Circular No. 45/2013/TT-BTC guiding the management, use, and depreciation of fixed assets

CIRCULAR

GUIDELINES ON THE MANAGEMENT, USE AND DEPRECIATION OF FIXED ASSETS

Pursuant to Law on Enterprises No. 60/2005/QH11 dated November 29, 2005;

Pursuant to Law on Corporate Income Tax No. 14/2008/QH12 dated June 3, 2008;

- Based on Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government detailing and guiding the implementation of certain provisions of the Law on Corporate Income Tax;

- Based on Decree No. 122/2011/NĐ-CP dated December 27, 2011 of the Government amending and supplementing Decree No. 124/2008/NĐ-CP dated December 11, 2008 of the Government detailing and guiding the implementation of certain provisions of the Law on Corporate Income Tax;

- Based on Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

- Considering the proposal of the Director of the Enterprise Finance Department;

The Minister of Finance issues this Circular guiding the management, use, and depreciation of fixed assets.

Chapter I: GENERAL PROVISIONS

Article 1. Scope of application:

1. This Circular applies to enterprises established and operating in Vietnam in accordance with the law.

2. The calculation and depreciation under this Circular shall be carried out for each individual fixed asset (hereinafter referred to as "TSCĐ") of the enterprise.

Article 2. Definitions used in this Circular are understood as follows:

1. Tangible fixed assets: are main means of labor having material form satisfying the criteria of tangible fixed assets, participating in multiple business cycles while maintaining their original physical form such as buildings, structures, machinery, equipment, transportation vehicles...

2. Intangible fixed assets: are assets without material form, representing a quantity of value invested that satisfy the criteria of intangible fixed assets, participating in multiple business cycles, such as certain costs directly related to land use; costs regarding issuance rights, invention patents, utility models, copyright...

3. Financial lease fixed assets: are TSCĐ leased from financial leasing companies. At the end of the lease term, the lessee has the option to purchase the leased asset or continue leasing it according to the conditions agreed upon in the financial lease contract. The total lease payment for a type of asset specified in the financial lease contract must be at least equivalent to the value of the asset at the time the contract was signed.

All TSCĐ leased if they do not meet the above regulations shall be considered as operational lease fixed assets.

4. Similar fixed assets: are TSCĐ with similar functions within the same business field and of comparable value.

5. Original cost of fixed assets:

- The original cost of tangible fixed assets is the total expenses incurred by the enterprise to acquire tangible fixed assets up to the point when the asset is put into its intended use state.

- The original cost of intangible fixed assets is the total expenses incurred by the enterprise to acquire intangible fixed assets up to the point when the asset is put into use as planned.

6. Fair value of fixed assets: is the value of the asset that can be exchanged between parties fully informed in an arm's length transaction.

7. Depreciation of fixed assets: is the gradual reduction in the usability and value of fixed assets due to participation in production and business activities, natural wear and tear, technological progress... during the operation of the fixed assets.

8. Accumulated depreciation of fixed assets: is the total depreciation value of fixed assets up to the reporting date.

9. Depreciation of fixed assets: is the systematic calculation and allocation of the original cost of fixed assets into production and business costs during the depreciation period of the fixed assets.

10. Depreciation period of TSCĐ: is the necessary time for the enterprise to carry out the depreciation of TSCĐ to recover the investment capital in TSCĐ.

11. Accumulated depreciation of fixed assets: is the total depreciation amount allocated to production and business costs over previous accounting periods of the fixed assets up to the reporting date.

12. Remaining value of fixed assets: is the difference between the original cost of TSCĐ and the accumulated depreciation (or accumulated depreciation value) of TSCĐ up to the reporting date.

13. Repair of fixed assets: is the maintenance, servicing, replacement repair of damages occurring during operation aimed at restoring the operational capacity to the initial standard state of the fixed assets.

14. Upgrade of fixed assets: is the activity of renovating, installing additional equipment to TSCĐ to enhance production capacity, product quality, functionality of TSCĐ compared to the initial level or extend the service life of TSCĐ; applying new production technology processes to reduce operational costs of TSCĐ compared to before.

