Circular No. 31/TC-NLTL guiding the profit distribution regime and the establishment of funds in state-owned agricultural enterprises

CIRCULAR

Guidelines for profit distribution and establishment of enterprise funds in state-owned agricultural enterprises

Implementing the Council of Ministers' Decision No. 76-HĐBT dated June 26, 1986, temporarily regulating the financial autonomy rights of grassroots economic units, after consultation with the Ministry of Agriculture and the Ministry of Finance, guidelines for profit distribution and fund establishment in state-owned agricultural enterprises (hereinafter referred to as agricultural enterprises) operating independently are as follows:

II- SUPPORT MEASURES FOR STATE-OWNED AGRICULTURAL FARMS AND FORESTRY COMPANIES IN THE FIELD OF SCIENCE AND TECHNOLOGY

1. The profit distribution system for agricultural enterprises is based on the actual profits generated by the unit, taking into account objective factors in agricultural production such as weather conditions, cultivation conditions, soil fertility, and the completion of legal plan indicators. The principle of distribution according to labor and fairness between enterprises, between crop farming and animal husbandry, harmonizing the interests of the State, the collective enterprise, and individual workers is applied.

Through the profit distribution system for agricultural enterprises, it is necessary to encourage units to fully exploit the capacity of orchards, livestock herds, and poultry throughout the planned year, but at the same time, attention must be paid to intensive farming for long-term benefits.

2. The basis for implementing the profit distribution system is the planned profit and the actual profit achieved by the agricultural enterprise:

- Annual planned profit of the enterprise is determined based on the total planned revenue calculated at the selling price of products (after deducting any price differences if applicable), minus the total planned cost and state revenue (or tax) payable.

The planned profit of the agricultural enterprise includes all profits from production activities such as main production, sideline production, and profits from self-built basic construction projects like land reclamation, new planting, and care during the initial construction period, which must be planned within a unified production-technical-financial plan of the unit.

- Actual profit of the enterprise includes the aforementioned profits and is determined based on the total actual revenue minus the approved actual costs, minus state revenue (including additional state revenue) or tax, and any revenue from price differences (between planned selling price and actual selling price) if applicable.

3. Profits from sideline production using waste materials, utilizing land for intercropping to improve soil quality, etc., are distributed according to encouraging ratios, while remaining profits are distributed according to uniform ratios.

Excess profits over the plan are encouraged with a higher percentage retained by the enterprise.

Conversely, if the enterprise fails to meet legal plan targets, deductions will be made from the profit retained by the enterprise to prevent the enterprise from solely pursuing profit, increasing reported profit without adequately implementing intensive farming procedures, thus failing to meet quantity and quality product targets, causing long-term harm to orchards and livestock herds.

4. The basis for calculating the amount to be set aside for enterprise funds is the actual profit of the enterprise, while the condition for establishing enterprise funds is the profit paid to the state budget and other major legal plan indicators.

Enterprises are allowed to establish three funds promptly each quarter of the year, after fulfilling their state budget payment obligations according to the plan.

5. Expanding the scope of profit use, the scope of use for the development incentive fund, welfare fund, and reward fund, to enhance the enterprise's autonomy in using retained profits.

II - DISTRIBUTION OF PROFITS AND ESTABLISHMENT OF ENTERPRISE FUNDS

1. Planning profit distribution:

The total planned profit of the enterprise (excluding sideline production profit) is distributed at a ratio of: retaining 50% for the enterprise and submitting 50% to the state budget.

For the planned profit of sideline production products, it is planned to retain 70% for the enterprise and submit 30% to the state budget.

The entire portion of planned profit retained by the enterprise is allocated to the three funds according to the following prescribed ratios:

- For the development incentive fund, from 35% to 50%, with specific figures ranging from 35% to 50% determined by the Ministry or Provincial Department in charge to suit the production requirements and characteristics of each enterprise and industry (crop farming, animal husbandry).

- The profit allocated to the two reward and welfare funds, where approximately 2/3 goes to the reward fund and approximately 1/3 goes to the welfare fund, decided by the Enterprise Director after consulting with the local trade union.

The enterprise may not use the portion of profit and basic depreciation that should be submitted to the state budget or other payments to repay loans from the bank for purchasing fixed assets.

2. Implementation of profit distribution.

Based on the total planned profit, the profit to be submitted to the state budget of the enterprise mentioned above is approved and becomes a legal plan indicator assigned by the State to the enterprise.

The planned profit to be submitted to the state budget is divided into funds based on the harvest and consumption seasons of the enterprise. The enterprise has the responsibility to timely and fully submit to the state budget according to the plan and any excess profit.

