Circular No. 27-TC/TNVT stipulates the profit distribution regime for enterprises supplying materials, commerce, and services.

CIRCULAR

OF THE MINISTER OF FINANCE NUMBER 27-TC/TNVT OCTOBER 20, 1982 REGULATING THE DISTRIBUTION SYSTEM OF PROFITS FOR ENTERPRISES SUPPLYING MATERIALS, COMMERCE, AND SERVICES

The Council of Ministers has issued Decision No. 146-HĐBT dated August 25, 1982 on amending and supplementing Decision No. 25-CP dated January 21, 1981. Based on the amendments and supplements in the aforementioned decision and to ensure a reasonable correlation between production enterprises and circulation enterprises, the Ministry of Finance regulates and guides the profit distribution system for material supply enterprises, commerce enterprises, and service enterprises (hotels, catering, laundry, haircutting, bicycle repair, motorcycle repair, radio and television repair, watch repair...) operating independently, hereinafter referred to as circulation enterprises as follows.

A. ECONOMIC AND FINANCIAL PLAN AS THE BASIS FOR PROFIT DISTRIBUTION

The business plan of circulation enterprises includes the main business plan and the auxiliary production plan (if any).

I. MAIN BUSINESS PLAN

The main business plan of an enterprise includes the basic business plan and the non-basic business plan (dependent accounting).

1. Basic Business Plan is the entire plan for goods turnover and profit belonging to the basic business according to three types of prices: supply price, state-guided price, and agreed price. All business activities and goods turnover according to the new three types of prices must be planned. When reviewing the plan, the goods turnover plan and the accumulation plan of the basic business operations including all three types of prices must be reviewed.

In the accumulation plan, it is necessary to clearly distinguish between price difference and profit.

a). For goods purchased and inventory accounted for at the state-guided price, profit is the difference between the approved commercial discount or material discount rate and the cost of circulation. Any excess over the approved discount rate is considered a price difference, and the entire price difference must be submitted to the state budget. The enterprise can only distribute profits within the approved discount rate (in other words, only profits from setting up funds from the profit standard within the discount group and item can be distributed).

The above price differences arise in two stages:

- Price Difference I arising in first-level enterprises may occur upon receipt or sale. Price difference arising upon receipt occurs when the actual purchase price is lower than the state-guided receipt price (the receipt price is the state-guided retail price or the wholesale material price minus (-) the discount); price difference arising upon sale occurs when the state-guided sale price is higher than the inventory accounting price. The entire Price Difference I must be submitted to the central budget.

- Price Difference II arising in second-level enterprises (including catering companies) is the difference between the actual state-guided sale price and the inventory accounting price. This type of difference usually arises from the local government's set selling price being higher than the centrally set selling price (for items and subjects where the local government is allowed to set a higher selling price). Generally, the entire Price Difference II must be submitted to the local budget. If Price Difference II arises due to industrial goods sold in the procurement fund being higher than the state-guided price, this difference must be used to offset the procurement price difference of agricultural products and foodstuffs that are higher than the state-guided price, with any surplus to be submitted to the budget. When the locality delivers agricultural products and foodstuffs to the central government, payment can only be made according to the state-guided price.

The Standing Office of the Council for International Cooperation on Non-Governmental Organizations (Vietnam Friendship Association) is the agency responsible for receiving registration dossiers, leading, and coordinating with member agencies of the Council to examine dossiers and return results of reviews of registration dossiers of foreign non-governmental organizations in Vietnam.)For goods purchased and sold at an agreed price,the enterprise can account for inventory at the actual purchase price (or average price). In principle, trading in such goods must cover costs and generate profit to establish funds and submit to the state budget.

The fixed profit rate for goods purchased and sold at an agreed price is determined based on the profit rate in the discount or the surplus of each group and item. Enterprises can distribute profits based on this fixed profit rate. Due to operating under the agreed price method, the accumulated earnings obtained may exceed the fixed profit rate, and the entire excess must be submitted to the state budget as a price difference.

In cases where an enterprise deals with multiple items and groups at an agreed price, each group having different fixed profit rates, the enterprise can calculate based on the weighted average profit rate of the groups and items. Alternatively, they can base it on the profit rate of the group or item with the majority sales volume to calculate for the total sales volume.

