Circular No. 19/2015/TT-BTC guiding the mechanism for mobilizing, managing, and using funds to support anti-smuggling and anti-counterfeiting activities related to cigarette smuggling and fake cigarette production and sales.

CIRCULAR

Guidelines on the mechanism for mobilizing, managing, and using funds to support anti-smuggling and anti-counterfeiting work for cigarette sticks and anti-production and sale of counterfeit cigarettesn l

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Pursuant to the Law on Prevention and Control of Harmful Effects of Tobacco Products dated June 18, 2012;

Pursuant to Decree No. 215/2013/NĐ-CP dated December 23, 2013 of the Government on the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decision No. 2371/QĐ-TTg of the Prime Minister dated December 26, 2014 on the implementation of the destruction of confiscated smuggled cigarettes;

At the request of the Director of the Tax Policy Department;

The Ministry of Finance issues this Circular guiding the mechanism for mobilizing, managing, and using funds to support anti-smuggling and anti-counterfeiting work for cigarette sticks and anti-production and sale of counterfeit cigarettes as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular guides the mechanism for mobilizing funds contributed from cigarette manufacturing and trading enterprises to form the Anti-Smuggling and Anti-Counterfeiting Fund for Cigarette Sticks (referred to as the Fund), and the management and use of the Fund.

Article 2. Scope of Application

1. The contributors to the Fund are cigarette manufacturing and trading enterprises belonging to the Vietnam Tobacco Association and other cigarette manufacturing and trading enterprises operating legally in Vietnam contributing to the Fund (referred to as enterprises).

2. Beneficiaries of the Fund include: functional forces directly implementing investigative, verification, inspection, arrest, handling, and destruction activities of smuggled cigarette sticks and counterfeit cigarettes; the National Steering Committee against Smuggling, Commercial Fraud, and Counterfeit Goods (referred to as the National Steering Committee 389) and the Office of the Permanent Secretariat of the National Steering Committee against Smuggling, Commercial Fraud, and Counterfeit Goods (Office of the Permanent Secretariat of the National Steering Committee 389); provincial and municipal steering committees against smuggling, commercial fraud, and counterfeit goods and their permanent offices (referred to as local steering committees 389) directly implementing guidance and coordination with forces to carry out arrests and handle the destruction of smuggled cigarette sticks and counterfeit cigarettes; the Fund Management Board of the Vietnam Tobacco Association; individuals and organizations that have made contributions to reporting acts and networks of storing and selling smuggled cigarette sticks and producing and selling counterfeit cigarettes.

Chapter II

CONTENTS OF THE MECHANISM FOR MOBILIZING AND USING THE FUND

Article 3. Principles for Mobilizing Contribution Funds and Using the Fund

1. Principles for Mobilizing Contribution Funds for the Fund

a) The total annual contribution to the Fund is determined by multiplying the estimated amount of cigarette sticks expected to be seized and destroyed in the planning year by (x) the level of support specified in Article 6 of this Circular.

The estimated amount of cigarette sticks expected to be seized and destroyed in the planning year is determined by the Vietnam Tobacco Association in collaboration with the National Steering Committee 389 based on the actual quantity of smuggled cigarette sticks and counterfeit cigarettes seized and destroyed in the previous year; forecasting and analyzing the situation of smuggling and production of fake goods currently and in the future, and the plan for implementing anti-smuggling and anti-counterfeiting work for cigarette sticks and anti-production of counterfeit cigarettes by the National Steering Committee 389.

b) The contribution level of each enterprise must be publicly disclosed, ensuring fairness and equality among enterprises; encouraging enterprises with favorable conditions to contribute more than the average level.

c) All funds contributed by enterprises to establish this Fund shall be deposited into a separate account at a bank under the name and management of the Vietnam Tobacco Association.

