Circular No. 27/1999/TT-BTC guiding the financial management regime for Airports Clusters (state-owned enterprises operating public services)

CIRCULAR

Guidelines on Financial Management for Airports Clusters

(State-owned Enterprises Engaged in Public Services)

Pursuant to Decree No. 56/CP dated October 2, 1996 of the Government on state-owned enterprises engaged in public services;

Pursuant to Decision No. 113/1998/QĐ-TTg dated July 6, 1998 of the Prime Minister on transferring the Northern, Central, and Southern Airport Clusters from revenue-generating public institutions to state-owned enterprises engaged in public services, and Decision No. 258/1998/QĐ-TTg dated December 31, 1998 of the Prime Minister on amending and supplementing Decision No. 113/1998/QĐ-TTg dated July 6, 1998 of the Prime Minister;

Pursuant to Circular No. 06 TC/TCDN dated February 24, 1997 of the Ministry of Finance guiding financial management for state-owned enterprises engaged in public services.

To be consistent with the specific characteristics of operations in the field of managing and operating infrastructure at airports, the Ministry of Finance provides guidance on certain aspects of financial management for airport clusters as follows:

I. GENERAL PROVISIONS

- Airport clusters are state-owned enterprises engaged in public services, tasked with managing and operating airports to provide air transport services and public services according to state policy, as planned by the state, and at prices set by the state. They shall implement the financial regime prescribed in Circular No. 06 TC/TCDN dated February 24, 1997 of the Ministry of Finance "Guidelines on Financial Management for State-owned Enterprises Engaged in Public Services" and the specific provisions of this circular.

- In addition to their public service tasks, airport clusters have the right to organize additional business activities in accordance with their Articles of Operation, in line with their capacity and market demand, subject to the following conditions:

+ Approval in writing by the Civil Aviation Administration of Vietnam.

+ Not affecting the fulfillment of assigned public service tasks.

+ Registration of additional business activities in accordance with current regulations.

+ Separate accounting for additional business activities.

+ Fulfillment of tax obligations for additional business activities in accordance with the law.

II. SPECIFIC PROVISIONS

A. FINANCIAL RESULTS AND DISPOSITION OF FINANCIAL RESULTS

1. Revenue: The revenue of airport clusters includes revenue from public service activities, revenue from production and business operations (if any), and other activities.

1.1. Revenue from public service activities:

Revenue from public service activities of airport clusters includes:

a. Revenue from providing services at airports:

- Charges for ground technical commercial services

- Charges for aircraft takeoff and landing control

- Charges for aircraft parking space usage

- Charges for passenger services

- Charges for passenger check-in counter rental

- Charges for concession rights

- Charges for specialized equipment rental

- Security screening charges

- Charges for supplementary air traffic control services for transit flights

- Charges for terminal building space rental

- Charges for vehicle parking space

- Charges for space rental outside the terminal building

- Charges for advertising space rental

- Other charges.

b. Fees and surcharges (if applicable)

c. Revenue from state subsidies and price supports (if applicable) and other revenues.

The content and rates of revenue from public service activities of airport clusters shall be implemented in accordance with Joint Circular No. 171/1998/TTLT/BVG-CAAV dated February 7, 1998 of the Government Price Control Board and the Civil Aviation Administration of Vietnam, and specific regulations of the Civil Aviation Administration of Vietnam.

1.2. Revenue from business operations and other activities: Apply the provisions for state-owned enterprises engaged in business operations.

2. Expenses: The expenses of airport clusters include expenses for public service activities, business operations, and other activities.

2.1. Expenses for public service activities: Expenses for public service activities of airport clusters include:

- Wages and allowances

- Social insurance, health insurance, trade union fees

- Raw material, fuel, and power costs

- Purchase and supply expenses for labor tools.

- Depreciation of fixed assets

- Major repairs of fixed assets

- Maintenance and regular repair costs of fixed assets

- Training and application of specialized science and technology costs

- Costs for ensuring operational management

- Flight calibration equipment costs

- Land tax costs

a) Quarterly, the Ministry of Public Security shall report the revenue, expenditure, and balance on the temporary account from the reorganization of houses and land to the Ministry of Finance for monitoring and consolidation.

2.2. The contents of business operation costs and other activity costs are implemented according to the regulations applicable to state-owned enterprises engaged in business operations.

3. Financial income and expenditure management of airport clusters

- Airport clusters may use revenue to offset expenses, including: Revenue from public service activities is used to offset expenses for public service activities, taxes payable under the law (excluding corporate income tax). Special fees and surcharges are managed in accordance with state regulations on fee and surcharge management. Revenue from business operations and other activities is used to offset the total cost of consumed products and services, other expenses, taxes, and national payments as stipulated by law (excluding corporate income tax). Business operations must maintain separate accounting records for revenue, expenses, and financial results of these activities, and cannot use the financial results of public service activities to cover losses (if any) of business operations.