Chapter II: PROVISIONS ON MANAGEMENT OF FIXED ASSETS

Article 3. Standards and Identification of Fixed Assets:

1. Means of production are tangible assets with independent structures, or a system consisting of multiple individual parts interconnected to perform one or several specific functions, such that if any part is missing, the entire system cannot operate; if they simultaneously meet all three standards below, they shall be considered fixed assets:

a) Certain economic benefits will be obtained from using the asset in the future;

b) The usage period exceeds one year;

c) The original cost of the asset must be reliably determined and have a value of at least 30,000,000 VND (Thirty million VND).

In cases where a system consists of multiple individual parts interconnected, each component having different usage periods, and even if one part is missing, the entire system can still perform its main operational function, but due to management requirements for fixed assets, it is necessary to manage each part separately, each part that simultaneously meets the three standards of fixed assets shall be considered an independent tangible fixed asset.

For working animals and/or those producing products, each animal meeting the three standards of fixed assets simultaneously shall be considered a tangible fixed asset.

For perennial tree gardens, each plot of trees or each tree meeting the three standards of fixed assets simultaneously shall be considered a tangible fixed asset.

2. Standards and identification of intangible fixed assets:

Any actual expenses incurred by the enterprise that simultaneously meet all three standards prescribed in Clause 1 of this Article, but do not form tangible fixed assets, shall be considered intangible fixed assets.

Expenses that do not simultaneously meet all three standards specified in Clause 1 of Article 3 of this Circular shall be directly recorded or gradually allocated to the enterprise's business costs.

Specifically, expenses arising during the implementation phase shall be recognized as internally generated intangible fixed assets if they simultaneously satisfy the following seven conditions:

a) Technical feasibility ensuring completion and putting the intangible asset into use as planned or for sale;

b) The enterprise intends to complete the intangible asset for use or for sale;

c) The enterprise has the ability to use or sell the intangible asset;

d) The intangible asset must generate economic benefits in the future;

đ) There are sufficient technical, financial, and other resources to complete the implementation phase, sale, or use of the intangible asset;

e) It is possible to reliably determine the total cost of the implementation phase to create the intangible asset;

g) An estimate indicates that the asset meets the usage period and value criteria stipulated for intangible fixed assets.

3. Establishment costs of the enterprise, employee training costs, advertising costs incurred before establishment, research phase costs, relocation costs, costs for purchasing and using technical documents, patents, technology transfer licenses, trademarks, and business advantages that are not intangible fixed assets shall be gradually allocated to the enterprise's business costs over a maximum period of three years according to the provisions of the Law on Corporate Income Tax.

4. For joint-stock companies converted from state-owned enterprises pursuant to Government Decrees issued prior to Government Decree No. 59/2011/NĐ-CP dated July 18, 2011 regarding the conversion of 100% state-owned enterprises into joint-stock companies, where the value of business advantages is included in the enterprise value when determining the enterprise value for shareholding conversion according to the asset method and approved by the competent authority, the allocation of the value of business advantages shall be carried out in accordance with Circular No. 138/2012/TT-BTC dated August 20, 2012 of the Ministry of Finance guiding the allocation of the value of business advantages for joint-stock companies converted from state-owned enterprises.

Article 4. Determination of the original cost of fixed assets:

1. Determination of the original cost of tangible fixed assets:

a) Purchased tangible fixed assets:

The original cost of purchased tangible fixed assets (including both new and used purchases): is the actual purchase price paid plus (+) taxes (excluding refundable taxes), and direct related costs incurred up to the time when the fixed asset is put into operational condition such as interest on borrowed funds during the acquisition process; transportation and handling fees; upgrade costs; installation and trial run costs; land registration fee and other directly related costs.

In case of tangible fixed assets purchased on credit or installment basis, the original cost of the fixed asset is the cash purchase price at the time of purchase plus (+) taxes (excluding refundable taxes), and direct related costs incurred up to the time when the fixed asset is put into operational condition such as transportation and handling fees; upgrade costs; installation and trial run costs; land registration fee (if applicable).

In case of purchasing tangible fixed assets that are buildings or structures attached to land use rights, the value of the land use rights must be determined separately and recorded as intangible fixed assets if they meet the criteria stipulated in point d, Clause 2 of this Article; for tangible fixed assets being buildings or structures, the original cost is the actual purchase price paid plus (+) direct related costs incurred up to the time when the tangible fixed asset is put into use.

