Circular No. 117/2002/TT-BTC guiding the financial management regime for Lottery Companies

CIRCULAR

||| Guidelines for implementing financial management regimes for Lottery Companies

||| Lottery Companies

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||| Pursuant to Decree No. 59/CP dated October 3, 1996 of the Government promulgating the "Regulations on Financial Management and Business Accounting for State-Owned Enterprises" and Decree No. 27/1999/NĐ-CP dated April 20, 1999 of the Government amending and supplementing certain provisions of the aforementioned financial regulations;

||| To be consistent with the Law on State-Owned Enterprises and the Law on Corporate Income Tax;

||| The Ministry of Finance issues guidelines for financial management regimes for Lottery Companies (XSKT) 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. Lottery Companies are state-owned enterprises operating in the lottery sector, possessing legal personality, receiving statutory capital from the State, and having rights and responsibilities to comply with current national regulations.

||| 2. Due to their specific characteristics, in addition to implementing Decree No. 59/CP dated October 3, 1996, Decree No. 27/1999/NĐ-CP dated April 20, 1999 of the Government, and the current financial management regimes of the Ministry of Finance, Lottery Companies must also implement specific provisions set out in this guiding circular.

||| II. SPECIFIC PROVISIONS:

||| 1. Revenue of Lottery Companies:

||| 1.1- Revenue from ticket sales of Lottery Companies includes the total amount of money from sold tickets, including traditional lottery ticket sales, scratch-off lottery ticket sales, lottery ticket sales by peeling, lottery ticket sales by lotto, and lottery ticket sales by electronic lottery (if applicable).

||| The revenue from ticket sales mentioned above does not include value-added tax.

||| 1.2- Revenue from other activities.

||| 2. Expenses of Lottery Companies:

||| In addition to managing cost prices as stipulated in Circular No. 63/1999/TT-BTC dated June 7, 1999 of the Ministry of Finance, Lottery Companies shall implement specific provisions as follows:

||| 2.1- Prize payout: When establishing prize structures, they must comply with the regulations of the Ministry of Finance for each type of lottery. Prize payouts must be based on valid winning tickets for each issuance period and actual payouts to determine the amount.

||| 2.2- Agent commission: This is the payment made to agents responsible for selling tickets on behalf of Lottery Companies.

||| Agent commissions are determined by Lottery Companies for each type of lottery and applied over specific periods and regions based on the general ratio prescribed by the Ministry of Finance.

||| The maximum agent commission rate shall not exceed 13% of total ticket sales revenue for plains provinces and cities; it shall not exceed 15% of total ticket sales revenue for mountainous and Central Highlands provinces.

||| Lottery Companies are responsible for withholding corporate income tax payable by agents subject to corporate income tax before paying agent commissions according to current regulations.

||| In addition to the agent commission rates above, depending on scale, region, nature, and business capacity, Lottery Companies may apply support expenses for developing the agent network as specified in point 2.8, section II of the circular.

||| 2.3- Wages and allowances with wage-like characteristics:

||| Implemented according to the current regime for managing wage expenditures, such as for state-owned enterprises.

||| 2.4- Ticket expenses: Ticket expenses are determined based on the actual transaction price with the printing base ordered by Lottery Companies through economic contracts, plus transportation, handling, storage, and legitimate additional fees (if any). These expenses must be supported by valid invoices and documents according to the prescribed regime.

||| 2.5- Expenses for drawing prizes, destroying unsold tickets, and storing expired tickets: Includes venue rental costs; remuneration for supervisory boards, witnesses for drawing prizes, destroying unsold tickets, and serving staff...

||| The level of remuneration for supervisory boards witnessing prize draws, supervising the destruction of unsold tickets, and retrieving winning ticket stubs for lotto...is established by Lottery Companies and registered with provincial financial management authorities based on principles that align with local market prices and enhance the responsibility of members in monitoring and witnessing prize draws and the destruction of unsold tickets. The basis for remuneration is a record of attendance at meetings.

||| 2.6- Contributions to the linked group (if applicable): This is the contribution to the common activities of the linked group used primarily for stamping tickets (if applicable), sorting tickets for provinces, remuneration for supervisory boards for drawing prizes and announcing results, serving inspection work, allowances for concurrently holding the board's permanent committee, paying salaries to dedicated staff (if applicable), meetings, awards for outstanding contributions to building the group (in accordance with the regulations on awarding incentives), and other necessary expenses directly serving the common activities of the linked group.