2. Principles for Managing and Using the Fund

a) The Fund shall be used to provide additional support to the beneficiaries mentioned in Clause 2, Article 2 of this Circular to implement: inspection, prevention, arrest, handling, and destruction of smuggled cigarette sticks and counterfeit cigarettes; encouraging reports of acts and networks of storing and selling smuggled cigarette sticks and producing and selling counterfeit cigarettes; coordinating, training sessions, interim reviews, final summaries, commendations, and dissemination of laws on anti-smuggling and anti-counterfeiting work for cigarette sticks and anti-production and sale of counterfeit cigarettes, and directing, supervising, and guiding ministries, sectors, and localities in implementing and coordinating anti-smuggling, commercial fraud, and counterfeit goods work. The Fund shall not be used for purposes unrelated to anti-smuggling and anti-counterfeiting work for cigarette sticks and anti-production and sale of counterfeit cigarettes.

b) Payments to functional forces in anti-smuggling and anti-counterfeiting work for cigarette sticks and anti-production and sale of counterfeit cigarettes shall be based on the actual quantity of cigarettes seized and destroyed recorded in the Decision on Administrative Sanction Seizure or Seizure Decision (in cases where the owner cannot be identified) issued by the competent authority handling violations and the Record of Destruction of Smuggled Cigarette Sticks and Counterfeit Cigarettes by the Destruction Committee.

c) The Fund must be strictly managed and used for its intended purpose; at the end of the fiscal year, the Vietnam Tobacco Association must submit a report on the mobilization and use of the Fund to the Ministry of Finance (Department of Tax Policy and General Department of Taxation) and to the local Tax Bureau where the enterprise's main office is located.

d) Units using the funds must separately track and record the specific amount of support funds; establish a regulation for using funds according to the principle of transparency. The head of the unit using the support funds shall decide on the specific expenditure based on the contents stipulated in Article 5 of this Circular, in accordance with the unit's work and bear direct responsibility before the superior management agency. Unspent funds may be carried over to the next year for continued use.

đ) The source of support funds guided in this Circular does not replace existing sources of funding applicable to anti-smuggling, commercial fraud, and counterfeit goods work. The handling of contraband and counterfeit cigarette sticks due to administrative violations shall be carried out in accordance with the provisions of the law on the management and disposal of contraband and counterfeit goods temporarily detained and confiscated through administrative procedures.

For example, in the state budget estimate for 2015, Customs Unit A was allocated 400 million VND for anti-smuggling, trade fraud, and counterfeit goods activities. Assuming that 1.2 million packs of smuggled and fake cigarettes were seized in 2015, apart from the funding support used according to the guidance provided in Article 5 of this Circular, Customs Unit A would still be entitled to the funding allocated by the state budget for anti-smuggling, trade fraud, and counterfeit goods activities as stipulated by current regulations.

Article 4. Establishing the Budget Estimate and Announcing Contribution Levels to the Fund

1. Establishing the Total Budget Estimate

Each year, the Vietnam Tobacco Association establishes the total budget estimate for the Fund.

- Total revenue budget: This is the total contribution funds of the contributing entities forming the Fund as specified in Clause 1 of Article 2 of this Circular. The total revenue budget for the planning year is determined by adding the total amount of funds raised from the contributing entities to the remaining unused funds from the previous year carried over for continued use.

- Total expenditure budget: This is the total fund expenditure for the beneficiaries as specified in Clause 2 of Article 2 of this Circular. The calculation method for the total expenditure budget for the planning year equals the estimated number of cigarettes to be seized and destroyed in the planning year multiplied by the support level specified in Article 6 of this Circular.

In principle, the total annual budget estimate must ensure sufficient coverage of the total expenditure budget.

2. The Vietnam Tobacco Association determines the annual contribution level to the Fund for each tobacco manufacturing and trading enterprise (referred to as the planned contribution level or the Fund contribution level based on the budget estimate) as follows:

The Fund contribution level based on the budget estimate for each enterprise equals the projected revenue of each enterprise multiplied by the common planned contribution rate applicable to all enterprises.

The common planned contribution rate applicable to all enterprises equals the total amount of funds needed to be raised in the budget projection divided by the projected revenue of the entire industry.

In cases where an enterprise voluntarily contributes more than its planned Fund contribution level, the Vietnam Tobacco Association will recalculate the common planned contribution rate applicable to all enterprises after deducting the voluntary excess contribution of the enterprise.

3. The Vietnam Tobacco Association publicly announces to the enterprises the total projected amount of funds raised for the Fund contribution and the planned Fund contribution level for each enterprise (in accordance with Form No. 01 issued together with this Circular) as a basis for implementation, while simultaneously sending it to the Ministry of Finance (Department of Tax Policy and General Department of Taxation) and the local tax authority where the enterprise's main office is located for monitoring.

