Circular No. 203/2009/TT-BTC guiding the management, use, and depreciation of fixed assets

CIRCULAR

Guidelines on the management, use, and depreciation of fixed assets

_________________

||| Based on the Enterprise Income Tax Law 2008;

||| Based on Decree No. 124/2008/NĐ-CP dated December 11, 2009 of the Government detailing and guiding the implementation of certain provisions of the Enterprise Income Tax Law;

||| Based on Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

||| The Ministry of Finance issues guidelines on the management, use, and depreciation of fixed assets for enterprises as follows:

Part A

GENERAL PROVISIONS

Article 1. Scope of Application:

1. These Guidelines apply to enterprises established and operating in Vietnam in accordance with the law.

Depreciation expenses calculated in accordance with these Guidelines shall be used to determine deductible costs when calculating enterprise income tax.

2. The calculation and allocation of depreciation under these Guidelines shall be carried out for each individual fixed asset (hereinafter referred to as "TSCĐ") of the enterprise.

Article 2. Definitions Used in These Guidelines:

1. Tangible Fixed Assets: are main means of labor having material form that meet the criteria of tangible fixed assets, participating in multiple business cycles while maintaining their original physical form such as buildings, structures, machinery, equipment, transportation vehicles...

2. Intangible Fixed Assets: are assets without material form, representing invested value that meets the criteria of intangible fixed assets, participating in multiple business cycles, such as certain costs directly related to land use; costs regarding issuance rights, invention patents, utility models, copyright...

3. Financial Leased Fixed Assets: are TSCĐ leased from financial leasing companies. At the end of the lease period, the lessee has the option to purchase the leased asset or continue leasing it according to the terms agreed upon in the financial lease contract. The total lease payment for a type of asset specified in the lease contract must be at least equivalent to the value of the asset at the time the contract was signed.

All TSCĐ leased if they do not satisfy the above regulations shall be considered operational leased fixed assets.

4. Similar Fixed Assets: are TSCĐ with similar functions within the same business sector and have comparable values.

5. Original Cost of Fixed Assets:

- The original cost of tangible fixed assets is the total of all costs incurred by the enterprise to acquire tangible fixed assets up to the point where the asset is put into a ready-to-use state.

- The original cost of intangible fixed assets is the total of all costs incurred by the enterprise to acquire intangible fixed assets up to the point where the asset is put into use as planned.

6. Fair Value of Fixed Assets: is the value of the asset that can be exchanged between parties with full knowledge in an arm's length transaction.

7. Useful Life of Fixed Assets: is the period during which the enterprise plans to use the fixed asset in production and business activities or determined based on the quantity or volume of products expected to be produced from using the fixed asset according to current regulations, under normal conditions, consistent with the economic and technical parameters of the fixed asset and other factors related to the operation of the fixed asset.

8. Depreciation of Fixed Assets: is the gradual reduction in the usability and value of fixed assets due to participation in production and business activities, natural wear and tear, technological progress... during the operation of the fixed asset.

9. Accumulated Depreciation of Fixed Assets: is the total accumulated depreciation of the fixed asset up to the reporting date.

10. Depreciation of Fixed Assets: is the systematic calculation and allocation of the original cost of fixed assets into production and business costs over the useful life of the fixed asset.

11. Accumulated Depreciation of Fixed Assets: is the total accumulated depreciation allocated to production and business costs through various business periods of the fixed asset up to the reporting date.

12. Remaining Value of Fixed Assets: is the difference between the original cost of TSCĐ after deducting (-) the accumulated depreciation (or accumulated depreciation) of TSCĐ up to the reporting date.

13. Maintenance of Fixed Assets: is the maintenance, repair, and replacement of damage occurring during operation to restore the operational capacity to its initial standard state of the fixed asset.

14. Upgrade of Fixed Assets: is the activity of renovation, installation, and additional equipment to improve the production capacity, product quality, functionality of TSCĐ compared to the initial level or extend the useful life of TSCĐ; applying new production technology processes to reduce the operating costs of TSCĐ compared to before.

