Circular No. 107/1999/TT-BTC guides accounting for Value Added Tax (VAT) on financial leasing activities.

CIRCULAR

Guidelines for Value Added Tax Accounting in Financial Leasing Activities

Based on Circular No. 49/1999/TT-BTC dated May 6, 1999 of the Ministry of Finance regarding guidelines for implementing the Law on Value Added Tax for financial leasing activities, the Ministry of Finance provides guidelines for Value Added Tax accounting in financial leasing activities as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. This Circular applies to enterprises engaged in financial leasing activities.

2. This Circular does not apply to:

- Enterprises engaged in financial leasing activities;

- Financial leasing activities of credit organizations currently applying the accounting system for banks and credit institutions;

- Ordinary asset leasing activities.

3. This Circular only guides the amended and supplemented points; points not guided herein shall be implemented according to the current enterprise accounting regulations.

II. SPECIFIC PROVISIONS

1. For enterprises engaging in financial leasing (with leased fixed assets) used for production and business activities subject to Value Added Tax under the tax deduction method, when receiving leased fixed assets and the lease service invoice from the lessor, the accountant records:

+ When receiving leased fixed assets, based on the financial lease contract and related documents, the value of the leased fixed assets is reflected at the price excluding Value Added Tax input, with deductible Value Added Tax input recorded as follows:

Debit: Account 212 - Leased Fixed Assets

Debit Account 133 - Deductible VAT

Credit: Account 342 - Long-term Debts.

+ At the end of the period, based on the lease service invoice and the amount of Value Added Tax input and output, calculate the deductible Value Added Tax input for the period according to the tax regulations to determine the Value Added Tax payable for the period and the deductible Value Added Tax input for the period, recorded as follows:

Debit: Account 3331 - Value Added Tax Payable (33311)

Credit: Account 133 - Deductible Value Added Tax.

2. For enterprises with leased fixed assets used for production and business activities of goods and services subject to Value Added Tax under the direct payment method, or not subject to Value Added Tax, when receiving leased fixed assets, based on the lease contract and related documents, the value of the leased fixed assets is reflected at the price including Value Added Tax (input Value Added Tax not deductible), recorded as follows:

Debit: Account 212 - Leased Fixed Assets

Credit: Account 342 - Long-term Debts.

3. Based on the lease service invoice for each period, the accountant determines the amount to be paid this period to the lessor, thereby calculating and determining the lease interest payable this period and long-term debts due for repayment, recorded as follows:

Debit: Account 342 - Long-term Debts (Total lease payments due this period minus (-) lease interest payable)

Debit: Account 642 - Business Management Expenses (Lease interest payable this period).

Credit: Account 315 - Long-term Debts Due for Repayment (Total lease payments due this period).

+ When paying lease payments to the lessor, recorded as follows:

Debit: Account 315 - Long-term Debts Due for Repayment

Credit Accounts 111, 112, ...

4. Commitment fees payable to the lessor, recorded as follows:

d. Transfer the residual balance of the Unemployment Compensation Reserve Fund as specified in Item 5 of this Circular as follows:

Credit: Account 342 - Long-term Debts.

Credit Accounts 111, 112.

5. At the end of the period, the accountant calculates depreciation of leased fixed assets and reflects it in production and business expenses according to the prescribed regulations, recorded as follows:

Debit: Accounts 627, 641, 642, etc.

Credit: Account 2142 - Depreciation of Leased Fixed Assets.

6. When returning leased fixed assets to the lessor, the accountant reflects the reduction in the value of leased fixed assets, recorded as follows:

Debit account 214 - Depreciation of fixed assets

Credit: Account 212 - Leased Fixed Assets.

7. In cases where the lease contract stipulates that the lessee leases only part of the asset value and then purchases it, when transferring ownership of the asset, the accountant reflects the reduction in leased fixed assets and an increase in owned tangible fixed assets, recorded as follows:

Debit: Account 211 - Tangible Fixed Assets

Credit: Account 212 - Leased Fixed Assets

Simultaneously, record the transfer of depreciation value:

Debit: Account 2142 - Depreciation of Leased Fixed Assets

Credit: Account 2141 - Depreciation of Tangible Fixed Assets.

8. In cases where additional funds are required to purchase the asset, simultaneously with the recording of the transfer of leased fixed assets to owned fixed assets (by the two entries above), the accountant must also reflect the increased value of the purchased fixed assets. Based on the lease service invoice (final installment) and related documents, recorded as follows:

Debit: Account 211 - Tangible Fixed Assets

Credit Accounts 111, 112, ...

III. IMPLEMENTATION

1. This Circular takes effect from the date Circular No. 49/1999/TT-BTC dated May 6, 1999 of the Ministry of Finance comes into force. All previous provisions contrary to those in this Circular are abolished.

2. During implementation, if there are any difficulties, units should report to the Ministry of Finance for study and resolution.