4. Quarterly, based on the planned Fund contribution level announced by the Vietnam Tobacco Association and the actual revenue achieved in the previous quarter, enterprises proactively calculate the amount of funds they need to contribute for the quarter (for enterprises voluntarily contributing more than the average, the contribution amount is based on the agreed level with the Association) and transfer the money to the Vietnam Tobacco Association within the first ten days of each quarter. The funds already used in the year to support anti-smuggling of cigarette sticks and anti-production and sale of counterfeit cigarettes, allocated by the Vietnam Tobacco Association to enterprises that have contributed to the Fund, can be included in reasonable expenses when determining corporate income tax revenue.

Article 5. Use of the Fund

The Fund shall be used to support the following expenditures:

1. Expenditures to provide additional support for functional forces directly implementing anti-smuggling and anti-counterfeiting activities related to cigarette smuggling and counterfeit cigarettes, including the following expenditures:

a) Expenditures for apprehending, night allowances, overtime payments, processing, and destroying smuggled cigarettes and counterfeit cigarettes;

b) Expenditures for purchasing equipment to directly support anti-smuggling activities related to smuggled cigarettes and counterfeit cigarettes, if there are sufficient financial resources. The purchase of equipment shall be decided by the Minister of Public Security, the Minister of National Defense, or the head of relevant ministries involved;

c) Expenditures for rewarding groups and individuals with outstanding achievements in anti-smuggling and anti-counterfeiting activities related to smuggled cigarettes and counterfeit cigarettes;

d) Expenditures for individuals and organizations that detect and report acts of storing, selling smuggled cigarettes and producing, trading counterfeit cigarettes;

The amount of support funds for direct forces shall be determined based on the number of packs of smuggled cigarettes and counterfeit cigarettes seized and destroyed (recorded in the Decision on Seizure and Destruction of Smuggled Cigarettes and Counterfeit Cigarettes and the Record of Destruction of Smuggled Cigarettes and Counterfeit Cigarettes), multiplied by the support rate after deducting the rates allocated to the National Steering Committee 389, local steering committees, and the Vietnam Tobacco Association's Management Board as stipulated in Article 6 of this Circular.

2. Expenditures to support the National Steering Committee 389 and local steering committees in organizing, directing, and inspecting the implementation of measures to prevent and combat cigarette smuggling and counterfeit cigarette production and sales, including the following expenditures:

a) Expenditures for developing plans, schemes, and projects on preventing and combating cigarette smuggling and counterfeit cigarette production and sales;

b) Expenditures for organizing specialized conferences, seminars, and training sessions to implement plans and coordinate measures among ministries, sectors, and relevant agencies;

c) Expenditures for promoting, mobilizing, and disseminating laws on preventing and combating cigarette smuggling and counterfeit cigarette production and sales;

d) Expenditures for organizing regular or spot inspections on preventing and combating cigarette smuggling and counterfeit cigarette production and sales at localities;

đ) Expenditures for summarizing, concluding, and rewarding organizations and individuals with outstanding achievements in preventing and combating cigarette smuggling and counterfeit cigarette production and sales;

e) Expenditures for directing, inspecting, urging, and guiding ministries, sectors, and localities to implement and coordinate in anti-smuggling, commercial fraud, and fake goods activities.

3. Expenditures to support the Management Board of the Fund of the Vietnam Tobacco Association

a) Subsidies for travel expenses when working in localities with smuggled cigarettes;

b) Expenditures for staff and experts of the Association to inspect, supervise, and enforce the destruction of smuggled cigarettes in some key areas;

c) Some expenditures for purchasing information about the activities of smuggling organizations to provide to functional forces;

d) Equipment costs for the Management Board to work such as photocopiers, computers;

đ) Expenditures for rewarding the Management Board of the Fund of the Vietnam Tobacco Association.

The level of funding support for beneficiaries receiving funds from the Fund, as stipulated in Clause 2, Article 2 of this Circular, is VND 3,000 per pack of 20 cigarettes, regardless of the value of the cigarettes (high-end or low-end). An additional VND 500 per pack of 20 cigarettes will be provided for the cost of destroying smuggled cigarette butts and counterfeit cigarettes, encouraging the use of destruction methods that do not affect the environment and are suitable for the conditions of each local area where destruction takes place.