||| Regarding the level of contribution, the Regional General Assembly agrees to approve reasonable and legitimate budgets according to the current financial regime. At the end of the fiscal year, financial settlement and reporting to the group's audit committee for approval are required. The Chairman of the group is responsible to the State for the legitimacy of these expenses. After settlement, if there is a surplus, it will be deducted from the corresponding contribution for the following year.

||| 2.7- Expenses for promoting lottery activities and announcing draw results: Includes advertising, marketing, promoting the purpose of lottery activities, providing information, printing flyers with draw results to serve customers and agents, and other related expenses.

||| 2.8- Expenses for developing the agent network: This is the expense aimed at encouraging the expansion and development of the sales phase of the special lottery business.

||| Expenses for developing the lottery agent network include: printing costs for forms, ledgers, lists, equipment, means of transport, transporting tickets to remote locations from the company headquarters, meetings, partial risk support during sales, and other necessary support for agents.

The maximum rate of expenditure is set at 2.5% of the total ticket sales revenue of the Lottery Company.

||| - The general ratio of expenditure is 2% of the total ticket sales revenue of Lottery Companies.

||| If, in the implementation year, Lottery Companies have a revenue increase of 10% or more compared to the previous year, they can spend up to a maximum of 2.5% of total ticket sales revenue.

||| Lottery Companies base the expenditure ratios specified above to apply them appropriately to the characteristics and business conditions of their units.

- The General Director of the Lottery Company shall establish and publicly promulgate the Regulation on Development Network Agent Expenses to be consistent with the business characteristics of each company. This Regulation on Development Network Agent Expenses must be registered with the local financial management agency and reported to the Lottery Company Supervisory Board for management purposes. Based on the provisions regarding agent support that have been issued, the General Director of the Lottery Company shall issue specific decisions on the level of support for each agent. Based on the Support Decision, the management department shall prepare payment vouchers for agents; monthly, quarterly, and annually, detailed lists of support expenses for agents (according to the attached form) shall be reported together with the company's financial reports.

2.9. Reception costs, ceremonial costs, transaction costs, external relations costs, conference costs, and other types of costs must have supporting documents as prescribed, linked to business results, not exceeding the control limits specified below:

- In the first two years of establishment, it shall not exceed 7% of total expenses (excluding prize payout expenses).

- In subsequent years, it shall not exceed 5% of total expenses (excluding prize payout expenses).

2.10. Other expenses: Costs for preventing illegal lottery activities, research and design of new lottery products...

The total revenue from ticket sales as stipulated in Section 2.2; 2.8 - Point 2 - Section II of the Circular shall be used to set the rate for commission payments and development network agent expenses, including value-added tax.

3-Value Added Tax of the Lottery Company:

The Lottery Company shall fully, timely, and correctly pay the Value Added Tax according to the Law at the Tax Department where the company's headquarters is located.

III. DISTRIBUTION OF PROFITS AND ESTABLISHMENT OF FUNDS:

1- The realized profit of the Lottery Company shall be determined as follows:

Where:

- Revenue from lottery ticket sales: as stipulated in Point 1, Section II of this Circular.

- Cost of goods sold includes: total issuance costs (+) prize payout costs.

2-Distribution of profits, establishment of funds:

-The payment of corporate income tax and additional corporate income tax paid by the Lottery Company shall be carried out according to current regulations.

- The distribution system of post-tax profits, establishment, and management of funds shall be implemented according to current regulations for state-owned enterprises.

IV. FINANCIAL REPORTING AND FINANCIAL DISCLOSURE SYSTEM:

In addition to implementing the financial reporting and financial disclosure regulations under the current system, the Lottery Company shall submit to the Ministry of Finance (Department of Financial Affairs of Banks and Financial Institutions):

- Reports on the implementation of debt and collateral situations of agents quarterly and annually.

- Reports on the payment of agent commissions and submission of corporate income tax by agents quarterly and annually.

- Quarterly and annual financial reports.

Quarterly reports must be submitted no later than the 20th day of the first month of the quarter; annual reports must be submitted no later than January 31 of the following year.

V. IMPLEMENTATION:

The Lottery Company is responsible under the law for the use of state capital and assets, ensuring the preservation and development of capital, and fulfilling all tax obligations according to the law. The company is subject to inspection and audit by competent state management agencies.

This Circular replaces Circular No. 127/1999/TT-BTC dated October 26, 1999, of the Ministry of Finance and takes effect from January 1, 2003.

During the implementation process, if there are any difficulties, please reflect them to the Ministry of Finance for consideration and timely supplementation or amendment.