Circular No. 25/2014/TT-BTC on the general valuation methods for goods and services

CIRCULAR

Specifies the general pricing methods for goods and services.

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Pursuant to the Law on Prices No. 11/2012/QH13 dated June 20, 2012;

Pursuant to Decree No. 149/2016/NĐ-CP dated November 11, 2016 of the Government amending and supplementing certain provisions of Decree No. 177/2013/NĐ-CP dated November 14, 2013 of the Government detailing and guiding the implementation of certain provisions of the Law on Prices;

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

At the proposal of the Director of the Price Management Department,

The Minister of Finance shall issue a Circular to specify the general pricing methods for goods and services.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular specifies the general pricing methods for goods and services priced by the State; goods and services listed in the price stabilization program during the period when the State implements measures to stabilize prices; goods and services when negotiating prices, examining price formation factors, and inspecting compliance with laws on prices.

2. Goods and services within the scope regulated under Clause 1 of this Article, if there are specific regulations on cost determination methods and pricing methods issued by competent authorities according to the law, shall be implemented in accordance with those regulations.

Article 2. Applicability

1. Enterprises, public institutions, cooperatives, agencies, units, individuals (referred to collectively as organizations and individuals) producing, trading, supplying goods and services specified in Clause 1 of Article 1 of this Circular.

2. State management agencies in the field of prices shall base their actions on the provisions of this Circular to:

a) Review pricing plans, decide on prices for goods and services priced by the State; goods and services listed in the price stabilization program when the State applies specific pricing measures such as maximum prices, minimum prices, or price ranges for stabilizing prices; decide on price support measures.

b) Examine price registration forms; negotiation price files; price declarations.

c) Examine price formation factors for goods and services specified in Article 26 of the Price Law; inspect compliance with laws on prices.

3. Organizations and individuals producing, trading, supplying goods and services not falling within the scope specified in Clause 1 of Article 1 of this Circular have the right to apply the pricing methods stipulated in this Circular to calculate and set prices for goods and services within their pricing authority.

Article 3. Principles of General Pricing

1. Ensuring compensation for actual reasonable production and business costs, achieving appropriate profits in line with market price levels and national policies on economic and social development that affect the prices of goods and services in each period.

Article 5. Bases for pricing

Article 4. Bases for General Pricing

Total cost, quality of goods and services at the time of pricing; expected profit level; approved price adjustment schedule for goods and services.

2. Supply and demand relationship for goods and services and purchasing power of money; consumers' payment capacity;

3. Domestic and international market prices (if applicable) and competitiveness of goods and services at the time of pricing; international commitments on prices (if applicable).

Chapter II

GENERAL PRICING METHODS FOR GOODS AND SERVICES

Section 1

 PRICING METHODS, SELECTION OF PRICING METHODS

Article 5. Pricing Methods, Selection of Pricing Methods

1. The general pricing methods for goods and services specified in this Circular include comparison method and cost method.

2. Based on the characteristics and usage value of each type of goods and service, specific conditions regarding production and business, market conditions, and circulation of goods and services, organizations and individuals select appropriate pricing methods for the goods and services they need to price.

Section 2

COMPARISON METHOD

Article 6. Definitions

1. Comparative method is a valuation method for goods and services based on the results of analyzing and comparing the price levels and economic and technical characteristics significantly affecting the prices of the goods and services to be valued with similar goods and services traded in the domestic market; reference may also be made to prices in regional and global markets (if available).

2. Similar goods and services are goods and services of the same type, identical or similar to the goods and services to be valued in terms of basic characteristics such as: purpose of use, economic and technical features, shape, size, construction principle, main technical parameters, quality, origin, production time, manufacturing technology, legal characteristics, etc.

Article 7. Comparative factors

1. The factors for analysis, comparison, and adjustment of prices are the main factors influencing the prices of the goods and services to be valued, including:

a) Transaction prices of similar goods and services on the market under normal conditions (without economic crises, natural disasters, enemy attacks, fires, epidemics), tied to the transaction time and conditions (market conditions, buying and selling conditions, delivery and payment conditions, exchange rates, consumer price indices, etc.) and state policies affecting the prices of goods and services.

b) Basic characteristics of goods and services such as: main economic and technical features of goods and services, usage status, quality, origin, production time, usage time, legal characteristics, purpose of use, and other relevant comparative parameters.

