Circular No. 34-TC/CN guides the transfer, leasing, sale, and liquidation of fixed assets

CIRCULAR

DIRECTIVE NO. 34-TC/CN OF JULY 31, 1990 ON GUIDELINES FOR TRANSFERRING, LEASING, SELLING, AND DISPOSING OF FIXED ASSETS

In order to positively impact the process of reforming production and business management in enterprises, to exploit existing potential fixed assets in the socialist-oriented market economy, and to combine with the requirement of gradually modernizing material and technical facilities in enterprises, it is necessary to strongly promote the handling of surplus fixed assets in enterprises through transfer, leasing, selling, and disposal measures.

I. GENERAL PROVISIONS

Based on the inventory data of fixed assets as of January 1, 1999, enterprises must assess, arrange, classify current fixed assets within the enterprise, confirm the needs for using fixed assets for the enterprise, the number of surplus fixed assets not needed by the enterprise, the number of damaged fixed assets that need to be disposed of... while determining the source of capital forming these assets, revalued value, amount already depreciated, and remaining value of each fixed asset object.

- Surplus fixed assets not needed by the enterprise shall first be transferred to other enterprises in the same industry (which are Companies, State Corporations, Joint Stock Companies). The industry's main management body directs enterprises to implement this. When there is no longer a need to transfer within the industry, the enterprise has the right to lease, sell, and dispose of damaged fixed assets.

- Fixed assets belonging to basic production and business capital now being transferred to other activities of the enterprise (such as services, living conditions...) must fully comply with financial-accounting regulations to monitor the movement of fixed assets and record depreciation into service costs and living expenses to accurately calculate costs, profits, and taxes for these business activities.

II. SPECIFIC PROVISIONS

A. TRANSFER OF FIXED ASSETS.

Fixed assets not needed by the enterprise may be transferred to other enterprises within the same economic organization (such as State Corporations, Companies, Joint Stock Companies) according to the principle of increasing and decreasing capital: increase fixed capital for the receiving enterprise; decrease fixed capital for the transferring enterprise.

Both parties involved in the transfer must complete all procedures for transferring fixed assets according to current financial-accounting regulations.

Fixed assets of enterprises removed from the industry (State Corporations, Companies, Joint Stock Companies) must be implemented according to the purchase-sale or rental system of fixed assets.

B. LEASING OF FIXED ASSETS.

1. Unused fixed assets of state-owned enterprises such as factories, warehouses, yards, machinery, equipment, transportation means, etc., may be leased to external entities (other state-owned units, collectives, individuals) according to the provisions of Clause 2, Article 2, Section 1 of Decision No. 217-HĐBT dated November 14, 1987 of the Council of Ministers.

This is a form of business activity of SOEs, therefore, SOEs must record and reflect fully in their final accounts according to the Accounting and Statistics Law issued by the State. State-owned enterprises must strictly fulfill their obligation to remit revenue to the budget for this business activity according to the current revenue collection regulations for SOEs.

2. Leasing business activities must be carried out based on economic contracts according to the State's Law on Economic Contracts.

The leasing contract must be implemented on the principle of preserving the value of fixed assets consistent with the prescribed usage period for each fixed asset. For fixed assets that have exceeded their usage period and have been fully depreciated according to regulations, the leasing contract is based on mutual agreement between both parties.

3. Revenue from leasing fixed assets is calculated based on the leasing price stipulated in the signed economic contract.

4. Regarding depreciation of leased fixed assets: state-owned enterprises must conduct depreciation of leased fixed assets into the leasing price and implement payment to the budget for basic depreciation according to Decision No. 93-HĐBT dated July 24, 1989 of the Council of Ministers and Circular No. 33-TC-CN dated September 1, 1989 of the Ministry of Finance.

For leased fixed assets that have exceeded their usage period and have been fully depreciated according to regulations, the entire basic depreciation is retained as additional capital for the enterprise's production development fund.

5. Regarding state revenue and profit

a. State revenue:

The temporary state revenue rate is set at 3% of the revenue from leasing fixed assets.

