Circular No. 19-CT/TCĐN guiding the performance of debt acceptance obligations and repayment of state budget capital by Vietnamese parties in joint ventures and foreign business cooperation contracts.

 CIRCULAR

DECISION NO. 19-CT/TCĐN OF JUNE 9, 1992 BY THE MINISTRY OF FINANCE GUIDING THE IMPLEMENTATION OF THE OBLIGATION TO ACCEPT DEBTS AND REPAY STATE CAPITAL IN JOINT VENTURE ENTERPRISES AND FOREIGN JOINT OPERATING CONTRACTS

Pursuant to the Law on Foreign Investment in Vietnam dated December 29, 1978; the Law Amending and Supplementing Certain Provisions of the Law on Foreign Investment in Vietnam dated June 30, 1990; the Ordinance on Banks, Credit Cooperatives and Financial Companies dated May 24, 1990; Decree No. 28-HĐBT dated February 6, 1991 of the Council of Ministers detailing the implementation of the Law on Foreign Investment in Vietnam; and Decree No. 189-HĐBT dated June 15, 1991 of the Council of Ministers promulgating the regulations on foreign bank branches and joint venture banks operating in Vietnam;
To implement Decree No. 22-HĐBT dated January 24, 1991 of the Council of Ministers on the regime for the collection and utilization of state capital and Directive No. 138-CT dated April 25, 1991 of the Chairman of the Council of Ministers on expanding the authority to use and responsibility for preserving production and business capital for basic state-owned units;
The Ministry of Finance guides the implementation of the obligation to accept debts and repay state capital of Vietnamese parties in joint ventures and foreign joint operating contracts as follows:

I. OBJECTS OF IMPLEMENTATION OF THE OBLIGATION

1. Objects accepting debts, repaying, and remitting proceeds from the use of state capital

The objects accepting debts, repaying, and remitting proceeds from the use of state capital include independent accounting economic entities with legal person status, including:

State enterprises and non-state domestic enterprises (hereinafter referred to as enterprises), which are Vietnamese parties in joint ventures (hereinafter referred to as joint ventures) and Vietnamese parties participating in joint operating contracts (hereinafter referred to as joint operations) operating under the Law on Foreign Investment in Vietnam and permitted to use state capital to contribute to joint ventures or joint operations.

State-owned commercial banks and shareholding banks (hereinafter also referred to as enterprises), which are Vietnamese parties in joint venture banks (hereinafter also referred to as joint ventures) operating under the Law on Foreign Investment in Vietnam and the Ordinance on Banks, Credit Cooperatives and Financial Companies and permitted to use state capital to contribute to joint ventures.

2. Total debt amount accepted by enterprises from the state budget includes:

a) The value of factories, construction works; machinery, equipment, transportation means; fixed assets without physical form such as technical secrets, patents, inventions; raw materials; Vietnamese dong or foreign currency provided by the state budget to enterprises before or at the time of establishing joint ventures to contribute to joint ventures, determined in US dollars or converted into US dollars.

b) Land, water surface, sea surface rental fees, which are state capital that enterprises are permitted by the State Committee on Cooperation and Investment to agree with foreign parties in joint venture contracts or joint operating contracts to contribute to joint ventures or joint operations.

II. PRINCIPLES FOR DETERMINING AND PROCEDURES FOR HANDLING DEBTS

1. The use of state capital mentioned in Section 1 Point 2.a to contribute to joint ventures must be approved in writing by the competent management agency and the Ministry of Finance (if it is a central enterprise) or the Department of Finance (if it is a local enterprise).

2. The use of state capital mentioned in Section 1 Point 2.b to contribute to joint ventures and joint operations must comply with land management regulations stipulated in the Land Law and be approved by the State Committee on Cooperation and Investment regardless of the economic sector.

3. The determination of the portion of state capital that enterprises accept debts to contribute to joint ventures and joint operations shall be conducted through a debt transfer council. The debt transfer council shall be established by the Ministry of Finance (for central enterprises) or the Department of Finance (for local enterprises) and shall consist of representatives from financial agencies, tax agencies, management agencies, and the enterprise's general director. The chairman of the council shall be a representative from the financial agency.

4. The debt transfer council has the following responsibilities:

a) Clearly determine the portion of the contribution of enterprises as state capital:

For the capital mentioned in Section 1 Point 2.a, based on the statutory capital contribution in joint ventures approved by the State Committee on Cooperation and Investment in the license, converted into US dollars or converted into US dollars after deducting the enterprise's loan capital.

