Joint Circular No. 118/2005/TTLT-BTC-BQP guiding certain provisions on finance for Defense Companies under Decree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government on production and supply of public goods and services

JOINT CIRCULAR

GUIDELINES ON CERTAIN PROVISIONS REGARDING FINANCE FOR DEFENSE COMPANIES UNDER DECREE NO. 31/2005/NĐ-CP OF THE GOVERNMENT ON PRODUCTION AND SUPPLY OF PUBLIC GOODS AND SERVICES ON MARCH 11, 2005

Pursuant to the State Enterprise Law 2003;
Pursuant to the Financial Management Regulations for State Enterprises and Management of State Capital Invested in Other Enterprises issued together with Decree No. 199/2004/NĐ-CP dated December 3, 2004 of the Government (hereinafter referred to as the Financial Management Regulations for State Enterprises);
Pursuant to Decree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government on production and supply of public goods and services (hereinafter referred to as Decree No. 31/2005/NĐ-CP);
The Ministry of Finance and the Ministry of National Defense issue guidelines on certain provisions regarding finance for defense companies under Decree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government on production and supply of public goods and services as follows:

I - GENERAL PROVISIONS

1. The objects and scope of application of this Circular are defense companies as defined in Article 7 of Decree No. 31/2005/NĐ-CP.

2. The production and supply of public goods and services shall be carried out in accordance with the Bidding, Ordering, and Plan Implementation Regulation for Public Goods and Services Production and Supply issued by the Prime Minister.

3. In addition to implementing the provisions of this Circular, defense companies must also comply with the Financial Management Regulations for State Enterprises and other guiding documents issued by the Ministry of Finance and the Ministry of National Defense.

II - RIGHTS, OBLIGATIONS, AND FINANCIAL SUPPORT FOR DEFENSE COMPANIES

A. Rights and obligations of defense companies.

1. The State invests sufficient capital to form assets directly for the production and supply of public goods and services directly serving national defense.

2. Comply with decisions of competent state authorities regarding the transfer of capital and assets directly serving national defense.

3. Have the right to transfer, lease, or mortgage assets serving the direct operational objectives of national defense under their management when approved in writing by the authority that established the company; for other assets according to current state regulations. Transfers and leases shall not affect the fulfillment of state orders or plans for products and services. Mortgages of land use rights and assets attached to land use rights serving the direct operational objectives of national defense shall be carried out in accordance with laws on land.

4. Defense companies may utilize assigned resources to organize production and supply of public goods and services beyond state orders or plans; engage in other business activities provided they meet the following conditions:

- Approval in writing by the authority that established the company.

- Not affecting the fulfillment of assigned national defense tasks.

- Register additional business operations in accordance with the law.

- Maintain separate accounting for business operations and public goods and services supply outside the plan.

- Fulfill tax obligations as prescribed by law.

5. Defense companies implement current state regulations on revenue, expenses, and production costs for public goods and services. Additionally, defense companies may include specific cost items in production costs, including pension payments and military uniforms for officers, non-commissioned officers, soldiers, and defense workers as stipulated by the Minister of National Defense.

6. Defense companies distribute profits in accordance with Article 27 of the Financial Management Regulations for State Enterprises and Management of State Capital Invested in Other Enterprises issued together with Decree No. 199/2004/NĐ-CP dated December 3, 2004 of the Government. The wage fund for considering the establishment of two reward and welfare funds is the actual wage fund of the company, including support wages for skilled workers as specified in Point 3.1, Section B, Part II of this Circular. dated December 3, 2004 of the Government.

7. Other rights and obligations as prescribed by law.

B. Financial support for defense companies.

During operation, in addition to general incentives and investment support as prescribed by law, defense companies producing and supplying public goods and services are entitled to:

1. Regarding business capital:

1.1. Registered capital of defense companies:

The registered capital of defense companies is the total state capital allocated to form assets directly for production and supply of public goods and services directly serving national defense.. The registered capital is determined as follows:

1.1.1. For newly established companies, the registered capital is equal to the total investment amount to form assets directly for production and supply of public goods and services directly serving national defense..

1.1.2. For operating companies without determined registered capital: The registered capital is determined based on the value of existing assets and the minimum asset requirements (if any) to ensure the company's stable and continuous fulfillment of state orders and plans.

