Joint Circular No. 14 TT/LB guiding the state collection and profit distribution in public catering and service economic units at the grassroots level.

JOINT CIRCULAR

Guidelines on State Collection and Profit Distribution in Public Catering and Service Economic Units

____________________________

Pursuant to Decision No. 76/HDBT dated June 26, 1986 of the Council of Ministers on "Ensuring Autonomy in Production and Business Operations of Basic Economic Units"; to create favorable conditions for the development of public catering and service sectors, better meeting social food and service needs, serving production and daily life, contributing to stabilizing prices and market leadership, gradually accumulating funds for the state budget and expanding socialist public catering reproduction; the Ministry of Finance and the Ministry of Trade temporarily stipulate the state collection and profit distribution systems for basic economic units engaged in public catering and services.

I-On State Collection

While the state has not yet issued alternative forms of collection to replace the state collection system, units in the public catering and service sector have the obligation to submit state collections to the state budget as prescribed in Circular No. 21 TC/TQD dated August 21, 1986 of the Ministry of Finance.

1. The production and business activities of the public catering-service sector that must submit state collections are:

- Catering operations (self-made goods)

- Production of confectionery, soft drinks, ice cream, ice

- Renting sleeping rooms, lodging houses

- Service activities: hair cutting, styling, laundry, tailoring, repair services of various types...

2. Entities submitting state collections:

- All entities directly engaging in the business activities specified in Point 1 above must submit state collections to the state budget at the local level where the entity is located.

3. The amount of state collection and exemption/reduction regulations:

a) The amount of state collection:

The amount of state collection is applied according to the state collection rate table prescribed in Circular No. 47/TT/TC-TQD dated December 27, 1985 and Circular No. 21/TC-TQD dated August 21, 1986 of the Ministry of Finance.

Specifically, for production units under the trade sector, due to low technical equipment and labor productivity; to support these units' development, they are temporarily allowed to reduce the state collection rate as follows:

- The state collection rate is a fixed percentage (%) based on actual turnover: for catering operations, it is calculated on the turnover of self-made goods sold; for service operations, it is calculated on service revenue; for hotel and lodging operations, it is calculated on the rental price of individual rooms (or beds); for production intended for sale, it is calculated on the wholesale price.

- After deducting state collections according to the general prescribed rate, if the remaining profit exceeds the profit standard, then the entity must further submit additional state collections to the state budget as determined by the Department of Finance.

b) Regarding the exemption and reduction of state collections:

+ The following activities are exempt from state collections:

- Ancillary production of the public catering-service sector;

- Ancillary production and service activities of collective dining halls serving food and service needs for workers, officials, students, and patients in agencies, enterprises, schools, hospitals...

- Turnover from providing group meals (monthly meals, conference services) for workers and officials at catering shops or delivered to agencies by public catering units.

+ The following activities are temporarily exempted or reduced from state collections:

- Public catering operations in mountainous, border, and island provinces truly facing difficulties; new service activities entering production and business operations are temporarily exempted from state collections for a period of time.

- Catering and service operations affected by implementing state social policies or due to objective reasons (natural disasters, fires...), when applying the prescribed collection rates result in losses or profits insufficient to establish three funds according to regulations, they are temporarily allowed to reduce the state collection rate.

c) All cases of exemption or reduction of state collections mentioned in Section b) of Point 3 above (rates and duration of exemptions) are decided by the Ministry of Finance (for central state enterprises) and the Department of Finance (for local state enterprises).

Procedures for declaring and submitting state collections are implemented as prescribed in Circular No. 47/TT/TC-TQD and Circular No. 21/TC-TQD of the Ministry of Finance.

d) The state collection rates stipulated in the "collection tables" of Circular No. 47 TT/TQD, Circular No. 21/TC/TQD, and this circular uniformly apply for the year 1986 and subsequent years. Based on actual turnover, entities are responsible for timely and fully submitting state collections to the budget; those eligible for exemptions or reductions will submit state collections to the budget according to the decisions of the Ministry of Finance or the Department of Finance.

II-On Profit Distribution

1- Profits from public catering and service operations are divided into two parts: one part submitted to the state budget, and one part retained by the unit to establish three funds.

Part on retained profit for setting aside three funds shall be calculated as two months' basic salary (rank-based or position-based salary) of the planned year plus 1% (one percent) of the original value of fixed assets, plus 1% (one percent) of the planned year's working capital.

Based on the profit distribution ratio specified in Point 2 below, the standard profit (ensuring sufficient allocation for three funds and tax payment) for the public catering industry and other services, categorized by region, is specifically as follows (the rate of 1% is calculated based on sales revenue):

+ Units in large cities: 2.5-3%

+ Units in plains: 2.0-2.5%

+ Units in mountainous and midland areas: 1.5-2.5%

As for service activities characterized by diverse operations, determining the standard profit has not yet met the conditions (guidance will follow). For the time being, units engaged in service activities shall base their standard profit plans on the principle of profit determination for service business operations stipulated in this Circular, to be submitted for review and decision by the direct supervising authority and the local financial agency at the same level.

2- Annual profit distribution shall be based on the planned profit and the actual profit achieved by the unit.

The State encourages units to actively exploit all potential for expanding production and business operations, reducing costs to exceed the planned profit target, whereby the portion of profit exceeding the plan and from sideline production shall be allocated a higher percentage to the unit compared to the planned profit. Additionally, there is special encouragement for practical service activities serving production and people's livelihood, with a higher ratio of planned profit left for setting aside three funds compared to other industries.

The profit distribution ratio in public catering and service businesses is stipulated as follows:

Due to different profit distribution ratios for various parts of profits, units must clearly account for each part of the profit to accurately assess the business results and ensure fair and reasonable profit distribution.

3- Regarding the establishment of funds: it shall be carried out according to Article 15 of the "Provisional Regulations on Financial Autonomy Rights of Basic Economic Units" (issued together with Decision No. 76/HDBT dated June 26, 1986 of the Council of Ministers).

III. Implementation Provisions

1- Based on the production and business plan, the immediate superior management body must approve the financial plan for subordinate economic units (including the plan for state revenue, profit, profit distribution, and fund establishment ...) by the end of the previous year or the beginning of the planned year.

2- Basic economic units shall base their fund allocation plan (with specific allocations to each fund) on the approved profit plan, registering with the bank and temporarily allocating 70% quarterly according to the approved plan. At the end-of-year settlement for basic economic units, the immediate superior management body, with the participation of the local financial agency, shall officially approve the amount of profit to be paid to the budget and the profit for fund establishment of the unit: if the unit has exceeded the approved retained profit, it must be deducted from the next year's allocation, and if there is a shortfall, additional allocation will be made.

3-The Ministry of Commerce, based on current state policies and sectoral guidance directions for public catering and service industries during each period, shall provide detailed guidelines on issues such as business structure; classification into ordinary and high-grade categories; methods for determining standard profit; conditions for fund establishment ... in catering and service businesses, suitable to the characteristics and operational features of specific production and business sectors.

4- This Circular takes effect from the date of issuance and applies to the profit distribution of the entire 1986 year for basic economic units engaged in public catering and service businesses under the internal trade system. The state revenue collection rate for units engaged in catering and service businesses in other sectors shall be applied as prescribed in Circular No. 47 TC/TQD of the Ministry of Finance.