Part B

PROVISIONS ON FIXED ASSET MANAGEMENT

Article 3. Standards and identification of fixed assets:

1. Means of production are tangible assets with independent structures, or a system consisting of multiple individual asset parts interconnected to perform one or several specific functions, such that if any part is missing, the entire system cannot operate; if they simultaneously meet all three standards below, they shall be considered fixed assets:

a. It is certain to derive economic benefits in the future from using the asset;

b. The usage period exceeds one year;

c. The original cost of the asset must be reliably determined and have a value of VND 10,000,000 (ten million dong) or more.

In cases where a system consists of multiple individual asset parts interconnected, each component having different usage periods, and even if one part is missing, the entire system can still perform its main operational function, but due to management and usage requirements for fixed assets necessitating separate management of each part, each part meeting the three standards of fixed assets simultaneously shall be considered an independent tangible fixed asset.

For working animals and/or those producing products, each animal meeting the three standards of fixed assets simultaneously shall be considered a tangible fixed asset.

For perennial orchards, each plot of orchard trees or tree meeting the three standards of fixed assets simultaneously shall be considered a tangible fixed asset.

2. Standards and identification of intangible fixed assets:

Any actual expenses incurred by the enterprise that simultaneously meet all three standards stipulated in point 1 above, without forming tangible fixed assets, shall be considered intangible fixed assets.

Expenses not simultaneously meeting all three standards specified in Clause 1 of Article 3 of this Circular shall be directly recorded or gradually allocated to the enterprise's business costs.

Specifically, expenses arising during the implementation phase shall be recognized as internally generated intangible fixed assets if they simultaneously satisfy the following seven conditions:

a. Technical feasibility ensuring completion and putting the intangible asset into use as planned or for sale;

b. The enterprise intends to complete the intangible asset for use or for sale;

c. The enterprise has the ability to use or sell the intangible asset;

d. The intangible asset must generate economic benefits in the future;

e. There are sufficient technical, financial, and other resources to complete the implementation phases, sell, or use the intangible asset;

f. It is possible to reliably determine the total costs in the implementation phase to create the intangible asset;

g. An estimate shows that it meets the usage period and value criteria set for intangible fixed assets.

Establishment costs, employee training costs, advertising costs incurred before establishment, research phase costs, relocation costs, and business advantages are not intangible fixed assets but shall be gradually allocated to business costs over a maximum period of three years from when the enterprise begins operations.

Article 4. Determining the original cost of fixed assets:

1. Determining the original cost of tangible fixed assets:

a. Tangible fixed assets purchased:

The original cost of tangible fixed assets purchased (including new and used purchases): is the actual purchase price paid plus (+) taxes (excluding refundable taxes), direct costs incurred up to the time the fixed asset is put into a ready-for-use state such as interest on loans arising during the investment process for purchasing fixed assets; transportation and handling costs; upgrade costs; installation and trial run costs; land registration fees and other directly related costs.

In cases where tangible fixed assets are purchased on credit or installment, the original cost of the fixed asset is the immediate cash purchase price at the time of purchase plus (+) taxes (excluding refundable taxes), direct costs incurred up to the time the fixed asset is put into a ready-for-use state such as transportation and handling costs; upgrade costs; installation and trial run costs; land registration fees (if applicable).

In cases where tangible fixed assets purchased are buildings or structures attached to land use rights, the value of the land use rights must be determined separately and recorded as intangible fixed assets, while the original cost of tangible fixed assets such as buildings or structures is the actual purchase price paid plus (+) direct costs related to putting the tangible fixed asset into use.