Within the level of support of VND 3,000 per pack of 20 cigarettes for beneficiaries receiving funds from the Fund as stipulated in Clause 2, Article 2 of this Circular, VND 150 per pack of 20 cigarettes (5%) will be allocated to support the National Steering Committee 389, VND 210 per pack of 20 cigarettes (7%) will be allocated to support the Local Steering Committee 389 where smuggled cigarette butts and counterfeit cigarettes are seized and destroyed, and VND 150 per pack of 20 cigarettes (5%) will be allocated to support the Management Board of the Fund of the Vietnam Tobacco Association. The remaining amount will be used to support frontline forces directly implementing anti-smuggling activities of cigarette butts and combating the production and sale of counterfeit cigarettes.

Article 7. Implementation Procedures for Funding Support from the Fund

The Vietnam Tobacco Association shall implement funding support for anti-smuggling activities of cigarette butts and the production and sale of counterfeit cigarettes according to the following procedures:

1. For frontline forces directly responsible for seizing and processing the destruction of smuggled cigarette butts and counterfeit cigarettes.

Based on the notification issued by the Local Steering Committee 389 regarding the actual quantity and type of smuggled cigarette butts and counterfeit cigarettes seized and destroyed, the Vietnam Tobacco Association will determine the amount of funding support for these frontline forces.

The transfer of funding support to frontline forces will be carried out in batches of seized and destroyed cigarette butts through the Local Steering Committee 389 in two steps as follows:

Within ten working days from the date of receipt of the notification from the Local Steering Committee 389 regarding the quantity and type of seized cigarette butts (accompanied by the Decision on Seizure and Destruction of Smuggled Cigarette Butts and Counterfeit Cigarettes), the Vietnam Tobacco Association will temporarily advance 50% of the determined funding support for the batch of seized cigarette butts by transferring the amount to the account of the Local Steering Committee 389.

After completing the destruction of cigarettes, the Local Steering Committee 389 will notify the Vietnam Tobacco Association of the quantity and type of seized cigarette butts that have been destroyed (accompanied by the Record of Destruction of Smuggled Cigarette Butts and Counterfeit Cigarettes).

Within ten working days from the date of receipt of the notification from the Local Steering Committee 389 regarding the quantity and type of seized cigarette butts that have been destroyed (accompanied by the Record of Destruction of Smuggled Cigarette Butts and Counterfeit Cigarettes), the Vietnam Tobacco Association will settle the remaining 50% of the funding support or the corresponding amount based on the number of smuggled cigarette butts and counterfeit cigarettes seized and destroyed, minus the temporarily advanced amount, by transferring the amount to the account of the Local Steering Committee 389.

Upon receipt of the funding transferred by the Vietnam Tobacco Association, the Local Steering Committee 389s are responsible for temporarily advancing or settling the funding for the frontline forces directly responsible for seizing and destroying smuggled cigarette butts and counterfeit cigarettes.

2. For the National Steering Committee 389 and Local Steering Committees 389.

Based on the results of the seizure and destruction of smuggled cigarette butts and counterfeit cigarettes every quarter, the Vietnam Tobacco Association will transfer funding to the National Steering Committee 389 (through the account of the Office of the Permanent Secretariat of the National Steering Committee 389) and the Local Steering Committees 389 where smuggled cigarette butts and counterfeit cigarettes were seized and destroyed within the first ten days of the next quarter.

Article 8. Settlement of the Fund

At the end of each year, the Vietnam Tobacco Association shall be responsible for settling the situation regarding the collection, management, and utilization of the Fund and informing enterprises to serve as the basis for implementation, specifically including the following contents:

- The total actual amount of funds collected during the year, detailed by contributing enterprise.

- The quantity and types of smuggled cigarette sticks and counterfeit cigarettes seized and destroyed during the year; the level of financial support calculated per pack of cigarettes.

- The total actual amount of funds provided to competent forces and the National Steering Committee 389, local Steering Committees 389, detailed by the user (according to Model No. 02 issued together with this Circular).

- The balance of the Fund as of December 31 each year.

Enterprises are responsible for submitting their actual revenue results for the year to the Vietnam Tobacco Association no later than January 15 of the following year for consolidation of the industry's actual revenue results.