2. The transaction prices of similar goods and services collected closest to the valuation date shall be based on at least one of the following documents:

a) Information sources published or provided by authorized agencies, organizations, or individuals; pricing decisions of organizations or individuals within their authority; actual successful transaction prices of organizations or individuals;

b) Import prices according to Customs Declaration forms or provided by the Customs Authority; prices recorded on Sales Invoices as prescribed;

c) Auction-winning prices, bidding prices; prices determined by organizations with appraisal functions;

d) Listed prices; declared prices; advertised prices;

đ) Prices recorded on quotation or tender forms from at least three supplying units; approved budget estimates for producing goods and providing services;

e) Reference prices from legitimate information provided by suppliers in accordance with Vietnamese law obtained through the Internet; through mass media; through commercial attachés of Vietnam in foreign countries;

g) Market survey results conducted by organizations or individuals carrying out surveys. In cases where individuals conduct surveys, a Survey Form attached to this Circular must be filled out. In cases where organizations collaborate on surveys, the survey results must be documented in a survey record signed by all collaborating parties.

3. The results of analysis, comparison, and price adjustment based on the comparable factors of similar goods and services shall be used to determine the price of the goods and services to be valued.

4. When implementing the comparative method, organizations or individuals may refer to the Vietnamese Appraisal Standards.

Article 8. Basic steps to conduct valuation using the comparative method

Step 1. Determine general information about the goods and services to be valued (quantity, type, characteristics, and key economic-technical parameters, usage period, actual condition at the time of valuation, and other relevant information); identify the main comparative factors that significantly affect the price of the goods and services to be valued; engage an organization with the function of appraising the economic-technical condition and quality of the goods and services to be valued (if necessary).

Step 2. Study the market, collect information on prices and related information about similar goods and services from sources of information as stipulated in Article 7 of this Circular; analyze the sources of information to select at least three (03) similar goods and services for comparison (if available). In cases where there are not enough three (03) similar goods and services for comparison, the comparison shall be made based on the actual number of collected items.

Step 3. Analyze the prices and related information of similar goods and services; analyze the main comparative factors affecting the price of the goods and services to be valued.

In cases where it is not possible to determine the adjustment ratio and specific adjustment level of the comparative factors: explain the basis for calculation and draw conclusions regarding the price of the goods and services to be valued.

In cases where the adjustment ratio and specific adjustment level of the comparative factors can be determined, the price adjustment shall be carried out according to the principle:

a) Taking the goods and services to be valued as the standard to adjust the prices of the comparative goods and services according to the characteristics of the goods and services to be valued;

b) The price adjustment shall be carried out based on the differences of each comparative factor, while fixing the remaining comparative factors (considered identical), each adjustment level according to each comparative factor must be proven from the collected market information, specifically:

- For factors in the comparative goods and services that are inferior compared to the goods and services to be valued, the price shall be adjusted upwards (added) based on the unit price of the comparative goods and services;

- For factors in the comparative goods and services that are superior compared to the goods and services to be valued, the price shall be adjusted downwards (subtracted) based on the unit price of the comparative goods and services;

- The adjustment of the difference in comparative factors may be carried out either in absolute monetary terms or as a percentage increase or decrease relative to the market price of the comparative goods and services;

- The net total adjustment value of the comparative goods and services is the sum of the individual adjustments according to each comparative factor, with negative signs (decrease) and positive signs (increase);

- The price of the goods and services after adjustment equals the price of the comparative goods and services plus (+) or minus (-) the net total adjustment value of those comparative goods and services;

c) Determine the price of the goods and services to be valued by taking the representative price after adjustment of the comparative goods and services or by the average price of the adjusted prices of the comparative goods and services:

The representative price of the comparative goods and services is the price after adjustment of each selected comparative goods and services based on the following criteria:

- Comparative goods and services with the fewest price adjustments;

- Comparative goods and services with the smallest adjustment ratio for each comparative factor;

- Comparative goods and services with the smallest net total adjustment value;

Table 1: Price Adjustment Table According to Comparative Factors and Determination of the Price for Goods and Services to be Valued

Section 3

COST METHOD

Article 9. Definitions

The cost method is a pricing method based on actual reasonable and valid production and business costs, and anticipated profit levels (if applicable), consistent with market price levels and state policies affecting the prices of goods and services.

