises include the depreciation fund, the production development fund, the welfare fund, and other sources (if any).

2. The rates of allocation from these funds to establish own capital for basic construction investment of enterprises are specified as follows:

- Production development fund approximately 50%;

- Welfare fund approximately 30%.

(Specific rates of allocation from these two funds are determined by the enterprise director).

- Depreciation fund:

Based on Decision No. 507-TC/DTXD dated July 22, 1986 of the Ministry of Finance on the management and depreciation of fixed assets and considering the status of fixed assets, needs, and conditions for implementing the renewal of fixed assets of each enterprise and the scale of each enterprise, the percentage of the basic depreciation fund retained to establish own capital for basic construction investment for different types of enterprises (by economic sector) is now stipulated as attached in the appendix.

For enterprises invested with state budget capital newly mobilized for production and business operations, within the first five years, the rate of basic depreciation retained by the enterprise equals 50% of the aforementioned prescribed rate, while the remaining 50% is remitted to the state budget.

After a certain period, when the enterprise has fully depreciated the initial state investment, it retains the entire amount of basic depreciation retained.

For fixed assets invested with credit funds, the enterprise receives the entire amount of basic depreciation retained to repay borrowed capital. The portion of basic depreciation used to repay loans can only be taken from the basic depreciation retained from fixed assets invested with credit funds and calculated according to the current management and depreciation system of fixed assets. Once the loan is fully repaid, the basic depreciation retained is transferred into the source of own capital for basic construction investment of the enterprise.

For fixed assets invested with own capital, the enterprise retains the entire amount of basic depreciation retained to supplement the source of own capital for basic construction investment of the enterprise.

For fixed assets due for major repairs but deemed necessary for technical modernization without periodic major repairs, the enterprise may use the portion of the major repair fund allocated to such assets to supplement the source of own capital for basic construction investment.

Other sources (if any), such as proceeds from the reallocation or sale of fixed assets allowed to retain according to state regulations...

3. The amount established as own capital for basic construction investment equals the percentage as specified in Point 2 above multiplied by the amount allocated from each fund during the year according to the current depreciation system of fixed assets and profit distribution regulations.

III. PLANNING, MANAGEMENT AND USE OF OWN CAPITAL

FOR BASIC CONSTRUCTION INVESTMENT.

1. Planning own capital for basic construction investment:

Each year, along with developing plans for production - technology - finance, each enterprise must develop a plan for own capital for basic construction investment. This plan must reflect the amount of own capital already extracted from previous years but not yet utilized up to the end of the reporting year; the amount expected to be extracted from the funds during the planning year and the amount expected to be used during the planning year.

The procedure for preparing and reviewing the plan for own capital for basic construction investment is carried out in accordance with the procedure for preparing, reporting, and reviewing the production - business - technology - finance plan of the enterprise.

2. Procedure for establishing own capital for basic construction investment during the year:

Each year, when allocating funds (depreciation of fixed assets, production development, welfare fund), enterprises temporarily allocate from each fund (according to the provisions in Part II of this Circular) to supplement the source of own capital for basic construction investment and immediately deposit it into the account for own capital for basic construction investment at the construction investment bank where the enterprise maintains its account.

At the end of each year, based on the results of fund allocations and the rates specified in Part II of this Circular, enterprises must accurately calculate the amount extracted from each fund to establish own capital for basic construction investment.

If the amount temporarily allocated from each fund during the year is less than the amount extracted, additional allocation is made to make up the difference; if it is more, the excess amount is returned to each fund.

3. Management and use of own capital for basic construction investment:

Own capital for basic construction investment of enterprises can only be used for deepening investments aimed at modernizing equipment, building new facilities, renovating and expanding production and business bases, and constructing housing and other welfare facilities of the enterprise.

All construction projects funded by own capital must comply with the procedures and management systems of the state for basic construction.

During the implementation of basic construction investment projects funded by own capital, if there is a shortage of capital, the enterprise can borrow from the construction investment bank. The source of repayment for the loan is the subsequent extracted own capital for basic construction investment.

Joint enterprises and Holding Companies (organizations operating according to the charter of joint enterprises) have the right to harmonize their own capital for basic construction investment among enterprises under their management (after obtaining consent from the enterprises) to serve common investment needs within the approved basic construction investment plan of the joint enterprise or holding company; at the same time, they must notify the higher-level supervisory authority, financial agency, and equivalent construction investment bank.

Enterprises permitted to set aside and use their own capital for basic construction investment must maintain accounting books and accounts to record, monitor the process of setting aside, managing, using, and the results of construction projects funded by this type of capital in accordance with the unified state accounting system.

IV - EFFECTIVE PROVISIONS

This Circular takes effect from July 1, 1986, except for the basic depreciation rate retained for setting aside capital for basic construction investment by enterprises which will be applied from January 1, 1987 (in 1986, the provisions of Circular No. 13-TC/DTXD dated March 10, 1985, of the Ministry of Finance shall still apply). Previous regulations that conflict with this Circular are no longer effective.

During implementation, if there are any difficulties, please promptly report them to the Ministry of Finance for study and resolution.

ANNEX

BASIC DEPRECIATION RATE RETAINED FOR ENTERPRISES

(Annexed to Circular No. 10-TC/DTXD dated July 22, 1986).