- Receipt vouchers are issued by the Ministry of Finance (General Department of Taxation); in cases where special receipt vouchers are used, airport clusters must register with the tax authority before implementation.

4. Disposition of financial results:

4.1. Airport clusters are state-owned enterprises engaged in public services, the difference between income and expenses is handled as follows:

a. Pay corporate income tax according to the law.

b. Deduct fines for violations of budget submission discipline, administrative violations, breach of contract penalties, overdue payment penalties, and legitimate expenses not deducted when determining taxable profit.

c. Offset unabsorbed losses prior to pre-tax profit.

d. The remaining profit after deducting items a, b, and c above, airport clusters may establish funds at the following ratios and limits:

+ Development Investment Fund: minimum extraction rate of 50%

+ Financial Reserve Fund: Extraction rate of 10%, the balance of this fund shall not exceed 25% of the registered capital.

+ Two welfare and incentive funds up to a maximum of three months' actual salary if the annual tax payment reported is higher than the previous year, and two months' actual salary if the annual tax payment reported is equal to or lower than the previous year.

After deducting items a, b, c, and d, if the profit allocated to the development investment fund and the financial reserve fund still leaves a surplus after setting aside for the reward and welfare funds, the remaining difference shall be transferred entirely to the development investment fund. If there is not enough source to allocate two reward and welfare funds equal to two months' actual salary, the Airports Group shall be provided with the necessary amount by the State.

4.2. For Airports Groups with revenue insufficient to cover expenses or with profits but insufficient to allocate two reward and welfare funds equal to two months' actual salary, the following measures shall be taken:

4.2.1. After using 50% of the operating profit and other activities' profits to offset losses, if there is still a deficit, the State shall support by:

- Subsidize the remaining loss.

- Providing two reward and welfare funds equal to two months' actual salary.

4.2.2. The remaining profit after deducting operating activities and other activities shall be allocated to the development investment fund at 80% and the financial reserve fund at 20%.

B. FINANCIAL PLAN

Annually, based on the regulations and guidelines of the financial authority, Airports Groups must prepare reports:

- Production and business plan including public service activities and other business activities according to the prescribed state regime.

- Financial income and expenditure budget (including subsidy and price support plans, if applicable).

These reports shall be submitted to the Civil Aviation Administration of Vietnam, the Ministry of Finance, and the tax authority. After receiving a written agreement from the Ministry of Finance, the Civil Aviation Administration of Vietnam will approve and assign the annual plan to the Airports Groups while organizing the implementation of the financial income and expenditure budget and ensuring the government revenue collection plan.

C. AUDITING AND PUBLIC DISCLOSURE OF FINANCIAL REPORTS

1. Preparing financial reports.

- Quarterly and annually, Airports Groups are responsible for preparing financial reports in accordance with current regulations. The General Director of the Airports Groups shall be accountable to the State and the law for the accuracy and truthfulness of the financial reports.

- Quarterly and annual financial reports shall be sent to the Civil Aviation Administration of Vietnam, local tax authorities, the State Capital and Asset Management Authority at enterprises, and statistical agencies according to the content and forms stipulated in Decision No. 1141TC/QĐ-CĐKT dated November 1, 1995, issued by the Minister of Finance regarding the accounting system for state-owned enterprises.

2. Auditing financial reports.

- Quarterly and annually, Airports Groups must self-audit their accounting and financial reports.

- The Civil Aviation Administration of Vietnam and the State Capital and Asset Management Authority at enterprises shall be responsible for organizing the audit and approval of the annual financial reports of regional Airports Groups.

- The Financial Authority has the duty to inspect compliance with financial systems, accounting practices, revenue discipline, and the accuracy and truthfulness of financial reports.

- Violations of accounting systems, financial income and expenditure systems, revenue discipline, and the establishment and use of enterprise funds shall be subject to administrative and economic penalties as prescribed by law.

3. Public disclosure of annual financial reports.

- Based on the approved annual financial report, Airports Groups shall publicly disclose certain financial indicators before the workers' and staff congress of the enterprise.

- The content of the disclosed indicators shall comply with Circular No. 06 TC/TCDN dated February 24, 1997, issued by the Ministry of Finance.^.

III. IMPLEMENTATION PROVISIONS

1. In addition to the provisions of this Circular, regional Airports Groups shall also implement other legal provisions applicable to state-owned enterprises.

2. This Circular shall take effect from January 1, 1999. All previous regulations concerning financial management of Airports Groups that conflict with this Circular shall be abolished.

3. During the implementation process, if there are any difficulties, enterprises are advised to promptly reflect them to the Ministry of Finance for research, revision, and supplementation to ensure compliance.