After purchasing tangible fixed assets that are buildings or structures attached to land use rights, if the enterprise dismantles or removes them to build anew, the value of the land use rights must be determined separately and recorded as intangible fixed assets; the original cost of newly constructed fixed assets is determined based on the final settlement price of the construction project according to the current regulations on investment management and construction. Assets dismantled or removed are processed according to the current regulations for liquidation of fixed assets.

b. Tangible fixed assets acquired through exchange:

The original cost of tangible fixed assets acquired through exchange with another non-similar tangible fixed asset or other asset is the fair value of the tangible fixed asset received, or the fair value of the tangible fixed asset given up (after adding additional amounts payable or subtracting amounts receivable) plus (+) taxes (excluding refundable taxes), direct costs incurred up to the time the fixed asset is put into a ready-for-use state, such as transportation and handling costs; upgrade costs; installation and trial run costs; land registration fees (if applicable).

The original cost of tangible fixed assets acquired through exchange with a similar tangible fixed asset, or which may be formed by selling to obtain ownership of a similar asset, is the remaining value of the tangible fixed asset given up.

c. Tangible fixed assets self-built or self-produced:

The original cost of tangible fixed assets self-built is the final settlement value of the construction project when it is put into use. In cases where tangible fixed assets have been put into use but not yet settled, the enterprise records the original cost based on provisional valuation and adjusts after the completion settlement of the construction project.

The original cost of tangible fixed assets self-produced is the actual production cost of the tangible fixed asset plus (+) installation and trial run costs, other directly related costs up to the time the tangible fixed asset is put into a ready-for-use state (excluding internal interest, recovered product value during trial runs, test production, unreasonable costs such as wasted materials, labor, or other costs exceeding the prescribed standards in construction or production).

d. Original cost of tangible fixed assets from construction investment:

The original cost of tangible fixed assets formed through construction investment via tendering is the final settlement value of the construction project according to the current regulations on investment management and construction plus (+) land registration fees, other directly related costs. In cases where tangible fixed assets from construction investment have been put into use but not yet settled, the enterprise records the original cost based on provisional valuation and adjusts after the completion settlement of the construction project.

For fixed assets that are working animals or produce products, long-term orchards, the original cost is the total actual costs incurred for those animals or orchards from their formation until they are put into operation and use.

đ. Tangible fixed assets received as sponsorship, gifts, donations, or discovered surplus:

The original cost of tangible fixed assets received as sponsorship, gifts, donations, or discovered surplus is the actual value assessed by the handover committee or a professional valuation organization.

e. Tangible fixed assets received or transferred:

The original cost of tangible fixed assets received or transferred includes the remaining value of the fixed asset on the accounting books of the transferring entity or the actual value assessed by a professional valuation organization as stipulated by law, plus (+) direct costs incurred by the receiving party up to the time the fixed asset is put into a ready-for-use state such as valuation organization rental fees; upgrade, installation, and trial run costs...

g. Tangible fixed assets received as capital contribution or returned capital contribution:

The value of tangible fixed assets received as capital contribution or returned capital contribution is agreed upon by the members or founding shareholders; or agreed upon between the enterprise and the contributing party; or valued by a professional organization as stipulated by law and approved by the members or founding shareholders.

2. Determining the original cost of intangible fixed assets:

a. Intangible fixed assets purchased:

The original cost of intangible fixed assets purchased is the actual purchase price paid plus (+) taxes (excluding refundable taxes) and direct costs incurred up to the time the asset is put into use.

In cases where intangible fixed assets are purchased on credit or installment, the original cost of the fixed asset is the immediate cash purchase price at the time of purchase (excluding deferred payment interest).

b. Intangible fixed assets acquired through exchange:

The original cost of intangible fixed assets acquired through exchange with a dissimilar intangible fixed asset or other property is the fair value of the received intangible fixed asset, or the fair value of the exchanged property (after adding additional amounts payable or subtracting receivable amounts) plus (+) taxes (excluding refundable taxes), and directly related costs incurred up to the estimated date of putting the asset into use.

The original cost of intangible fixed assets acquired through exchange with a similar intangible fixed asset, or formed by selling to acquire ownership of a similar asset, is the remaining value of the exchanged intangible fixed asset.

c. Intangible fixed assets received as grant, gift, donation, or transferred:

The original cost of intangible fixed assets received as grant, gift, or donation is the initial fair value plus (+) directly related costs incurred up to the date of putting the asset into use.