Article 10. Determining the price of goods and services

1. For domestically produced goods and services:

The price of domestically produced goods and services is determined according to the following formula:

a) Total cost (Z) is determined in accordance with the provisions of Article 11 of this Circular.

b) Anticipated profit is determined in accordance with the provisions of Article 13 of this Circular.

c) Special consumption tax, value-added tax, other taxes (if applicable) in accordance with current tax laws.

2. For imported goods and services:

The price of imported goods and services is determined according to the following formula:

a) Import cost (G_V) is determined according to the following formula:

Where:

- The purchase price at the Vietnamese customs port (CIF price) equals [the actual purchase price in the foreign market plus the costs incurred to bring the goods to Vietnam (including international insurance costs, international freight costs) plus other costs required to be added according to regulations (if applicable) minus other costs required to be deducted according to regulations (if applicable) from the value of imported goods for calculating import duties as prescribed] multiplied by the exchange rate for converting foreign currency.

The exchange rate for converting foreign currency is calculated based on the actual exchange rate that organizations and individuals have settled with the Bank (where the organization or individual conducts transactions) when borrowing or purchasing foreign currency to buy goods. In cases where organizations and individuals have not yet settled with the Bank, it is calculated based on the selling exchange rate of the commercial bank where the organization or individual has borrowed or purchased foreign currency at the time of pricing.

For the maximum purchase price plan and minimum sales price plan for national reserve goods, the State Reserve Administration establishes the pricing plan, and the foreign currency exchange rate is calculated based on the selling exchange rate published by the Vietnam Commercial Joint Stock Bank at the time of pricing or the nearest date to the pricing time.

- Import tax, special consumption tax, other taxes and fees arising at the import stage (if applicable) shall be determined in accordance with current tax laws.

- Other monetary expenses as prescribed (if applicable).

b) Selling expenses, management expenses, financial expenses (if applicable) are determined in accordance with the provisions of Article 11 of this Circular.

c) Anticipated profit is determined in accordance with the provisions of Article 13 of this Circular.

d) Value-added tax, other taxes (if applicable) in accordance with current tax laws.

Table 2. Calculation table for costs and total cost of imported goods and services

Article 11. Determination of costs and total cost of domestically produced and traded goods and services

Production and trading costs and total cost of goods and services (hereinafter referred to as products) serving as the basis for pricing are determined based on cost factors or cost items as follows:

Table 3. Calculation table for costs and total cost of domestically produced and traded goods and services

The contents of each cost item are determined in accordance with current laws, specifically as follows:

1. Direct material costs

Direct material costs include direct material, material, fuel, power, tools, equipment... (hereinafter collectively referred to as material costs) and are determined based on the level of material consumption and the price of materials:

Material cost = Level of material consumption x Price of materials

a) Material consumption rates are determined based on economic-technical norms as follows:

- For products that already have economic and technical norms prescribed by competent state authorities, these norms shall be applied.

- For products without economic and technical norms prescribed by competent state authorities, norms shall be established by the Board of Directors (BOD) or the Board of Members (BOM) for enterprises with a BOD/BOM, or the General Director (Director) of the enterprise, or the head of the unit, and they shall bear legal responsibility for the accuracy of the economic and technical norms applied, ensuring the principles of thrift and efficiency.

- The level of material consumption refers to tools and equipment used in production and business with a value greater than one year's usage period, which should be gradually allocated to production and business costs.

b) The price of materials is determined as follows:

Social insurance, health insurance, unemployment insurance, trade union fees, and other expenses for direct workers handling solid waste are governed by current laws (including amounts paid by employees and those paid by enterprises).

- For products that are not subject to value-added tax or are subject to value-added tax under the direct method, the price of materials includes value-added tax.