After purchasing tangible fixed assets that are buildings or structures attached to land use rights, if the enterprise dismantles or cancels them to build anew, the value of the land use rights must be determined separately and recorded as intangible fixed assets if they meet the criteria stipulated in point d, Clause 2 of this Article; the original cost of newly constructed fixed assets is determined as the final settlement value of the investment construction project according to the current Investment Management and Construction Regulations. Assets that are dismantled or canceled are processed and accounted for according to the current regulations on liquidating fixed assets.

b) Tangible fixed assets acquired through exchange:

The original cost of tangible fixed assets acquired through exchange with non-similar tangible fixed assets or other assets is the fair value of the tangible fixed assets received, or the fair value of the tangible fixed assets given up (after adding additional amounts payable or subtracting amounts receivable) plus (+) taxes (excluding refundable taxes), and direct related costs incurred up to the time when the fixed asset is put into operational condition, such as transportation and handling fees; upgrade costs; installation and trial run costs; land registration fee (if applicable).

The original cost of tangible fixed assets acquired through exchange with similar tangible fixed assets, or formed by selling to acquire ownership of similar assets is the remaining value of the tangible fixed assets given up.

c) Tangible fixed assets self-built or self-produced:

The original cost of self-built tangible fixed assets is the final settlement value of the construction project when it is put into use. In case the tangible fixed assets have been put into use but the final settlement has not yet been completed, the enterprise accounts for the original cost based on provisional valuation and adjusts it after the completion of the final settlement of the construction project.

The original cost of self-produced tangible fixed assets is the actual production cost of the tangible fixed assets plus (+) installation and trial run costs, and other directly related costs incurred up to the time when the tangible fixed asset is put into operational condition (excluding internal interest, recovered product values during trial runs, unreasonable costs such as wasted materials, labor, or other costs exceeding the prescribed standards in construction or production).

d) Original cost of tangible fixed assets from investment construction:

The original cost of tangible fixed assets formed through basic construction investment under tendering method is the final settlement value of the construction project according to the current Investment Management and Construction Regulations plus (+) land registration fee and other directly related costs. In case the tangible fixed assets from investment construction have been put into use but the final settlement has not yet been completed, the enterprise accounts for the original cost based on provisional valuation and adjusts it after the completion of the final settlement of the construction project.

For fixed assets that are working animals and/or producing products, long-term orchards, the original cost is the total actual costs incurred for these animals and orchards from their formation until the time they are put into operation and use.

đ) Tangible fixed assets received as sponsorship, gifts, donations, or discovered surplus:

The original cost of tangible fixed assets received as sponsorship, gifts, donations, or discovered surplus is the actual value assessed by the handover committee or a professional valuation organization.

e) Tangible fixed assets assigned or transferred:

The original cost of tangible fixed assets assigned or transferred includes the remaining value of the fixed assets on the accounting books of the assigning or transferring unit, or the actual value assessed by a professional valuation organization as stipulated by law, plus (+) direct related costs that the receiving party must incur up to the time when the fixed asset is put into operational condition such as valuation organization rental fees; upgrade, installation, and trial run costs...

g) Tangible fixed assets received as capital contribution or returned capital contribution:

Tangible fixed assets received as capital contribution or returned capital contribution are valued by the unanimous agreement of the members or founding shareholders; or agreed upon by the enterprise and the contributing party; or valued by a professional organization as stipulated by law and approved by the members or founding shareholders.

2. Determination of the original cost of intangible fixed assets:

a) Purchased intangible fixed assets:

The original cost of purchased intangible fixed assets is the actual purchase price paid plus (+) taxes (excluding refundable taxes) and direct related costs incurred up to the time when the asset is put into use.

In case of intangible fixed assets purchased on credit or installment basis, the original cost of the fixed asset is the cash purchase price at the time of purchase (excluding deferred payment interest).

b) Intangible fixed assets acquired through exchange:

The original cost of intangible fixed assets acquired through exchange with a non-similar intangible fixed asset or other property is the fair value of the received intangible fixed asset, or the fair value of the exchanged property (after adding additional amounts payable or subtracting receivable amounts) plus (+) taxes (excluding refundable taxes), and directly related expenses incurred up to the estimated date of putting the asset into use.

The original cost of intangible fixed assets acquired through exchange with a similar intangible fixed asset, or formed by selling to acquire ownership of a similar asset, is the remaining value of the exchanged intangible fixed asset.

c) Intangible fixed assets received as grants, gifts, donations, or transferred:

The original cost of intangible fixed assets received as grants, gifts, or donations is the initial fair value plus (+) directly related expenses incurred up to the date of putting the asset into use.