Based on the amount of Fund used and the industry's actual revenue results for the year, the Vietnam Tobacco Association will calculate and determine the actual annual contribution ratio for all enterprises, the actual amount of Fund contributions used that can be recorded as reasonable expenses, and the excess or shortfall of the amount contributed compared to the initial budget of each enterprise (according to Model No. 03 issued together with this Circular), and inform the enterprises for their knowledge and as the basis for recording reasonable expenses when determining corporate income tax; at the same time, send to the Ministry of Finance (Department of Tax Policy and General Department of Taxation) and the local Tax Bureau where the enterprise is headquartered for monitoring.

If the amount recorded as reasonable expenses exceeds the amount contributed according to the initial budget, the enterprise must make up the shortfall by contributing it to the Fund. If the amount recorded as reasonable expenses is less than the amount contributed according to the initial budget, the excess amount will be carried forward to offset the amount to be contributed to the Fund in the following year.

The notification of the Vietnam Tobacco Association according to Model No. 03 issued together with this Circular is a legitimate document to determine the reasonable expenses of each enterprise.

Article 9. Destruction of Smuggled and Counterfeit Cigarettes

The destruction of smuggled and counterfeit cigarettes shall be conducted periodically under the supervision of the Vietnam Tobacco Association, as follows:

- The agency or unit making the decision to confiscate smuggled and counterfeit cigarettes shall prepare a destruction plan and send it to the local Steering Committee 389 where the smuggled and counterfeit cigarettes were seized and destroyed, to notify the Vietnam Tobacco Association to send representatives and representatives from other tobacco manufacturing and trading enterprises to witness the destruction of smuggled and counterfeit cigarettes. Notifications about the destruction of smuggled and counterfeit cigarettes must be sent to the Vietnam Tobacco Association at least seven days before the destruction takes place.

- The destruction of smuggled and counterfeit cigarettes shall be carried out monthly; in cases where a large number of cigarettes are seized, multiple destructions may be organized within the month.

- The destruction of smuggled and counterfeit cigarettes shall be organized by the Destruction Handling Council and must prepare a record with signatures of all members of the Council in accordance with Circular No. 173/2013/TT-BTC dated November 20, 2013, issued by the Ministry of Finance guiding the implementation of certain aspects concerning the management and handling of contraband items and means of transportation temporarily detained or confiscated through administrative procedures.

Article 10. Responsibilities of the Vietnam Tobacco Association

1. The Vietnam Tobacco Association shall be responsible for mobilizing, managing, and using the Fund in accordance with the guidelines set forth in this Circular and shall be liable under the law for the accuracy of the figures reported by the Association as stipulated in Article 8 of this Circular.

2. For smuggled cigarette sticks and counterfeit cigarettes seized where the direct force has been temporarily advanced 50% of the support funding but has not yet carried out destruction, the Vietnam Tobacco Association shall be responsible for requesting the seizing authority to promptly carry out the destruction of the seized smuggled cigarette sticks and counterfeit cigarettes. In cases where there are no cigarettes available for destruction, the Vietnam Tobacco Association shall recover the temporarily advanced support funding and inform the National Steering Committee 389 and handle the matter accordingly.

3. Annually, the Vietnam Tobacco Association shall report on the situation of mobilizing, managing, and using the Fund to the Ministry of Finance and the Ministry of Industry and Trade.

Chapter III

IMPLEMENTATION

Article 11. Effective Date

1. This Circular shall take effect from February 3, 2015. Annually, the Ministry of Finance shall lead and coordinate with the National Steering Committee 389 and the Vietnam Tobacco Association to conduct mid-term reviews and evaluate the results of implementing this mechanism.

2. This Circular replaces Circular No. 57/2012/TT-BTC dated April 11, 2012, issued by the Ministry of Finance, guiding the mechanism for mobilizing funds to support anti-smuggling efforts of cigarette sticks and the production and sale of counterfeit cigarettes.

3. Any remaining unutilized funds (if any) as prescribed in Circular No. 57/2012/TT-BTC dated April 11, 2012, issued by the Ministry of Finance, shall continue to be managed and utilized in accordance with this Circular. The National Steering Committee 389 and the local Steering Committee 389 shall inherit any remaining unutilized funds from the Central Steering Committee 127 and the local Steering Committee 127.

In the course of implementation, if any difficulties arise, agencies and units are requested to report to the Ministry of Finance for coordination in resolving them./.