2. Non-Basic Business Plan is the entire plan for production, processing, agency... dependent on the basic business operations, which must be planned and reviewed together in the main business plan of the circulation enterprise. The accumulation from non-basic business operations must be clearly distinguished between price difference and profit as follows:

Profit is the difference between the planned cost (or standard cost) and the actual cost. The profit obtained is added to the profit of the basic business mentioned above for distribution.

Price difference is the difference between the state-guided receipt price and the planned cost (or standard cost). The entire price difference must be submitted to the state budget.

II. AUXILIARY PRODUCTION OF CIRCULATION ENTERPRISES

For circulation enterprises without auxiliary circulation operations, all such circulation-related operations must be recorded in the main business plan under Section I above (basic and non-basic business operations). In cases where circulation enterprises utilize surplus labor or waste materials collected during their business processes to produce goods for consumption, these production activities are referred to as auxiliary production of circulation enterprises. For example, catering shops may utilize wastewater and leftover food to organize livestock farming, tailor shops may use scrap fabric to make pillowcases and economical quilts, and chemical product stores may use discarded packaging to produce children's toys. Prior to incorporating collected waste materials into auxiliary production, circulation enterprises must manage and value recoveries to reduce the circulation costs of main business operations. If the State has specified that certain waste materials should be included in the distribution plan for raw materials for other units, circulation enterprises are not allowed to retain them for auxiliary production. The management and distribution of auxiliary production profits for circulation enterprises shall be applied according to the regulations on auxiliary production in industrial enterprises stipulated in Decision No. 146-HĐBT dated August 25, 1992, of the Council of Ministers and Circular No. 21-TC/CNA dated September 1, 1982, of the Ministry of Finance. Relevant ministries need to provide specific guidance on which operations constitute auxiliary production for each type of business. This requires consensus from the State Planning Commission and the Ministry of Finance. Annually and quarterly, enterprises must register their auxiliary production plans, cost prices, and selling prices with their direct supervisory authorities.

B. DISTRIBUTION OF PROFITS

I. If the main business plan targets set by the State are met , the enterprise is entitled to allocate profits according to predetermined standards to establish the following enterprise funds:

1. Business Development Incentive Fund which can be allocated from 1% to 2% of the original value of fixed assets, with the specific amount for each type of enterprise determined by the competent authority after consultation with the financial body at the same level, based on maximizing the effectiveness of the fund. If the enterprise fails to meet its profit target, the business development incentive fund will only be allocated according to the degree of completion of the profit target.

2. Welfare and Reward Funds.

Enterprises dealing in agricultural products, foodstuffs, forest products, construction materials, salt, and service enterprises can allocate 20% of the annual wage fund from the main business plan.

Industrial product trading enterprises can allocate 18% of the annual wage fund from the main business plan. The total allocation is divided as follows:

Reward Fund 70%,

Welfare Fund 30%.

3. The remaining profit must be paid into the State budget according to the periodicity prescribed by the state revenue collection agency.

II. If there is excess profit due to subjective efforts in achieving over two targets: exceeding sales volume (after excluding price factors) and reducing circulation costs, then 60% of the excess profit must be paid into the State budget, while the remaining 40% is to be added to the funds in proportion as follows:

60% to the award fund,

20% for the business development incentive fund,

20% to the welfare fund.

When determining whether an enterprise has completed its profit target, it cannot solely rely on the final report showing the achievement of profit indicators, as these indicators often fail to fully account for price differences during accounting. Therefore, strict scrutiny of the factors determining the completion of the profit target is necessary.

- Sales volume both purchased and sold, both in value and quantity, regarding value, the increase in price must be excluded, and actual purchase price must be compared with the recorded purchase price.

- Circulation costs must consider the actual expenses incurred during the period, the pre-drawn expenses, and the expenses allocated to inventory. Reduced expenses used for rewarding thrift must be accounted for. Expenses not recorded as circulation costs but instead recorded as purchase prices must also be considered.

- Losses of assets, bad debts, receivables that cannot be recovered, these items must be examined and dealt with in relation to profit targets and circulation costs. According to current regulations, when losses are caused by the unit, apart from the compensation required under the material responsibility system, some losses are counted as circulation costs, and some are counted as interest within the period.