- The price of materials used to calculate the product price is determined in accordance with the standards, types, and quality of materials used, linked to the location of product production. Specifically, as follows:

+ For materials priced by the State: calculated based on the State-prescribed price plus reasonable circulation costs (if applicable);

+ For externally purchased materials: if there are no complete invoices and receipts as prescribed, the price is calculated based on the lowest price from sources such as market prices provided by organizations with relevant functions; or quoted prices from manufacturers, supplier information; if there are complete invoices and receipts as prescribed, the price is calculated based on the price applied to similar products in the same area (region) with the same standards and quality; or the purchase price recorded on the invoice, or the winning bid price, auction price, listed price plus reasonable and valid costs to deliver materials to the company warehouse (if applicable).

For directly imported materials used in production: calculated based on the import cost as stipulated in point a, clause 2, Article 10 of this Circular plus actual reasonable costs to deliver materials to the company warehouse (if applicable).

For self-made materials: Calculate based on the actual price at which they leave the warehouse plus (+) the actual costs incurred during the process of putting them into production (if any).

For materials processed under outsourcing contracts: Calculate based on the actual price at which they leave the warehouse for processing plus (+) processing fees plus (+) reasonable costs to bring the materials back to the company's warehouse (if any).

The prices of various types of materials and expenses related to processing, transportation, storage, procurement, etc., must be recorded on invoices and documents in accordance with the provisions of the law. In cases where materials are agricultural, forestry, or aquatic products purchased directly from producers without invoices, the buyer must prepare a purchase list detailing the name, address of the seller, quantity of goods, unit price, total amount; signed by the seller and approved by the head of the unit, General Director (Director) of the enterprise in accordance with accounting, statistical laws, tax laws, and other relevant laws.

2. Direct labor costs

Direct labor costs include amounts payable to direct production workers such as wages, salaries, and allowances with the nature of wages, social insurance, health insurance, unemployment insurance, and trade union fees, etc., of direct production workers in accordance with the Labor Code and related legal documents.

Direct labor costs in product prices are determined based on labor norms and wage rates.

Direct labor costs = Labor norm x Wage rate or salary rate

- Labor norm:

For products that have labor norms prescribed by competent state agencies, apply those labor norms.

For products that do not have labor norms prescribed by competent state agencies, apply labor norms established by the Board of Directors/Board of Management for enterprises with a Board of Directors/Board of Management or by the General Director (Director) of the enterprise or the head of the unit, who are responsible for the accuracy of the applied labor norms, ensuring the principles of thrift and efficiency.

- Wage rate or salary rate:

The wage rate is implemented according to current laws on wages.

For organizations paying wages through employment contracts or collective labor agreements, the wage costs payable to employees are based on the employment contract or collective labor agreement.

b) Depending on actual conditions and requirements, wage costs can be determined based on the wage fund and total revenue, or total revenue minus total costs excluding wages or profits, or per unit of product, or other production and business performance indicators suitable for the nature of the organization's activities, following the guidelines of the Ministry of Labor, Invalids, and Social Affairs.

3. Direct depreciation costs for machinery and equipment

Implement the regulations of the Ministry of Finance regarding management, use, and depreciation of fixed assets and the schedule for incorporating depreciation costs into product prices as prescribed by the competent authority (if applicable).

If direct depreciation costs for machinery and equipment serving production and business operations have already been included in the general production costs of the enterprise, they shall not be counted again hereunder.

4. Production and business costs specific to each industry and field (not counted in points 1, 2, and 3 above)

Determining production and business cost levels for products in specialized industries (such as editorial costs, printing costs, creation costs, stage production costs, performance costs, textbook compilation costs, feed costs in animal husbandry, fertilizer costs in crop cultivation, etc.) shall be carried out in accordance with specialized laws.

5. General production costs for enterprises

a) General production costs include common costs incurred in workshops, departments, teams, etc., serving the production of products and service provision, including:

Workshop staff costs: These are amounts payable for wages and allowances for workshop managers, department heads, team leaders; midday meal costs for workshop managers, department heads, team leaders; social insurance, health insurance, unemployment insurance, and trade union fee contributions calculated according to the current ratio on the wages payable to workshop staff, department heads, team leaders, etc.