The original cost of intangible fixed assets transferred to another entity is the original cost recorded in the accounting books of the transferring enterprise. The receiving enterprise is responsible for recording the original cost, accumulated depreciation, and residual value of the asset according to regulations.

d) Intangible fixed assets created internally within the enterprise:

The original cost of intangible fixed assets created internally within the enterprise is the total of directly related expenses incurred up to the estimated date of putting the asset into use, including construction and trial production costs.

Specifically, internal costs incurred for obtaining trademarks, publishing rights, customer lists, research phase costs, and similar items that do not meet the criteria and recognition standards for intangible fixed assets shall be charged to current period operating expenses.

đ) Intangible fixed assets are land use rights:

- Intangible fixed assets as land use rights include:

+ Land use rights granted by the State with payment for land use or legally transferred land use rights (including land use rights with a term and land use rights without a term).

+ Land use rights leased before the effective date of the Land Law 2003, where the full lease payment has been made for the entire lease period or advance payments have been made for multiple years, with at least five years remaining in the lease term and a certificate of land use right issued by the competent authority.

The original cost of intangible fixed assets as land use rights is the total amount paid to obtain legal land use rights plus (+) compensation and relocation expenses, land leveling fees, and stamp duty (excluding construction project costs on the land); or the value of contributed land use rights.

- Land use rights not recognized as intangible fixed assets include:

+ Land use rights granted by the State without payment for land use.

+ Leasing land with a one-time payment for the entire lease period (lease term after the effective date of the Land Law 2003, without issuance of a land use right certificate), where the lease payment is gradually allocated to operating expenses over the lease years.

+ Leasing land annually, where the annual lease payment is recorded as current period operating expenses corresponding to the annual lease payment.

- For real estate properties intended for sale or business operations by real estate companies, enterprises are not allowed to record them as fixed assets and cannot depreciate them.

e) The original cost of intangible fixed assets as copyright, industrial property rights, and plant variety rights, as stipulated by the Intellectual Property Law, is the total actual costs incurred by the enterprise to acquire such rights according to intellectual property laws.

g) The original cost of software programs as fixed assets:

The original cost of software programs as fixed assets is the total actual costs incurred by the enterprise to acquire the software programs when the software program is a separable component from related hardware, integrated circuit layout designs, as stipulated by intellectual property laws.

3. Leased Fixed Assets:

The original cost of finance-leased fixed assets reflected in the lessee's records is the value of the leased asset at the inception of the lease plus (+) initial directly related expenses associated with the finance lease activity.

4. The original cost of fixed assets of an enterprise may only be changed in the following cases:

a) Revaluation of the value of fixed assets in the following circumstances:

- As decided by the competent state authority.

- Implementing restructuring of the enterprise, changing ownership of the enterprise, changing the form of the enterprise: division, separation, merger, consolidation, shareholding, contracting, leasing, converting a limited liability company into a joint-stock company, or converting a joint-stock company into a limited liability company.

- Using assets to invest outside the enterprise.

b) Investment in upgrading fixed assets.

c) Dismantling one or more parts of fixed assets that are managed according to the standard of a single tangible fixed asset.

When changing the original cost of fixed assets, the enterprise must prepare a memorandum clearly stating the grounds for change and re-determine the original cost indicators, residual value on accounting books, accumulated depreciation, useful life of the fixed asset, and proceed with accounting according to regulations.

Article 5. Principles for managing fixed assets:

1. All fixed assets in enterprises must have their own separate files (including handover records, contracts, purchase invoices for fixed assets, and other related documents and papers). Each fixed asset must be classified, numbered, and have its own card, tracked in detail according to each recorded fixed asset, and reflected in the fixed asset tracking ledger.

2. Each fixed asset must be managed according to its original cost, accumulated depreciation, and remaining value on accounting books:

3. For unused fixed assets awaiting disposal but not yet fully depreciated, enterprises must manage, monitor, and preserve them in accordance with current regulations and record depreciation as stipulated in this Circular.

4. Enterprises must manage fixed assets that have been fully depreciated but continue to participate in business operations as regular fixed assets.