The original cost of intangible fixed assets transferred is recorded at the original cost shown in the accounting books of the transferring enterprise. The receiving enterprise is responsible for recording the original cost, depreciation value, and residual value of the asset according to regulations.

d. Intangible fixed assets created internally by the enterprise:

The original cost of intangible fixed assets created internally by the enterprise is the total of directly related costs incurred up to the estimated date of putting the asset into use, including construction and trial production phases.

Specifically, internal expenses incurred for obtaining trademarks, publishing rights, customer lists, research phase expenses, and similar items that do not meet the criteria for recognizing intangible fixed assets are charged to current period operating expenses.

đ. Intangible fixed assets are land use rights:

- In cases where the enterprise is allocated land with payment for land use rights: the original cost of the land use right is determined as the total amount paid to obtain lawful land use rights, plus (+) compensation and resettlement costs, site leveling costs, and stamp duty (excluding construction project costs on the land); or the value of the contributed land use right.

- In cases where the enterprise leases land, lease payments are included in operating expenses and not recognized as intangible fixed assets. Specifically:

+ If the enterprise pays the lease fee in full for the entire lease period, it shall be gradually allocated to operating expenses over the years of the lease.

+ If the enterprise pays the lease fee annually, it shall be recorded in the current period's operating expenses corresponding to the annual lease payment.

e. The original cost of intangible fixed assets such as copyright, industrial property rights, and plant variety rights, as stipulated by the Intellectual Property Law, is the total actual costs incurred by the enterprise to obtain these rights according to intellectual property laws.

g. The original cost of fixed assets consisting of software programs:

The original cost of software programs as fixed assets is determined as the total actual costs incurred by the enterprise to obtain the software programs when they are separable components from related hardware, integrated circuit layout designs, as stipulated by intellectual property laws.

3. Financial leased fixed assets:

The original cost of financial leased fixed assets reflected in the lessee's records is the value of the leased asset at the start of the lease or the present value of minimum lease payments (if the asset's value exceeds the present value of minimum lease payments) plus (+) initial directly related costs arising from the leasing activity.

4. The original cost of fixed assets of an enterprise may only be changed in the following circumstances:

a. Revaluation of the value of fixed assets in the following cases:

- As decided by the competent state authority.

- Implementing restructuring of the enterprise, changing ownership of the enterprise, changing the form of the enterprise: division, separation, merger, consolidation, privatization, sale, contracting out, leasing, converting a limited liability company into a joint stock company, or converting a joint stock company into a limited liability company.

- Using assets to invest outside the enterprise.

b. Investment in upgrading fixed assets.

c. Removing one or more parts of fixed assets that are managed according to the standards of a single tangible fixed asset.

When changing the original cost of fixed assets, the enterprise must prepare a record detailing the basis for the change and re-determine the original cost indicators, residual value on accounting books, accumulated depreciation, useful life of the fixed assets, and proceed with accounting according to regulations.

Article 5. Principles for managing fixed assets:

1. All fixed assets in enterprises must have their own separate files (including delivery and receipt records, contracts, purchase invoices for fixed assets, and other related documents and papers). Each fixed asset must be classified, numbered, and have its own card, tracked in detail according to each recorded fixed asset, and reflected in the fixed asset tracking ledger.

2. Each fixed asset must be managed according to its original cost, accumulated depreciation, and remaining value on accounting books:

3. For unused fixed assets awaiting disposal but not yet fully depreciated, enterprises must manage, monitor, and preserve them according to current regulations and record depreciation as stipulated in this Circular.

4. Enterprises must manage fixed assets that have been fully depreciated but continue to participate in business operations as regular fixed assets.