The amount allocated to the three funds according to the annual plan is divided into quarters, and the enterprise is allowed to temporarily allocate 70% to each fund in each quarter after completing the submission of profit and other revenues to the state budget according to the approved quarterly plan and obtaining confirmation from the finance authority (Central Revenue and Enterprise Management Bureau for central enterprises, or local finance authorities for local enterprises).

At the end of the year when reviewing the final accounts (including the review to officially establish the enterprise funds), the enterprise will calculate the full amount allocated to the three funds in the following order:

- The total profit realized within the approved profit plan shall be distributed as provided in Section 1 of Part II above, with 50% remitted to the State budget and 50% retained by the enterprise for main production, and for the profit from secondary production, 30% remitted to the State budget and 70% retained by the enterprise. In cases where the enterprise fails to meet the profit submission plan for main production (based on realized profit), then the profit from secondary production must be remitted to the State budget at 50% and retained by the enterprise at 50%.

The distribution ratio of profit from secondary production applies uniformly to both the planned portion and the excess over the plan.

Excess profit realized over the plan for main production shall be distributed as follows: 20% remitted to the State budget and 80% retained by the enterprise.

The portion of profit retained by the enterprise (including both planned and excess over the plan) shall be allocated to three funds in accordance with the ratios specified in Point 1, Section II, after deducting penalties for violations of economic contracts, disciplinary fines, payment settlement penalties, unreasonable and invalid expenditures not included in cost calculations such as negative costs, waste, etc.

If the enterprise fails to complete 3 (or 2, or 1 depending on the type of enterprise) of the following major plan indicators:

- The value of goods produced (specifying the export turnover if applicable).

- Main products with specifications and quality standards stipulated for consumption according to plans and contracts (specifying the portion for national defense and for export if applicable).

- Payments to the State budget (profit payments and other payments).

Then for each percentage point not completed regarding either of the first two indicators, 2% of the amount allocated to each fund (three funds) shall be deducted, and for each percentage point not completed regarding the third indicator, 3% of the amount allocated to each fund shall be deducted.

When evaluating the degree of completion of the "payments to the State budget" plan indicator, the actual total payments made must be compared with the planned total payments, including the excess over the plan which includes state-owned profit payments (or taxes), basic depreciation payments, and other payments such as price differences if any... and these actual payments can only be confirmed within the scope of the amounts due for payment.

Example:

Unit: million dong

If the enterprise violates the State's economic and financial management system, such as violating reporting and statistical accounting systems, failing to timely remit payments due to the State budget, including those exceeding the plan, etc., then for each violation, depending on the severity of the violation, 2 to 5% of the amount allocated to each fund (three funds) shall be deducted.

The deductions mentioned above from the three enterprise funds must be remitted to the State budget.

The condition for the enterprise to fully allocate (100%) the profit retained for establishing the three funds as prescribed above is that the enterprise must complete 100% of the profit required to be remitted to the State budget as stipulated (confirmed by the same-level financial authority) based on the annual audit settlement data for the enterprise.

3. For units operating at a loss under the State's pricing policy and listed in the directory of enterprises allowed by the State to offset losses, the profit distribution method shall be applied as follows:

The enterprise shall enjoy a basic allocation rate into the two reward and welfare funds equal to two months' basic salary realized in the year, with approximately 2/3 allocated to the reward fund and 1/3 to the welfare fund.

The basic allocation rate into the production development incentive fund of the enterprise shall be calculated at 1% of the average original value of fixed assets used in the year and current assets within the standard.

If the enterprise fails to complete 2 (or 1 depending on the type of enterprise) of the major plan indicators for the whole year as follows, then for each percentage point not completed regarding one indicator, 2% shall be deducted from the basic allocation rate of each fund (three funds):

- The value of goods produced (specifying the export turnover if applicable).

- Main products with specifications and quality standards stipulated according to plans and contracts (specifying the portion for national defense and export if applicable).

Specifically, for the loss realization indicator (including penalties for violations of economic contracts, disciplinary fines, payment settlement penalties, unreasonable and invalid expenditures not included in cost calculations such as negative costs, waste), for each percentage point increase in loss compared to the plan, 3% of the amount allocated to each fund (three funds) shall be deducted. When assessing the degree of completion of this indicator, the enterprise may exclude increased losses due to State increases in material prices and consumption volume.

If the enterprise violates the State's economic and financial management system, such as violating reporting and statistical accounting systems, failing to timely and fully remit payments to the State budget, including those exceeding the plan, then for each violation, depending on the severity of the violation, 2 to 5% of the amount allocated to each fund (three funds) shall be deducted.

If the enterprise reduces planned losses through subjective efforts to lower product costs, the reduction in losses shall be considered as excess profit over the plan and additional allocations into the three funds shall be made at a rate of 80% of the reduction in losses compared to the plan. The allocation rates into each fund shall be as specified in Point 1, Section II of this Circular.