Specifically:

- For leasing ships, the state revenue rate is 20%, and for leasing other transportation means, it is 5% according to Decision No. 163-TC/TQD dated September 23, 1989 of the Ministry of Finance.

- For leasing real estate (including residential buildings, warehouses, wharfs...) under the use rights of SOEs, apply corporate income tax and business income tax (in lieu of profit) according to the guidance in Circular No. 12-TC/CTN dated March 5, 1990 of the Ministry of Finance.

b. Profit:

Profit from leasing fixed assets is determined as follows:

Pay profit into the State budget.

State-owned enterprises with leased fixed assets in which industry must pay profit into the State budget according to the rate specified by that industry in Circular No. 12-TC/CN dated March 25, 1988 of the Ministry of Finance.

Regulations on TQD and profit will apply until the Business Tax Law and Income Tax Law come into effect.

C. SALE OF FIXED ASSETS.

Fixed assets that cannot be handled according to the two cases A and B mentioned above can be widely sold to various economic sectors' needs (state-owned, collective, private).

- Sale prices are agreed upon through bidding.

- Proceeds from the sale of fixed assets are handled as follows:

1. Fixed assets belonging to state capital:

- Remit to the State budget the remaining value of the fixed assets not yet fully depreciated, calculated based on the latest revaluation price.

- Any excess proceeds over the remaining value of the fixed assets not yet fully depreciated, the enterprise may supplement into its post-disposal production development fund after covering any disposal costs.

- If the proceeds are less than the remaining value of the fixed assets not yet fully depreciated, the enterprise must use its production development incentive fund to repay the State budget the shortfall in depreciation.

- For fully depreciated fixed assets, the entire proceeds from the sale belong to the enterprise and are added to the post-disposal production development fund after covering any disposal costs.

2. Fixed assets belonging to the enterprise's own supplementary capital:

Proceeds from the sale of these fixed assets are handled as in case two (2) above (fully depreciated) if the fixed assets are financed by bank loans that have not been fully repaid, then they should be used to repay the remaining loan to the bank.

All cases of the sale of fixed assets must complete all accounting procedures for reducing fixed assets according to the current accounting regulations and be supervised by the factory's chief accountant and chief engineer.

The proceeds from the sale of fixed assets must be analyzed and implemented according to the aforementioned provisions.

D. DISPOSAL OF OBSOLETE FIXED ASSETS.

Fixed assets that are no longer usable due to damage or obsolescence and are not needed for use within or outside the factory (cannot be rented out or sold within at least three months after reporting and advertising), the factory is permitted to dispose of them, sell them as scrap. Fixed assets subject to disposal must follow the current procedures for disposing of fixed assets regarding accounting treatment as prescribed. If the factory uses this scrap material for its production and business needs (using scrap steel to cast machine parts...), it shall still be considered as selling scrap or must reduce the production cost accordingly.

- Proceeds from selling scrap from the disposal of fixed assets shall be handled as follows:

1. If the fixed assets have been stored for a long time and are damaged, unused, and not fully depreciated, the remaining depreciation amount must be returned to the budget.

2. If the fixed assets have been fully depreciated, the entire proceeds from selling scrap minus the disposal costs shall be allocated to the production development fund. If the value of the scrap sold, minus the disposal costs, is lower than the remaining depreciation amount, it must be deducted from the production development fund. In cases where this difference is significant and deducting it from the production encouragement development fund affects the factory's new investment needs, the factory must report to the superior management authority and financial department for consideration and resolution on a case-by-case basis.

Note that factories with educational facilities, clinics, kindergartens, guesthouses, housing for experts, etc., built in remote areas using state funds, which are now unnecessary, cannot be rented out or sold, must report to higher authorities and the financial department for disposal. All interior furnishings must be recovered fully to be included in the investment fund for other places or sold to return state capital. Any losses from disposal that cannot recover the full capital must be settled to reduce the fixed capital of the factory.

This Circular takes effect from July 1, 1990.