Article 6. Classification of fixed assets of enterprises:

Based on the purpose of use of fixed assets, enterprises classify fixed assets according to the following criteria:

1. Fixed assets for business purposes are those fixed assets managed and used by enterprises for their business purposes.

a) For tangible fixed assets, enterprises classify them as follows:

Type 1: Buildings, structures: These are fixed assets formed through construction processes such as office buildings, warehouses, fences, water towers, parking lots, decorative works for buildings, roads, bridges, railway tracks, airport runways, wharfs, embankments.

Type 2: Machinery and equipment: This includes all types of machinery and equipment used in enterprise operations such as specialized machinery, work equipment, drilling rigs in the oil and gas sector, cranes, production lines, individual machines.

Type 3: Transportation means and transmission equipment: These include various transportation means such as rail, waterway, road, air, pipeline transport, and transmission equipment like communication systems, electrical systems, water pipelines, conveyor belts.

Type 4: Management equipment and tools: These are equipment and tools used in enterprise management activities such as computers for management, electronic devices, measuring and quality inspection equipment, dehumidifiers, dust extractors, pest control devices.

Type 5: Long-term plantations, working animals and/or producing animals: These include long-term plantations such as coffee gardens, tea gardens, rubber plantations, fruit orchards, grasslands, greenery...; working animals and/or producing animals such as elephant herds, horse herds, buffalo herds, cattle herds...

Type 6: Other fixed assets: This includes all other fixed assets not listed in the above five types such as paintings, artworks.

b) Intangible fixed assets: land use rights as stipulated at point d Clause 2 Article 4 of this Circular, issuance rights, invention patents, literary, artistic, and scientific works, products, results of artistic performances, sound recordings, video recordings, broadcasting programs, satellite signals carrying encoded programs, industrial designs, layout-designs of integrated circuits, trade secrets, trademarks, trade names and geographical indications, crop varieties and propagation materials.

2. Fixed assets for welfare, public services, security, and defense purposes are those fixed assets managed and used by enterprises for welfare, public services, security, and defense within the enterprise. These fixed assets are also classified according to the provisions set out in point 1 above.

3. Fixed assets held in custody, kept in trust, or stored in trust are those fixed assets held in custody, kept in trust for other units, or stored in trust for the State in accordance with the regulations of competent State authorities.

4. Depending on the management requirements of each enterprise, enterprises may further classify fixed assets within each group in a more detailed manner as appropriate.

Article 7. Investment in upgrading and repairing fixed assets:

1. The expenses incurred by enterprises for investing in upgrading fixed assets shall be reflected as an increase in the original cost of such fixed assets, and these expenses shall not be recorded as production and business costs for the period.

2. Expenses for repairing fixed assets shall not be reflected as an increase in the original cost of fixed assets but shall be directly recorded or gradually allocated to business costs for the period, but not exceeding three years at maximum.

For fixed assets where repairs are periodic, enterprises may pre-record repair costs according to budget estimates into annual costs. If the actual repair expenses exceed the estimated amount, the enterprise may include the excess as reasonable costs. If the actual repair expenses are less than the estimated amount, the difference shall be recorded as a reduction in business costs for the period.

3. Costs related to intangible fixed assets that arise after initial recognition and are certain to enhance economic benefits beyond the level of initial operation shall be reflected as an increase in the original cost of intangible fixed assets. Other costs related to intangible fixed assets arising after initial recognition shall be recorded as production and business costs.

Article 8. Leasing, Pledging, Mortgaging, Selling, Liquidating Fixed Assets:

1. All activities of leasing, pledging, mortgaging, selling, and liquidating fixed assets must comply with current legal regulations.

2. Regarding leased fixed assets:

a) Leased operating fixed assets:

- The lessee enterprise must manage and use the fixed assets in accordance with the lease contract provisions. Lease expenses for fixed assets shall be recorded as business costs for the period.

- The lessor enterprise, as the owner, must monitor and manage the leased fixed assets.

b) For financial lease fixed assets:

- The lessee enterprise must monitor, manage, and use the leased fixed assets as if they were owned by the enterprise and must fulfill all obligations committed in the lease contract.

- The lessor enterprise, as the investor, must monitor and comply with the provisions of the financial lease contract.

c) In cases where the lease contract (including both operating leases and financial leases) stipulates that the lessee is responsible for repairing the asset during the lease period, the repair costs for leased fixed assets may be recorded as costs or gradually allocated to business costs, but not exceeding three years at maximum.