For the state capital mentioned in Section 1 Point 2.b, based on the value of land, water surface, sea surface usage rights contributed as statutory capital in joint ventures or business capital in joint operations approved by the State Committee on Cooperation and Investment in the license, converted into US dollars.

b) Prepare the debt transfer record and plan for repaying state capital (Appendix No. 1 attached) according to the following provisions:

The debt transfer council bases on the economic and technical justification, the time of profitable operation, and the expected profit share for Vietnamese parties to determine the plan for repaying state capital. The starting point for repaying state capital mentioned in Section 1 Point 2.a by Vietnamese parties in joint ventures shall not be later than the time when the joint venture starts distributing profits according to the economic and technical justification. The starting point for repaying state capital mentioned in Section 1 Point 2.b by Vietnamese parties in joint ventures may be later if the profit distributed to Vietnamese parties is insufficient to repay both types of state capital mentioned in Section 1 Point 2.a and Section 1 Point 2.b.

Vietnamese parties participating in joint operations must pay annual land, water surface, and sea surface rental fees to the state budget according to the level specified in the license from the date of capital contribution. If enterprises accept these debts from the state, the debt transfer council shall determine the plan for repaying state capital from the time the joint operation begins to make a profit.

III. REGULATIONS ON REPAYMENT AND REMITTANCE OF PROCEEDS FROM THE USE OF STATE CAPITAL 1. The objects mentioned in Section 1 Point 1 have the responsibility to repay the accepted state debts twice a year according to the schedule recorded in the debt transfer record and annually remit proceeds from the use of state capital.

2. The rate of proceeds from the use of state capital is set at 3% per annum on the balance of the accepted debt in US dollars or converted into US dollars and shall be remitted to the state budget according to the provisions of Circular No. 13-CT/TCT dated February 28, 1991 of the Ministry of Finance.

2. The level of fees for using State budget capital shall be set at three percent per annum on the balance of debts received in US dollars or converted into US dollars, and shall be remitted to the State budget in accordance with Circular 13-CT/TCT issued on February 28, 1991, by the Ministry of Finance.

3. In the case where a business is permitted by the State Committee on Cooperation and Investment to transfer its share capital in a joint venture involving state-owned capital that has been recognized as debt to another business, the transferring business must complete all obligations to repay the actual debt recorded in the memorandum of debt receipt to the state treasury from the time the joint venture was granted a license until the transfer date within the latest period of three (3) months.

The two businesses must report to the council for debt receipt and delivery to process the change in the debtor within the latest period of one (1) month from the date of approval of the transfer.

- Within the latest period of one (1) month from the date of approval of the transfer, the two businesses must report to the council for debt receipt to process the change in the debtor.

4. In the event that the joint venture terminates the contract due to expiration of the term or premature dissolution approved by the State Committee on Cooperation and Investment, the debtor must repay the state-owned capital including the capital under Section 1 Point 2.a and the capital under Section 1 Point 2.b within six (6) months from the date of the decision to terminate the contract.

Specifically, if the joint venture or cooperative enterprise is dissolved prematurely, the amount of state-owned capital recognized as debt under Section 1 Point 2.b must be repaid as the debt arising from the issuance of the license to the date of the approved dissolution decision.

5. If enterprises fail to repay state-owned capital according to the schedule recorded in the memorandum of debt receipt, the entity responsible for collecting revenue from the use of state-owned capital as stipulated in Point 2 above must also pay interest penalties on the overdue amount. The rate of interest penalty for late payment shall be determined by the State Bank.

 IV. SOURCES OF REPAYING STATE CAPITAL AND PAYING FUNDS FOR THE USE OF STATE CAPITAL

1. Sources of repaying state capital and paying funds for the use of state capital include profits or products distributed during the operation of the joint venture or cooperative enterprise, assets and capital distributed upon liquidation of the joint venture or cooperative enterprise, and other lawful sources. These repayment sources may not be accounted for as expenses or costs of the enterprise itself.

2. The aforementioned amounts must be paid in freely convertible foreign currency (if the distribution is in foreign currency) or in Vietnamese dong (if the distribution is in Vietnamese dong) at the buying rate published by the Central Foreign Trade Bank at the time of payment.

V. ACCOUNTING FOR REPAYMENTS OF STATE CAPITAL

1. All repayments of state capital mentioned in this Circular shall be processed through the state treasury system.

2. For the state capital under Section 1 Point 2.a, the enterprise under which level of management must repay the recognized debt to the corresponding budget.

3. The state capital under Section 1 Point 2.b must be repaid to the central budget.

4. In the case of repayment to the budget in freely convertible foreign currency, the deposit into the centralized foreign currency fund shall be carried out in accordance with Circular No. 27 TC/KBNN dated May 7, 1991, issued by the Ministry of Finance regarding the management of state foreign currency through the state treasury system. The central budget will refund the local budget the portion of capital under Section 1 Point 2.a in Vietnamese dong at the buying rate published by the Central Foreign Trade Bank at the time of refund.

5. In the case of repayment in Vietnamese dong, the repayment capital shall be accounted for according to the chapter, type, item, category, and sub-item in the State Budget Classification.

VI. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date of signature and is applicable to all joint ventures and cooperative enterprises that have been licensed and are being implemented before the issuance of this Circular.