Article 6. Classification of fixed assets of enterprises:

Based on the purpose of use, enterprises classify fixed assets according to the following criteria:

1. Fixed assets for business purposes are those fixed assets managed and used by enterprises for their business purposes.

a. For tangible fixed assets, enterprises classify as follows:

Type 1: Buildings, structures: These are fixed assets of enterprises formed through construction processes such as office buildings, warehouses, fences, water towers, sports fields, decorative works for buildings, roads, bridges, railway tracks, airport runways, shipyards, wharfs, embankments.

Type 2: Machinery and equipment: This includes all types of machinery and equipment used in enterprise operations such as specialized machines, work equipment, oil drilling platforms, cranes, production lines, individual machines.

Type 3: Transportation means and transmission equipment: These include various transportation means such as rail, waterway, road, air, pipeline transport, and transmission equipment like communication systems, electrical systems, water pipelines, conveyor belts.

Type 4: Management equipment and tools: These are equipment and tools used in enterprise management activities such as computers for management, electronic devices, measuring and quality inspection equipment, dehumidifiers, dust extractors, pest control equipment.

Type 5: Long-term crop gardens, working animals and/or product-producing animals: These include long-term crop gardens such as coffee plantations, tea gardens, rubber plantations, fruit orchards, grasslands, greenery plots; working animals and/or product-producing animals such as elephant herds, horse herds, buffalo herds, cattle herds.

Type 6: Other fixed assets: This includes all other fixed assets not listed in the above five types such as paintings, artworks.

b. Intangible fixed assets: land use rights, issuance rights, invention patents, literary, artistic, and scientific works, performance products, audio and video recordings, broadcast programs, encrypted satellite signals carrying programs, industrial designs, integrated circuit layout designs, trade secrets, trademarks, trade names and geographical indications, plant varieties and breeding materials.

2. Fixed assets for welfare, public services, security, and defense purposes are those fixed assets managed and used by enterprises for welfare, public services, security, and defense within the enterprise. These fixed assets are also classified according to the provisions set out in point 1 above.

3. Entrusted storage fixed assets are those fixed assets entrusted to enterprises for storage by other units or by the State according to the regulations of competent State authorities.

4. Depending on the management requirements of each enterprise, enterprises may further classify fixed assets within each group in accordance with their specific needs.

Article 7. Investment in upgrading and repairing fixed assets:

1. The expenses incurred by the enterprise for investing in upgrading fixed assets shall be reflected as an increase in the original cost of such fixed assets, and these expenses shall not be recorded as production and business costs for the period.

2. Expenses for repairing fixed assets shall not be reflected as an increase in the original cost of fixed assets but shall be directly recorded or gradually allocated to business costs for the period, but not exceeding three years at most.

For fixed assets where repairs are periodic, the enterprise may pre-record repair costs according to the budget into annual costs. If the actual repair expenses exceed the budgeted amount, the enterprise may record the excess as additional reasonable costs. If the actual repair expenses are less than the pre-recorded amount, the difference shall be recorded as a reduction in business costs for the period.

3. Costs related to intangible fixed assets that occur after initial recognition and are certain to increase the economic benefits of the intangible fixed asset beyond its initial level of operation shall be reflected as an increase in the original cost of the intangible fixed asset. Other costs related to intangible fixed assets that occur after initial recognition shall be recorded as production and business costs.

Article 8. Leasing, Pledging, Mortgaging, Selling, Liquidating Fixed Assets:

1. All activities of leasing, pledging, mortgaging, selling, and liquidating fixed assets must comply with current legal regulations.

2. Regarding leased fixed assets:

a. Leased operating fixed assets:

- The lessee enterprise must manage and use the fixed assets in accordance with the lease contract provisions. Lease expenses for fixed assets shall be recorded as business costs for the period.

- The lessor enterprise, as the owner, must monitor and manage the leased fixed assets.

b. For financial lease fixed assets:

- The lessee enterprise must monitor, manage, and use the leased fixed assets as if they were owned by the enterprise and must fulfill all obligations committed in the lease contract.