1.2. Authority to approve registered capital.

The Prime Minister approves the registered capital for defense companies producing and supplying public goods and services established by the Prime Minister upon the proposal of the Ministry of National Defense and the written opinion of the Ministry of Finance; the Ministry of National Defense approves the registered capital for defense companies producing and supplying public goods and services established by the Ministry of National Defense after obtaining the written opinion of the Ministry of Finance.

1.3. Additional registered capital for defense companies according to the plan approved by the Prime Minister.

1.4. Procedures and formalities for increasing or decreasing registered capital.

1.4.1. Adjustments to the registered capital of defense companies can only be made in the following cases:

- Transfer of capital or assets directly serving production and supply of goods for national defense from one defense company to another defense company to fulfill national defense tasks as decided by the Minister of National Defense.

- Reorganization of defense companies (merger, consolidation, division, or separation).

- The State supplements capital to form assets for production and supply of national defense products.

1.4.2. VThe transfer of capital or assets used for direct activities serving national defense as stipulated in point 1.4.1 above shall be carried out in the form of increasing or decreasing capital.

1.4.3. Documents for adjusting increased or decreased registered capital include:

- The company's plan for adjusting registered capital (specifying the reasons for increasing or decreasing registered capital and the new level of registered capital).

- The company's financial statements at the time of adjusting registered capital.

- Written comments from the Ministry of Finance on the new level of registered capital.

Within fifteen working days from the date of receiving complete valid documents, the Minister of National Defense issues a decision on the new level of registered capital of the company.

After the decision is issued, the company implements registration and public disclosure of the new registered capital according to current laws.

2./ Exemption from land rental fees, land use fees, and land use tax for the area of land necessary for direct service of national defense.

- Annually, the National Defense Company reports the total area of land allocated by the State, rented and used by the company, including the area of land necessary for direct service of national defense (with confirmation from the competent authority under the Ministry of National Defense), to the local tax authority.

- Based on the report of the company with confirmation from the competent authority, the tax authority informs the company of the area of land exempted from land rental fees, land use fees, and land use tax, and the area of land subject to payment of land rental fees, land use fees, and land use tax.

In case of changes or adjustments in the area of land used, the National Defense Company reports to the tax authority for adjustment notification.

For the area of land used for business purposes, it shall be implemented according to the current regulations of the State.

3./ The State provides funding in cases where production is temporarily suspended and the company lacks the ability to cover costs as follows:

3.1. For production lines directly producing national defense products permitted by the Ministry of National Defense to temporarily suspend production in a given year, the State provides funding during the period of suspension, including:

- Funding for maintenance, repair, and overhaul of production lines according to economic and technical norms issued by the competent authority or according to the design specifications of the production lines.

- Support for wages of skilled workers (workers with skill levels 5 and above) within the staffing of the suspended production line when their actual wages are lower than the wage rate corresponding to their skill level based on the minimum wage set by the State.

Documents for considering support include:

- A letter requesting support from the National Defense Company.

- A document from the Ministry of National Defense regarding permission for the production line to temporarily suspend production in the year of support implementation.

- Financial statements of the company in the year of support implementation, including settlement of repair and maintenance costs for the suspended production line.

- A list and wage rates of skilled workers within the staffing of the suspended production line (confirmed by the competent authority of the Ministry of National Defense).

- Settlement of actual wages of skilled workers within the suspended production line.

3.2. For production lines directly producing national defense products in a year that must temporarily suspend production due to orders from the Ministry of National Defense with production plans lower than the designed capacity, all expenses for maintenance, repair of production lines, public services, and support for wages of skilled workers during the suspension period as specified in point 3.1 are recorded as production and supply costs for public services in the year. The National Defense Company uses revenue from the State's payment for public services to offset production and supply costs. If revenue does not cover production costs, the State will provide support for the difference.

4./ National Defense Companies operating in remote areas, border islands, or strategically difficult regions without schools (kindergartens, primary schools) according to the education system (confirmed by the Department of Education and Training in the locality), the portion directly managing kindergartens and primary schools will be supported by the State as follows:

4.1. Initial investment funds for building classrooms, purchasing desks, chairs, and teaching materials not exceeding 50 million VND per class (for units not yet equipped). In cases where classrooms, teaching materials are damaged and need replacement and supplementation, the expenditure limit does not exceed 5 million VND per class per year.