III. In cases where enterprises fail to meet major plan targets and violate economic and financial management policies and systems, deductions will be made from the reward and welfare funds as follows:

1. If three major targets are not met as follows, for every percentage point not achieved in a target, 2% of the basic quarterly allocation amount must be deducted.

- Total sales volume purchased and sold,

- Quantity of key goods purchased and sold,

- Profit and amounts payable to the State budget (actual payment versus required payment).

Specifically, for the quantity purchased target, if it is found that purchasing goods according to the planned target would lead to accumulation, the enterprise must report this to higher authorities, and when allocating the fund, this will be exempted.

2. If the enterprise violates economic and financial management policies and systems of the State listed below, for each violation, depending on the severity, deductions ranging from 2 to 5% of the basic quarterly allocation amount for the business operation fund (including the portion of the fund drawn from excess profit if any) will be made.

- Causing damage to physical assets and capital.

- Violating economic contracts, violating State procurement and pricing systems.

- Violating reporting, accounting, statistical, and disciplinary systems for State revenue payments.

- Causing fatal accidents due to management deficiencies or lack of responsibility.

IV. If there is profit from auxiliary production, after paying taxes or state revenue, this profit will be distributed as follows: 30% to the State budget, and the remaining 70% to supplement the funds in proportion as follows:

60% to the award fund,

20% to the welfare fund,

20% for the business development incentive fund.

V. Maximum limit for the reward fund. The total annual reward fund allocated under Sections I, II, and IV above shall not exceed six months' average wage of production and business workers in the enterprise.

The amount exceeding six months' factory wage shall be retained at 30%, with 20% submitted to higher authorities (the Ministry in charge for central units, and Departments or Bureaus in charge for local enterprises) to establish a centralized financial reserve fund. The remaining 50% shall be submitted to the State budget (the Ministry of Finance will issue specific regulations on the financial reserve fund). Of the 30% retained by the enterprise, it shall be distributed as follows:

60% for the bonus fund, 20% for the welfare fund.

20% for the business development incentive fund.

VI. In cases where the enterprise has a need to increase working capital or to construct basic facilities according to the plan, the enterprise may allocate part of the profit submitted to the State budget to supplement working capital and construction funds. The allocation rate shall be determined simultaneously by the superior management agency and the financial agency at the same level when reviewing the enterprise's financial plan.

VII. If the planned profit is insufficient to establish the funds, the budget shall provide additional funding to make up the difference. If the enterprise fails to meet its plan or has its welfare and bonus funds reduced, and the combined total of both funds does not reach 60 dong per capita, then the budget shall provide assistance to ensure that the combined total reaches 60 dong per capita. For enterprises or industries without a planned profit, the enterprise's management agency and the financial agency at the same level shall refer to similar industries or sectors to establish a profit standard for the enterprise. This profit standard shall be reviewed by the Ministry of Finance (for central enterprises) and the People's Committee of the province or city (for local enterprises).

Points not amended or supplemented in this Circular shall continue to be applied according to the conditions stipulated in Circular No. 3-TC/CNXD dated March 28, 1978, and Circular No. 4-TC/VP dated March 18, 1981, issued by the Ministry of Finance. Before the management agency reviews the fund allocation ratio, it must obtain the agreement of the financial agency at the same level. Management agencies, banking agencies, and financial agencies need to strengthen financial oversight of enterprises to ensure that the establishment of enterprise funds complies with the system. If an enterprise allocates more than the allowed amount, the enterprise must return the excess; if there is no money in the fund, it shall be deducted from the next period's plan. Anyone who violates the system shall have their bonus standard revoked.

This Circular shall be uniformly applied to all circulation enterprises, material supply enterprises, trading enterprises, and independent accounting service enterprises. This Circular shall apply to profit distribution starting from 1982 onwards. All provisions related to profit distribution of circulation enterprises that conflict with this Circular shall be abolished. For independently accounting industrial, agricultural, and transportation enterprises within the circulation sector, the profit distribution system applicable to each type of enterprise shall be implemented.

During implementation, any issues encountered by sectors, levels, or enterprises shall be reported promptly to the Ministry of Finance.