Enterprises of this type shall also temporarily allocate 70% of the planned allocations into the three funds quarterly, after completing the loss plan indicators and State budget payments, and obtaining confirmation from the State revenue collection agency or local finance department.

The formal amount to be allocated for setting up the three funds as prescribed above will be based on the annual audit settlement data of the enterprise.

4. The establishment and use of financial reserve funds and Minister's funds at higher-level management agencies shall be regulated as follows:

a) Enterprises shall use the production development encouragement fund to supplement working capital needs for increasing circulating capital, own capital for deepening basic construction investment, developing new products, expanding main and auxiliary production, and submitting to higher management authorities to establish a centralized scientific and technological research fund according to the enterprise's annual plan.

From 1 to 3 percent of the production development encouragement fund of enterprises shall be allocated to establish a financial reserve fund at higher direct management authorities such as总公司、企业联合体（不进行集中经济核算）或部主管单位。具体比例（1-3％）由这些上级管理机关根据各行业具体需求规定。在部级层面，通过从直属独立经济核算单位的生产发展鼓励基金中提取来设立集中财务储备基金。

b) Total companies and enterprise associations that have not established a financial reserve fund do not need to submit it to the principal ministry for establishment at the ministerial level.

For local economic base units, the financial reserve fund can only be established at enterprise associations and total companies that do not conduct centralized economic accounting; it cannot be established at the principal management bases.

The financial reserve fund centrally established at total companies, enterprise associations, or principal ministry management authorities shall be used to provide timely financial support for difficulties faced by subordinate enterprise base units according to the reimbursement principles determined by the superior authority managing the fund.

c) One percent of the welfare and reward funds of enterprises shall be set aside for the Minister's Fund. If the immediate superior of the enterprise is an enterprise association or a total company that is not a centralized economic accounting unit, then one percent shall be divided into two parts: 0.5% to establish the General Director's Fund of the enterprise association or total company, and 0.5% to be transferred to the Ministry to establish the Minister's Fund. In cases where the enterprise association or total company is a centralized economic accounting unit, they must allocate one percent of their welfare and reward funds to establish the Minister's Fund (with specific regulations governing the use of the Minister's Fund).

5. There is no maximum limit on the reward fund and welfare fund, but when the total amount allocated to these two funds exceeds 50% of the basic wage fund implemented throughout the year by the enterprise's workers and staff, the enterprise must pay a progressive adjustment fee as follows:

- When the basic wage fund implemented reaches from 51% to 70%, the enterprise must pay 50% to the state budget and 10% to the higher management authority to establish the financial reserve fund, with the remaining 40% to be supplemented into the enterprise's various funds, which shall be decided by the enterprise director as to which fund and how much.

- When the basic wage fund implemented reaches 71% or more, the enterprise must pay 70% to the state budget and 10% to the higher management authority to establish the financial reserve fund, with the remaining 20% to be supplemented into the enterprise's various funds as decided by the enterprise director.

6. For enterprise associations and total companies that are not independent economic accounting units (not subject to the establishment of three enterprise funds) may allocate the reward and welfare funds based on the average actual extraction rate achieved for these two funds per person among all workers and staff of the subordinate enterprise units. The source of allocation for the reward and welfare funds of the enterprise association and total company is the retained profit of the enterprise units. The allocation ratio for each subordinate enterprise unit shall be decided by the enterprise association or total company director according to the specific requirements and capabilities of each enterprise unit.

III- IMPLEMENTATION PROVISIONS

1. Based on the tasks and national plan indicators assigned to the principal management sector, the higher management authorities must assign financial plans to subordinate base units, including profit distribution plans, at the end of the previous year or the beginning of the planning year. Higher management authorities must assign profit submission plans to subordinate enterprises, which must not be lower than the national plan and bear responsibility for completing the profit submission plan to the state. If the assigned plan is lower, for every percentage point below the plan, a penalty deduction of 2% of the total Minister's Fund (or the General Director's Fund of the total company or enterprise association) extracted in the year shall be imposed. This deducted amount must be paid into the state budget.

2. Base units must register quarterly plans for establishing the three funds with the same-level finance authority and local bank, and allocate quarterly as stipulated in Section II of this Circular.

3. When reviewing the final annual settlement for base units, the principal management authority and the higher finance authority, together with local enterprise finance specialists, shall review the officially retained profit for establishing the three funds and other needs as stipulated in Point 2, Section II of this Circular, and determine the profit to be submitted to the state budget. If the enterprise uses more than the officially approved retained profit, it must be deducted from the allocation of the following year, and vice versa if less is allocated.

This Circular takes effect from July 1, 1986, and applies to the profit distribution for the entire 1986 year of central and local state-owned agricultural enterprises under all economic sectors. Previous provisions contrary to this Circular are abolished.