Chapter III: PROVISIONS ON DEPRECIATION OF FIXED ASSETS

1. All existing fixed assets of enterprises must be depreciated, except for the following:

- Fixed assets that have been fully depreciated but are still being used in production and business operations.

- Fixed assets that have not yet been fully depreciated but have been lost.

- Other fixed assets managed by the enterprise but not under its ownership (excluding financial lease fixed assets).

- Fixed assets that are not managed, monitored, or recorded in the enterprise's accounting books.

- Fixed assets used in welfare activities serving employees of the enterprise (excluding fixed assets serving employees working at the enterprise such as: rest rooms between shifts, mid-shift dining rooms, changing rooms, bathrooms, clean water tanks, parking lots, medical clinics for health check-ups, shuttle buses for employees, training centers, vocational schools, housing built by the enterprise for employees).

- Intangible fixed assets from non-repayable aid after being handed over by competent authorities for scientific research purposes.

- Intangible fixed assets representing long-term land use rights with payment for land use or legitimate transfer of long-term land use rights.

2. Depreciation expenses of fixed assets are considered reasonable costs when calculating corporate income tax in accordance with legal documents on corporate income tax.

3. In cases where fixed assets used in welfare activities serving employees of the enterprise as specified in Clause 1 of Article 9 of this Circular participate in production and business activities, the enterprise shall base on the usage time and nature of these fixed assets to calculate and record depreciation into business costs and notify the direct tax authority for monitoring and management.

4. Fixed assets that have not been fully depreciated and are lost or damaged beyond repair, the enterprise shall determine the cause and responsibility for compensation by individuals or organizations. The difference between the remaining value of the asset and the compensation from the organization or individual causing damage, insurance compensation, and recovered value (if any) shall be covered by the Financial Reserve Fund. If the Financial Reserve Fund is insufficient, the shortfall shall be included as a reasonable cost of the enterprise when determining corporate income tax.

5. Enterprises leasing operating fixed assets must depreciate the leased fixed assets.

6. Enterprises leasing fixed assets through financial leasing (referred to as financial lease fixed assets) must depreciate the leased fixed assets as if they were owned by the enterprise in accordance with current regulations. In cases where the enterprise leasing financial lease fixed assets commits at the start of the lease period not to purchase the leased asset in the financial lease contract, the lessee enterprise may depreciate the financial lease fixed assets over the lease term specified in the contract.

7. When re-evaluating the value of fully depreciated fixed assets for capital contribution, transfer upon division, merger, or consolidation, these fixed assets must be professionally appraised with a value not lower than 20% of their original cost. The depreciation period for these assets starts from the date the enterprise officially receives and puts them into use, with a depreciation period of 3 to 5 years. The specific period is determined by the enterprise but must be reported to the tax authority before implementation.

For enterprises undergoing shareholding reform, the depreciation period for the aforementioned fixed assets is the date the enterprise is granted the Business Registration Certificate to become a joint-stock company.

8. Enterprises with 100% state-owned capital In determining the enterprise value for equitization using the discounted cash flow (DCF) method, the increase in state capital between the actual value and the book value recorded in the accounting books shall not be recognized as intangible fixed assets and shall be gradually allocated to production and business costs within a period not exceeding ten years. The allocation into costs begins at the time the enterprise officially becomes a joint-stock company (with a business registration certificate).

9. The deduction or cessation of depreciation of fixed assets shall be implemented starting from the day (based on the number of days in the month) when the fixed assets increase or decrease. The enterprise shall record the increase or decrease in fixed assets according to the current regulations on enterprise accounting.

10. For construction projects that have been completed and put into use, enterprises have recorded an increase in fixed assets based on provisional prices due to the lack of final settlement. When there is a difference between the provisional value and the settled value upon completion of the construction project, the enterprise must adjust the original cost of the fixed asset according to the approved settled value. The enterprise does not need to adjust the depreciation expense already deducted from the time the fixed asset was completed and handed over for use until the approval of the final settlement. Post-settlement depreciation expenses shall be determined based on the approved settled value of the fixed asset minus the amount already depreciated up to the date of approval, divided by the remaining depreciation period as prescribed.

