Circular No. 38/2001/TT-BTC amending and supplementing Circular No. 44 - TC/TCDN dated July 8, 1997 of the Ministry of Finance, guiding the handling of exchange rate discrepancies in state-owned enterprises.

CIRCULAR

Amending and supplementing Circular No. 44-TC/TCDN dated July 8, 1997 of the Ministry of Finance guiding the handling of exchange rate differences in state-owned enterprises.

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In order to resolve difficulties for businesses of all economic sectors in accounting for exchange rate differences and create a fair business environment among businesses in accordance with the State Enterprise Law, the Enterprise Law, the Foreign Investment Law, and the Law amending and supplementing the Foreign Investment Law in Vietnam, the Ministry of Finance amends and supplements some points of Circular No. 44-TC/TCDN dated July 8, 1997 on handling exchange rate differences as follows:

I. Amend the name of Circular No. 44-TC/TCDN dated July 8, 1997 as follows:

"Circular guiding the handling of exchange rate differences in enterprises"

II. Part I of Circular No. 44-TC/TCDN dated July 8, 1997 is amended and supplemented as follows:

"I. General principles

1. Scope of application:

This Circular applies to:

a. State-owned enterprises;

b. Enterprises operating under the Enterprise Law No. 13/1999/QH10 adopted by the National Assembly of the Socialist Republic of Vietnam on June 12, 1999;

c. Joint ventures, wholly foreign-owned enterprises, and foreign parties participating in business cooperation (hereinafter referred to as foreign joint venture parties) based on contracts under the Foreign Investment Law and the Law amending and supplementing the Foreign Investment Law in Vietnam shall account in Vietnamese dong and apply mandatory exchange rate difference treatment to determine deductible costs and taxable income.

For joint ventures established based on agreements signed between the Government of the Socialist Republic of Vietnam and the Government of a foreign country, if the agreement contains provisions on handling exchange rate differences that differ from the guidance provided in this Circular, such provisions shall be implemented according to the agreement.

2. In this Circular, the following terms shall be understood as follows:

2.1. Foreign currency means any currency other than the Vietnamese dong.

2.2. Foreign currency transactions refer to receipts and payments in foreign currency for current accounts and pricing purposes.

2.3. Exchange rate refers to the rate of exchange between two currencies (hereinafter referred to as exchange rate).

2.4. Exchange rate difference (hereinafter referred to as exchange rate difference) is the difference between the recorded exchange rate in the accounting books and the conversion rate at the time of adjustment for the same type of foreign currency.

3. The entities specified in point 1 shall account for exchange rate differences arising from foreign currency transactions in accordance with the current accounting regulations.

The conversion rate of foreign currency into Vietnamese dong shall be carried out in accordance with Circular No. 77/1998/TT-BTC dated June 6, 1998 of the Ministry of Finance guiding the conversion rate of foreign currency into Vietnamese dong for use in enterprise accounting.

4. For foreign currencies for which the State Bank of Vietnam has not announced a conversion rate into Vietnamese dong, they shall be uniformly converted through the US dollar."

III. For enterprises with foreign investment capital, the unhandled exchange rate difference of foreign currency loans incurred before the effective date of this Circular shall be handled as follows:

The higher exchange rate difference resulting from revaluation of the end-of-period balances of foreign currency debts arising from fiscal years 1999 and earlier shall be evenly allocated to the production and business expenses of the enterprise over the remaining years of debt repayment according to the loan agreement, starting from fiscal year 2000; the allocation period shall not exceed five years. The enterprise must register with the local Tax Department the allocation of the aforementioned exchange rate difference.

If the business operations of the enterprise progress well, the enterprise may request the local Tax Department to shorten the allocation period.

IV. This Circular replaces Circular No. 101/2000/TT-BTC dated October 17, 2000 of the Ministry of Finance and takes effect for financial settlement and tax settlement from fiscal year 2000 onwards (including enterprises ending their fiscal year in 2000). Other provisions in Circular No. 44-TC/TCDN dated July 8, 1997 of the Ministry of Finance that do not conflict with the provisions of this Circular remain in effect.

V. During implementation, if there are difficulties, please reflect them to the Ministry of Finance for study and amendment.