- The lessor enterprise, as the investor, must monitor and comply with the provisions of the financial lease contract.

c. In cases where the lease contract (including both operating leases and financial leases) stipulates that the lessee is responsible for repairing the asset during the lease term, the repair expenses for leased fixed assets may be recorded as costs or gradually allocated to business costs, but not exceeding three years at most.

4. Regarding transactions involving the sale and re-leasing of fixed assets:

- In cases where the enterprise sells and re-rents fixed assets under an operating lease, the enterprise must follow the provisions applicable to enterprises leasing operating fixed assets. Any differences arising from the agreed sale price, rental income lower or higher than the fair value shall be immediately recorded as revenue for the period of occurrence or gradually allocated to costs as prescribed.

- In cases where the enterprise sells and re-rents fixed assets under a financial lease, the enterprise must follow the provisions applicable to enterprises leasing financial fixed assets. The difference between the revenue from selling the asset and the remaining book value shall be recorded as revenue as prescribed.

Part C

PROVISIONS ON DEPRECIATION OF FIXED ASSETS

Article 9. Principles for Depreciation of Fixed Assets:

1. All existing fixed assets of enterprises must be depreciated, except for the following fixed assets:

- Fixed assets that have been fully depreciated but are still being used in production and business activities.

- Fixed assets that have not been fully depreciated and are lost.

- Other fixed assets managed by the enterprise but not owned by the enterprise (excluding financial lease fixed assets).

- Fixed assets that are not managed, monitored, or recorded in the enterprise's accounting books.

- Fixed assets used in welfare activities serving employees of the enterprise (excluding fixed assets serving employees working at the enterprise such as: rest houses during shifts, mid-shift dining rooms, changing rooms, bathrooms, clean water tanks, parking lots, medical clinics for diagnosis and treatment, vehicles for employee transportation, training centers, housing provided by the enterprise for employees).

- Land and buildings purchased with long-term land use rights granted by the state, where the value of the land use rights does not need to be depreciated.

- Intangible fixed assets from无偿援助，在移交给企业用于科学研究工作后。

- Intangible fixed assets are land use rights.

2. The depreciation expenses of fixed assets specified in Point 2.2, Section IV, Part C of Circular No. 130/2008/TT-BTC dated December 26, 2008, issued by the Ministry of Finance guiding the implementation of certain provisions of the Law on Corporate Income Tax No. 14/2008/QH12 and guiding the implementation of Decree No. 124/2008/NĐ-CP dated December 11, 2008, of the Government detailing the implementation of certain provisions of the Law on Corporate Income Tax shall not be included in reasonable expenses when calculating corporate income tax.

3. In cases where fixed assets used in welfare activities serving employees of the enterprise as stipulated in Clause 1 of Article 9 of this Circular participate in production and business activities, the enterprise shall base on the time and nature of use of these fixed assets to calculate and allocate depreciation into the enterprise's business costs and notify the directly managing tax authority for monitoring and management.

4. For fixed assets that have not been fully depreciated and are lost or damaged beyond repair, the enterprise shall determine the cause and responsibility for compensation by the collective or individual responsible. The difference between the remaining value of the asset and the compensation amount and recovered value (if any) shall be covered by the Financial Reserve Fund. If the Financial Reserve Fund is insufficient to cover the difference, the enterprise may include the shortfall as a reasonable expense when determining corporate income tax.

5. Enterprises leasing out fixed assets for operation must allocate depreciation for leased fixed assets.

6. Enterprises leasing fixed assets under financial lease arrangements (referred to as financial lease fixed assets) must allocate depreciation for leased fixed assets as if they were owned by the enterprise according to current regulations. In cases where, at the start of the lease period, the enterprise leasing financial lease fixed assets commits not to purchase the leased asset in the lease agreement, the leasing enterprise may allocate depreciation for financial lease fixed assets over the lease term specified in the agreement.