4.2. Funds to ensure salaries and other prescribed benefits for teachers and caregivers according to the rank and grade prescribed by the State in the locality.

5./ National Defense Companies operating in areas requiring the maintenance of hospitals and clinics due to special conditions will be supported by the State as follows:

- Investment and equipment funds for initial setup up to a maximum of 70 million VND per hospital or clinic (in cases not yet equipped).

- Regular operational funds for the activities of hospitals and clinics.

+ For currently operating hospitals and clinics: based on the previous year's regular operational expenditures of the unit to determine the level of support.

+ For newly established hospitals and clinics: the level of support is based on the budget for regular operational expenditures of the unit and approved by the competent authority.

Determining the level of regular operational support for hospitals and clinics may refer to and apply the regular operational expenditure levels of similar healthcare facilities of the same scale in the region where the unit is stationed.

The Ministry of National Defense approves the list of hospitals and clinics under National Defense Companies eligible for this support.

6./ Companies undertaking special national defense tasks as decided by the Prime Minister (National Defense Companies operating in strategic areas combining economy with national defense...) in addition to implementing rights and obligations stipulated for State-owned Enterprises under the Law on State-Owned Enterprises 2003, the Financial Management Regulations of State-Owned Enterprises and management of State capital invested in other enterprises promulgated together with Decree No. 199/2004/NĐ-CP dated December 3, 2004 of the Government, also enjoy preferential treatment.

- Shall be supported with nursery and kindergarten funding in areas without schools according to the education system and health care funding for places that must maintain hospitals and clinics due to special conditions as stipulated in Points 4 and 5 of Section B of Part II of this Circular.

- Shall be subsidized by the State with two reward and welfare funds for a period of two months' salary in cases of loss or insufficient sources to establish these two funds.

- Shall enjoy other benefits and support as decided by the Prime Minister.

III - ESTABLISHING BUDGETS, ISSUING FUNDS AND SETTLING ACCOUNTS FOR SUPPORTING EXPENSES

1./ Establishing budgets.

- Defense companies eligible for financial support shall prepare detailed budgets for each item specified in Part II above and report to the superior management agency under the Ministry of National Defense for review and consolidation into the Ministry's overall budget proposal submitted to the Ministry of Finance for consideration and consolidation to be presented to the Government for examination and decision in accordance with the State Budget Law.

- The Ministry of National Defense shall be responsible for consolidating the support budget for defense companies into the overall state budget proposal of the Ministry of National Defense to be sent to the Ministry of Finance for review and consolidation to be presented to the Government for examination and decision in accordance with the State Budget Law.

2./ Issuing funds.

Based on the annual state budget allocation assigned by the Prime Minister and the Ministry of Finance, the Ministry of National Defense shall detail the tasks of issuing funds for support to each defense company according to the items specified in Part II above, submit them to the Ministry of Finance for review as the basis for implementation in accordance with current regulations; the Ministry of National Defense shall issue funds through budget withdrawals.

For investment and capital supplementation expenses for defense companies from the state budget, the Ministry of Finance shall directly issue funds to defense companies through payment orders.

3./ Settling accounts for funds.

At the end of the fiscal year, defense companies must implement the financial reporting system in accordance with current regulations, including the settlement report on state budget support funds. The Ministry of Finance (Enterprise Financial Department) shall cooperate with the Ministry of National Defense (Financial Department) to inspect the settlement of support fund usage to ensure compliance with state regulations and provisions of this Circular. In cases of improper expenditure or exceeding the prescribed spending limit, the finance authority has the right to cancel the improperly spent amount and the excess amount. Any person who issues improper payment orders must compensate and may face penalties according to the law depending on the severity of the violation.

IV - IMPLEMENTATION ORGANIZATION

This Circular shall take effect fifteen days from the date of publication in the Official Gazette. Previous regulations regarding rights, obligations, and financial support for state-owned enterprises engaged in public services under the Ministry of National Defense are hereby abolished.

During implementation, if there are any difficulties, defense companies are advised to report to the Ministry of Finance and the Ministry of National Defense for study and amendment.