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 financial matters for defense companies pursuant toDecree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government on production andsupply of public goods and services

Pursuant to the State-Owned Enterprise Law 2003;

Pursuant to the Financial Management Regulation for State-Owned Companies 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 Regulation for State-Owned Companies);

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 financial matters 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 subjects 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 tendering, ordering, and production and supply plan implementation regulations of the Prime Minister.

3. In addition to implementing the provisions of this Circular, defense companies must also comply with the Financial Management Regulation for State-Owned Companies 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 IN RELATION TONATIONAL DEFENSE CORPORATION

A. Rights and obligations of defense companies.

1. To receive state investment sufficient to form assets directly for producing and supplying public goods and services directly serving national defense.

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

3. To have the right to transfer, lease, or mortgage assets serving direct operational purposes for national defense under their management when approved in writing by the authority that established the company; for other assets according to current state regulations. Such transfers or leases shall not affect the fulfillment of state orders or plans for products and services. Mortgaging the value of land use rights and assets attached to such land for direct operational purposes for 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 according to current laws.

- 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 shall implement current state regulations on revenue, expenses, and cost of production and supply of public goods and services. Additionally, defense companies may include certain special expense items in the cost of production, including pension wages, military uniforms for commanding officers, non-commissioned officers, soldiers, and defense workers as stipulated by the Minister of National Defense.

6. Defense companies shall distribute profits according to Article 27 of the Financial Management Regulation for State-Owned Companies 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 wage support for skilled workers as specified in Point 3.1, Section B, Part II of this Circular.

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 determined by the total investment amount for forming 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 current asset value and the minimum additional asset requirement (if any) to ensure the company can consistently fulfill 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 receiving the written opinion of the Ministry of Finance.

1.3. Additional registered capital allocation 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 shall 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 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. The 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 increased or decreased capital.

1.4.3. The documents for adjusting registered capital include:

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

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

- The written opinion of 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 shall issue a decision on the new level of registered capital of the company.

After issuing the decision, the company shall register and publicly announce the new level of registered capital in accordance with current laws.

2. Exemption from land rental fees, land usage fees, and land usage taxes for the necessary land area used directly for national defense purposes.

- Annually, the National Defense Company reports the total land area allocated by the State and leased and used by the company, including the necessary land area used directly for national defense (confirmed by the competent authority under the Ministry of National Defense), to the local tax authority.

- Based on the report of the company confirmed by the competent authority, the tax authority informs the company of the land area exempted from land rental fees, land usage fees, and land usage taxes, and the land area subject to payment of land rental fees, land usage fees, and land usage taxes.

In case of changes or adjustments in the land usage area, the National Defense Company shall report to the tax authority for adjustment notifications.

For 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 that are permitted by the Ministry of National Defense to suspend production during the year, the State provides funds during the period of suspension, including:

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

- Support for wages of skilled workers (craftsmen of grade 5 or higher) within the staffing quota of the suspended production line if their actual wages are lower than the wage scale based on their craftsmanship grade as prescribed by the State.

Documents for reviewing support include:

- A letter requesting support from the National Defense Company.

- A document from the Ministry of National Defense approving the suspension of the production line for the year in which support is provided.

- Financial statements of the company for the year in which support is provided, including settlement of repair and maintenance expenses for the suspended production line.

- A list and wage scales of skilled workers within the staffing quota 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 that must suspend production due to orders or plans set by the Ministry of National Defense below 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 shall be included in the production and supply costs of products and public services for the year. The National Defense Company uses revenue from state payments for public service products 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, border, island, or strategically difficult areas without schools (kindergartens, primary schools) according to the education system (confirmed by the provincial Department of Education and Training) shall have the following support for managing kindergartens and primary schools:

4.1. Initial investment funding for building classrooms, purchasing desks, chairs, and teaching materials not exceeding 50 million VND/classroom (for units not yet equipped). In cases where classrooms and teaching materials need replacement and supplementation due to damage, the expenditure shall not exceed 5 million VND/classroom/year.

4.2. Funding to ensure salaries and other prescribed benefits for teachers and kindergarten 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 shall receive the following support from the State:

- Investment and equipment funding for initial setup not exceeding 70 million VND/hospital or clinic (for units not yet equipped).

- Regular operational funding for hospitals and clinics.

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

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

Determining the level of regular operational funding for hospitals and clinics may refer to and apply the regular operational funding levels of similar healthcare facilities of the same scale in the unit's location.

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

6. Companies performing 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 fulfilling the 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, shall also enjoy preferential treatment.

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

- Shall be granted state subsidies for 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 BUDGET PROJECTIONS, ISSUING FUNDS AND SETTLING ACCOUNTS FOR SUPPORT FUNDS SETTLEMENT OF SUPPORT FUNDS EXPENSES

1. Establishing budget projections.

- Defense companies eligible for financial support shall prepare detailed budgets for each item specified in Part II above, report to the superior management agency under the Ministry of National Defense for review and consolidation within the Ministry of National Defense's overall state budget projection.

- The Ministry of National Defense shall be responsible for consolidating the support budget for defense companies within the overall state budget projection of the Ministry of National Defense, submit it to the Ministry of Finance for examination and consolidation, and then present it to the Government for submission to the National Assembly for approval in accordance with the State Budget Law.

2. Issuing funds.

Based on the annual state budget expenditure plan assigned by the Prime Minister and the Ministry of Finance, the Ministry of National Defense shall allocate detailed tasks for supporting each defense company according to the items specified in Part II above, send them to the Ministry of Finance for review as the basis for implementation according to current regulations; the Ministry of National Defense shall implement expenditures through budget withdrawals.

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

3. Settling accounts for funds.

At the end of the fiscal year, defense companies must comply with the current financial reporting system, including the settlement report of 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 expenditures or exceeding the prescribed limits, the finance authority has the right to reverse the improper expenditures and excess amounts. Those who issue improper payment orders must compensate and may face penalties according to the law depending on the severity.

IV. IMPLEMENTATION ORGANIZATION

This Circular shall take effect fifteen days after its publication in the Official Gazette. Previous regulations regarding rights, obligations, and financial support for public-interest state-owned enterprises under the Ministry of National Defense are hereby repealed.

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.

Place of Receipt:

- Prime Minister, Deputy Prime Ministers;

- National Assembly's Office;

- President's Office;

- Government Office;

- Central Office and Party Committees;

- Ministries, agencies equivalent to ministries, and agencies under the Government;

- Provincial People's Committees;

- Supreme People's Court;

- Supreme People's Procuracy;

- Official Gazette;

- Legal Documents Inspection Bureau (Ministry of Justice);

- Provincial Departments of Finance, Taxation Bureaus;

- Units under the Ministry of Finance and the Ministry of National Defense;

- Archive: Ministry of Finance, Ministry of National Defense.