7. When re-evaluating the value of fully depreciated fixed assets for capital contribution, transfer, division, merger, conversion of business form, such fixed assets must be professionally appraised with a value not less than 20% of their original cost. The depreciation allocation period for these assets starts from the date the enterprise officially receives and puts the asset into use, with a depreciation period of 3 to 5 years. The specific period is determined by the enterprise but must be registered with the tax authority before implementation.

8. State-owned enterprises implementing the determination of enterprise value for shareholding transformation using the discounted cash flow (DCF) method, the increase in state capital between the actual value and the book value recorded in the accounting books shall not be recognized as intangible fixed assets and shall be gradually allocated to production and business costs within a period not exceeding 10 years. The allocation period begins from the date the enterprise officially becomes a joint-stock company (with a business registration certificate).

9. The allocation or cessation of allocation of depreciation for fixed assets shall commence from the day (based on the number of days in the month) when the fixed assets increase or decrease. Enterprises shall record increases or decreases in fixed assets according to current regulations on enterprise accounting systems.

Article 10. Determining the period of use for tangible fixed assets:

1. For new fixed assets (not yet in use), enterprises must base on the framework of the period of use for fixed assets prescribed in Appendix 1 issued together with this Circular to determine the period of use for fixed assets.

2. For used fixed assets, the period of use for fixed assets shall be determined as follows:

Where:

The reasonable value of TSCĐ is the actual purchase or exchange price (in case of sale or exchange), residual value of TSCĐ or value assessed by a professional valuation organization (in case of being given, presented, gifted, granted, transferred), and other cases.

3. Changing the period of use for fixed assets:

a. In the case where an enterprise wants to determine the period of use for new and used fixed assets differently from the framework of the period of use prescribed in Appendix 1 issued together with this Circular, the enterprise must prepare a Plan to change the period of use for fixed assets based on explaining the following contents:

- Technical life of TSCĐ according to design;

- Current status of TSCĐ (time TSCĐ has been in use, generation of asset, actual condition of the asset);

- Impact of increasing or decreasing depreciation of TSCĐ on production and business results and sources of funds to repay credit organizations.

b. Authority to approve the Plan to change the period of use for fixed assets:

- The Ministry of Finance approves for state-owned companies, including: parent companies of economic groups, state-owned corporations; subsidiaries held 100% of charter capital by the state; joint-stock companies held 51% or more of charter capital by the state belonging to economic groups, state-owned corporations.

- The Department of Finance approves for independent state-owned companies directly under Ministries, People's Committees of provinces, and other economic sector enterprises headquartered within their jurisdiction.

Based on the approved Plan to change the period of use for fixed assets, within 20 days from the date of approval of the Plan, the enterprise must register with the direct tax management authority for monitoring and management.

c. An enterprise may only change the period of use for TSCĐ once for each asset. Extending the period of use for TSCĐ must ensure that it does not exceed the technical life of TSCĐ and does not alter the business results of the enterprise from profit to loss or vice versa in the year of decision to change. If an enterprise changes the period of use for TSCĐ contrary to regulations, the Ministry of Finance and the direct tax management authority will require the enterprise to re-determine according to the correct regulations.

4. In cases where there are influencing factors (such as upgrading or dismantling one or several parts of fixed assets) aimed at extending or shortening the previously determined period of use for fixed assets, the enterprise shall re-determine the period of use for fixed assets according to the three criteria mentioned above at the time of completion of the transaction, and must prepare a record clearly stating the grounds for changing the period of use, and submit to the competent authority for decision in accordance with Clause b, Article 10 of this Circular.

Article 11. Determining the period of use for intangible fixed assets:

1. Enterprises shall determine the period of use for intangible fixed assets on their own, but it shall not exceed twenty years at most.

2. For intangible fixed assets that are land use rights with a term, the period of use shall be the permitted term of land use as stipulated.

3. For intangible fixed assets that are copyright, intellectual property rights, and plant variety rights, the period of use shall be the protection term recorded on the certificate of protection as stipulated (the extended protection term shall not be counted).