Workshop material costs: Materials used for repairing and maintaining fixed assets, tools, and equipment managed and used by the workshop, temporary shed costs, etc.

Tool and equipment costs: Used for the management activities of workshops, departments, teams, etc.

Depreciation costs for fixed assets directly used in product production and service provision and shared fixed assets used in workshop, department, team, etc. activities (if already counted in Clause 3 of this Article, they shall not be counted again hereunder).

External service costs for workshop, department, team, etc. activities, including repair costs for fixed assets, external rental costs, electricity, water, telephone costs, fixed asset rental costs, payments to contractors (if any).

Other monetary costs outside those mentioned above for workshop, department, team, etc. activities.

b) Methods for determining certain costs within general production costs

Material and tool costs and direct labor costs are calculated according to the provisions of Clauses 1 and 2 of this Article.

Fixed asset depreciation costs are implemented according to the regulations of the Ministry of Finance on the management, use, and depreciation of fixed assets.

6. Selling expenses

a) Selling expenses include actual costs incurred (if any) during the sale of goods and provision of services:

Costs payable to sales personnel, packaging personnel, transporters, and product storage personnel, including wages, midday meal costs, salaries, and social insurance, health insurance, unemployment insurance, and trade union fees, etc.

- Material costs and packaging expenses for product storage, consumption such as product packaging material costs, material and fuel costs for storage, handling, and transporting products during consumption, materials for repairing and maintaining fixed assets... used for the sales department.

- Tool and equipment costs serving the product consumption process such as measuring tools, computing devices, working equipment...

- Depreciation costs of fixed assets in the storage and sales departments, such as warehouses, stores, docks, loading and unloading equipment, transportation equipment, computing and measuring devices, quality testing equipment...

- Product warranty costs.

- External service costs for sales activities such as outsourcing repair costs for fixed assets directly serving the sales process, warehouse rental fees, dock rental fees, product transportation fees for sale, commission fees paid to sales agents, export consignment units...

- Other monetary costs arising in the sales process other than those mentioned above such as hospitality costs in the sales department, product introduction costs, advertising, marketing costs, customer conference costs...

Among the aforementioned sales expenses, any expense that has economic and technical norms established by competent state agencies, with state regulations or laws (tax, accounting, statistics laws and related laws) and state-set prices shall be calculated according to these regulations. For expenses without such provisions, the Chairman of the Board of Directors/Board of Management or General Director (Director) of the enterprise, or the head of the agency/unit must approve them in accordance with the law, ensuring economy, efficiency, and having valid invoices and receipts as stipulated by the Law.

For national reserve goods, public utility products, services ordered by the State, production plans assigned and settled from the state budget, no advertising, marketing, promotional, commission, and agent fees can be included in the cost calculation.

b) Method for determining some sales expenses

Material and tool costs and direct labor costs are calculated according to the provisions of Clauses 1 and 2 of this Article.

- Fixed asset depreciation costs are implemented according to Clause 3 of this Article.

7. Financial Costs

Financial costs included in the pricing plan are interest payments on loans (if any) directly related to the production and business of the product whose price needs to be determined and exchange rate differences (if any) during the purchase of materials and goods, allocated to each unit of the product or service.

For national reserve goods, public utility products, services ordered by the State, production plans assigned and settled from the state budget, and other goods and services fully funded by the State or organizations in advance for implementation, loan interest payment costs cannot be included.

11. Value-added tax and other taxes (as applicable)

a) Administrative expenses include:

- Managerial staff costs including payments to management personnel such as salaries, allowances, social insurance, health insurance, unemployment insurance, and trade union fees of the Board of Directors, management staff in various departments.

- Material costs for administrative work such as office supplies, materials used for repairing fixed assets, tools, and equipment...

- Office supplies costs for management activities.

- Depreciation costs of shared fixed assets such as office buildings of various departments, warehouses, architectural structures, transportation and transmission facilities, management machinery and equipment used in offices.

- Taxes, fees, and charges such as business license tax, land rent... and other fees and charges.

- Provisional costs (if any) including difficult-to-collect receivables provisions and payable provisions included in production and business costs.