11. For fixed assets currently being monitored, managed, and depreciated according to Circular No. 203/2009/TT-BTC, if they no longer meet the criteria for the original cost of fixed assets as stipulated in Article 2 of this Circular, the remaining value of these assets shall be allocated to the enterprise's production and business costs, with the allocation period not exceeding three years from the effective date of this Circular.

Article 10. Determination of the Depreciation Period for Tangible Fixed Assets:

1. For new fixed assets (unused), enterprises must base their determination of the depreciation period on the framework for the depreciation period of fixed assets set out in Appendix 1 attached to this Circular.

2. For used fixed assets, the depreciation period of the fixed asset is determined as follows:

Wherein: The reasonable value of fixed assets is the actual purchase price or exchange price (in case of purchase or exchange), the residual value of fixed assets or the assessed value by a valuation organization (in case of receipt, gift, donation, transfer, etc.) and other cases.

3. Change in the Depreciation Period of Fixed Assets:

a) In the case where an enterprise wishes to determine a different depreciation period for new and used fixed assets compared to the framework for the depreciation period specified in Appendix 1 attached to this Circular, the enterprise must prepare a plan to change the depreciation period of fixed assets based on explaining the following contents clearly:

- Technical life of fixed assets according to design;

- Current status of fixed assets (time used, generation of assets, actual condition of the asset);

- Impact of increasing or decreasing depreciation of fixed assets on production and business results and sources of funds to repay financial institutions.

- For assets formed from investment projects under the BOT, BCC model, the enterprise must supplement the signed contract with the investor.

b) Authority to Approve the Plan to Change the Depreciation Period of Fixed Assets:

- The Ministry of Finance approves for:

+ Parent companies of economic groups, corporations, and companies holding more than 51% of the charter capital established by ministries, sectors, or the Prime Minister.

+ Subsidiaries held by parent companies of economic groups, corporations with more than 51% of the charter capital.

- Provincial Departments of Finance approve for corporations and independent companies established by provincial People's Committees, and other economic entities headquartered in their respective provinces.

Based on the approved plan to change the depreciation period of fixed assets, the enterprise must notify the directly managing tax authority within twenty days from the date of approval of the plan for monitoring and management.

c) An enterprise may only change the depreciation period of fixed assets once for each asset. Extending the depreciation period of fixed assets must ensure it does not exceed the technical life of the fixed assets and does not alter the business results of the enterprise from profit to loss or vice versa in the year of the change decision. If an enterprise changes the depreciation period of fixed assets contrary to regulations, the Ministry of Finance and the directly managing tax authority will require the enterprise to re-determine according to the correct regulations.

4. In cases where factors affecting (such as upgrading or dismantling parts of fixed assets) extend or shorten the previously determined usage period of fixed assets, the enterprise shall reassess the depreciation period of fixed assets according to the three criteria mentioned above at the time the transaction is completed, and must prepare a report detailing the basis for changing the depreciation period, submitted to the competent authority for decision-making as stipulated in sub-clause b, Clause 3 of this Article.

Article 11. Determining the depreciation period for intangible fixed assets:

1. Enterprises shall determine the depreciation period for intangible fixed assets on their own, but it shall not exceed twenty years at most.

2. For intangible fixed assets that are land use rights with a term, or leased land use rights, the depreciation period shall be the permitted land use period of the enterprise.

3. For intangible fixed assets that are copyright, intellectual property rights, or plant variety rights, the depreciation period shall be the protection term recorded on the certificate of protection (excluding any extended protection periods).

Article 12. Determining the depreciation period for fixed assets in certain special cases:

1. For investment projects under the Build-Operate-Transfer (BOT) model; Joint Venture Contract Projects (BCC), the depreciation period for fixed assets shall be determined from the time the fixed assets are put into use until the end of the project. In cases where these projects generate uneven revenue over the implementation years and calculating depreciation according to the above principle affects the business results of the enterprise, the enterprise shall report to the Ministry of Finance for consideration and decision on increasing or decreasing depreciation in accordance with Clause 3, Article 10 of this Circular.

2. For production lines with military-specific characteristics directly performing national defense and security tasks at defense companies and security companies, the depreciation period for these assets shall be decided by the Ministry of National Defense and the Ministry of Public Security based on the provisions of this Circular.