Article 12. Determining the period of use for fixed assets in certain special cases:

1. For investment projects under the Build-Operate-Transfer (BOT) model, the period of use for fixed assets shall be determined from the time the fixed assets are put into use until the end of the project.

2. For joint business contracts (BCC) involving foreign parties, after the expiration of the contract term, the foreign party shall transfer the fixed assets to the State of Vietnam without compensation, then the period of use for transferred fixed assets shall be determined from the time the fixed assets are put into use until the end of the project.

3. For production lines with military-specific characteristics directly performing national defense and security tasks at defense companies and security companies, the period of use for these assets shall be determined based on this Circular, by the Ministry of National Defense and the Ministry of Public Security.

Article 13. Methods for depreciation of fixed assets:

1. The contents of the straight-line depreciation method; the adjusted declining balance depreciation method; and the depreciation method based on quantity and volume of products are specified in Appendix 2 issued together with this Circular.

2. Based on the ability to meet the conditions for applying each depreciation method for fixed assets, enterprises may choose suitable methods for each type of fixed asset of the enterprise according to the provisions applicable to each depreciation method.

a. Straight-line depreciation method:

Fixed assets participating in business activities shall be depreciated using the straight-line depreciation method.

Enterprises with high economic efficiency may accelerate depreciation up to twice the straight-line depreciation rate to quickly update technology. Accelerated depreciation applies to machinery and equipment; measuring and testing tools; transportation equipment; management tools; long-lived livestock and perennial orchards. When implementing accelerated depreciation, enterprises must ensure profitability. In cases where the accelerated depreciation exceeds twice the rate specified in the period of use framework for fixed assets set out in Appendix 1 accompanying this Circular, the excess depreciation (over twice) shall not be included in reasonable expenses when calculating income tax for the period.

b. Adjusted declining balance depreciation method:

The adjusted declining balance depreciation method shall be applied to enterprises operating in sectors requiring rapid technological changes and development.

Fixed assets participating in business activities and depreciated using the adjusted declining balance method must satisfy the following conditions simultaneously:

- They are newly invested fixed assets (not previously used);

- They are types of machinery and equipment; measuring and testing tools.

c. Depreciation method based on quantity and volume of products:

Fixed assets participating in business activities and depreciated using this method must satisfy the following conditions simultaneously:

- Directly related to product manufacturing;

- The total quantity and volume of products produced according to the design capacity of the fixed assets can be determined;

- The actual average monthly utilization rate during the fiscal year is not less than fifty percent of the design capacity.

3. Enterprises must register the chosen depreciation method for fixed assets with the directly managing tax authority before implementing depreciation. If the enterprise's choice does not meet the required conditions, within thirty days from the date the directly managing tax authority receives the registration of the depreciation method for fixed assets (based on postmark), the tax authority shall notify the enterprise in writing to change the depreciation method appropriately.

4. The depreciation method selected and registered by the enterprise for each fixed asset must be consistently applied throughout its usage period unless there is a change in the way the asset is used to benefit the enterprise or a significant change in the way economic benefits are expected to be recovered for the enterprise.

In special cases requiring a change in the depreciation method, the enterprise must clearly explain the changes in the use of fixed assets and the changes in the way economic benefits are expected to be recovered for the enterprise for the fixed assets needing a change in the depreciation method, and each fixed asset may only change the depreciation method up to two times during its usage period and must obtain written approval from the directly managing tax authority.

Part D

IMPLEMENTATION

Article 14. This Circular takes effect from January 1, 2010, and replaces Decision No. 206/2003/QD-BTC dated December 12, 2003, of the Minister of Finance on the issuance of the Management, Use, and Depreciation System for Fixed Assets.

Article 15. Individuals engaged in business with fixed assets meeting all the regulations on fixed asset management in this Circular shall be allowed to depreciate fixed assets to determine reasonable expenses deductible when calculating personal income tax.

Article 16. Units under the Ministry of Finance, within their functions and responsibilities, shall be responsible for implementing, organizing, and guiding enterprises to comply with this System properly./.