- External service costs for administrative work; costs for purchasing and using technical documents, patents... (not meeting criteria for fixed asset recognition) are calculated through gradual allocation to administrative costs; rental fees for fixed assets, contractor payment costs (if any).

- Other common administrative costs outside those mentioned above such as conference costs, hospitality costs, travel expenses, female employee costs, research and training costs, association membership fees, and other reasonable costs.

Among the administrative costs, any expense that has economic and technical norms, policies, and regulations established by competent authorities or laws (tax, accounting, statistics laws and related laws) and state-set prices shall be calculated according to these regulations; for expenses without such norms and procurement principles, the Chairman of the Board of Directors/Board of Management or General Director (Director), or the head of the agency/unit must approve and bear responsibility for their decisions.

b) Method for determining some administrative expenses

Material and tool costs and direct labor costs are calculated according to the provisions of Clauses 1 and 2 of this Article.

- Fixed asset depreciation costs are implemented according to Clause 3 of this Article.

9. Allocation of expenses

For common costs and costs related to multiple products that cannot be separated, such as fixed asset depreciation; salaries, social insurance, health insurance, unemployment insurance, and trade union fees; sales costs, business administration costs,... they need to be aggregated and allocated according to appropriate criteria consistent with relevant legal provisions for each product.

10. Allocation of Production Costs to By-products Obtained in the Same Production Process as the Main Product

The allocation of costs to by-products is carried out based on the principle that by-products recoverable during production for sale or further use as raw materials for producing other products must have production costs allocated to them to be deducted from the main product's production costs. If by-products cannot be recovered for sale or use, no cost allocation is required.

Article 12. Expenses not to be included in reasonable costs for determining product cost

1. Expenses not to be included in reasonable and legitimate costs for determining product cost shall be implemented in accordance with the current laws on expenses not deductible when determining taxable income for corporate income tax and expenses not to be included in production costs and product cost as prescribed by relevant legal documents.

2. Expenses that have been guaranteed by the state budget; expenses already included in the price of other products or services of organizations or individuals.

Article 13. Anticipated Profit

1. Based on the provisions of Article 3 of this Circular, organizations and individuals engaged in the production and business of goods and services anticipate a profit margin or a reasonable level of profit (if any) to ensure that the determined selling price of goods and services does not exceed the market selling price (for goods and services with a market price).

The profit margin is the percentage (%) of profit calculated on total cost; or on selling price; or on revenue; or on equity or State investment capital allocated by the owner's representative (allocated to each unit of goods or service).

2. Method for determining a reasonable level of profit

a) For goods and services circulating in the market or similar goods and services produced and circulated in the market, the maximum anticipated profit level or maximum anticipated profit margin is determined based on the audited financial statements or the most recent settlement report closest to the valuation date of businesses producing and trading similar goods and services, or determined based on referencing industry data or actual data from the previous years of the business.

b) For goods and services (produced or imported) ordered by the State or assigned plans that have not yet circulated in the market or do not have similar goods and services produced and circulated in the market, the anticipated profit level after paying corporate income tax must ensure the establishment of two welfare funds and a reward fund according to current laws; or the anticipated profit level should not exceed the actual profit level or actual profit margin (audited or settled) closest to the valuation date for other goods and services that the business has been and is currently producing and trading.

Chapter III

IMPLEMENTATION AND EFFECTIVE PROVISIONS

Article 14. Implementation Organization

1. The Ministry of Finance shall take the lead and coordinate with relevant agencies to direct, guide, and inspect the implementation of the provisions of this Circular and related legal documents.

2. Provincial Departments of Finance under the central government shall be responsible for leading and coordinating with relevant functional agencies to organize the implementation and inspection of the provisions of this Circular within their localities.

Article 15. Implementation Provisions

This Circular takes effect from April 15, 2014, and replaces Circular No. 154/2010/TT-BTC dated October 1, 2010, issued by the Minister of Finance on the Regulation on Pricing of Assets, Goods, and Services.

During the implementation process, if there are any difficulties, agencies, organizations, and individuals are requested to promptly reflect them to the Ministry of Finance for resolution./.