Article 13. Methods of Depreciation for Fixed Assets:

1. Depreciation methods:

a) Straight-line method.

b) Diminishing balance method with adjustment.

c) Units-of-production method.

2. Based on the ability to meet the conditions applicable to each depreciation method for fixed assets, enterprises may choose suitable methods for each type of fixed asset of the enterprise:

a) The straight-line method is a depreciation method that evenly allocates the depreciation expense into the enterprise's production and business costs annually for participating fixed assets.

Enterprises with high economic efficiency can accelerate depreciation up to twice the amount determined by the straight-line method to quickly update technology. Fixed assets participating in business activities that can have accelerated depreciation include machinery and equipment; measuring and testing tools; transportation equipment and means; management tools; livestock and perennial gardens. When implementing accelerated depreciation, the enterprise must ensure profitability. If the enterprise's accelerated depreciation exceeds twice the amount specified in the fixed asset usage period outlined in Appendix 1 attached to this Circular, the excess portion (over twice) shall not be included in reasonable expenses when calculating income tax for the period.

b) Diminishing balance method with adjustment:

The diminishing balance method with adjustment applies to enterprises in sectors requiring rapid technological changes and development.

Fixed assets participating in business activities that can be depreciated using the diminishing balance method with adjustment must simultaneously satisfy the following conditions:

- They are newly invested fixed assets (not previously used);

- They are types of machinery and equipment; measuring and testing tools.

c) Units-of-production method:

Fixed assets participating in business activities that can be depreciated using this method must simultaneously satisfy the following conditions:

- Directly related to product production;

- The total quantity or volume of products produced according to the design capacity of the fixed asset can be determined;

- The actual average monthly utilization rate during the fiscal year is not less than 100% of the design capacity.

The contents of the depreciation methods are detailed in Appendix 2 issued together with this Circular.

3. Enterprises shall independently decide on the depreciation methods and periods for fixed assets in accordance with this Circular and notify the directly managing tax authority before implementation.

4. The depreciation method applied to each fixed asset chosen and notified to the directly managing tax authority by the enterprise must be consistently implemented throughout the entire usage period of the fixed asset. In special cases requiring a change in the depreciation method, the enterprise must clearly explain the change in the usage method of the fixed asset to bring economic benefits to the enterprise. Each fixed asset is only allowed to change its depreciation method once during the usage period and must notify the directly managing tax authority in writing.

Chapter IV: IMPLEMENTATION ORGANIZATION

Article 14. Effective Date:

1. This Circular shall take effect from June 10, 2013 and apply to the fiscal year 2013.

2. This Circular replaces Circular No. 203/2009/TT-BTC dated October 20, 2009 of the Minister of Finance guiding the management, use, and depreciation of fixed assets. From the tax year 2013, paragraph k point 2.2 Clause 2 Article 6 of Circular No. 123/2012/TT-BTC dated July 27, 2012 of the Minister of Finance guiding the implementation of certain provisions of the Law on Corporate Income Tax shall be implemented according to the following amended and supplemented provisions:

“k) The right to use land for a long term shall not be depreciated and allocated into deductible costs when determining taxable income; the right to use land for a limited period, if it has complete invoices and receipts and complies with all procedures prescribed by law, and participates in business activities, shall be gradually allocated into deductible costs over the permitted usage period recorded in the land use rights certificate, except in cases where the land use rights granted with payment for a limited period can be depreciated and included in reasonable costs when calculating corporate income tax.”

3. In cases where individuals engaged in business have fixed assets that meet the regulations on fixed asset management stipulated in this Circular, they shall be allowed to depreciate their fixed assets to determine reasonable deductible costs when calculating personal income tax.

4. During the implementation process, if there are any difficulties, they are requested to report promptly to the Ministry of Finance for timely resolution./.

ANNEX I

FRAMEWORK FOR DEPRECIATION PERIODS OF FIXED ASSETS
(Annexed to Circular No. 45/2013/TT-BTC dated April 25, 2013 of the Ministry of Finance)

ANNEX 2

METHODS OF DEPRECIATING FIXED ASSETS
(Annexed to Circular No. 45/2013/TT-BTC dated April 25, 2013 of the Ministry of Finance)

I. Straight-Line Depreciation Method:

1. Content of the method:

Fixed assets in enterprises are depreciated using the straight-line depreciation method as follows:

- Determine the average annual depreciation rate for fixed assets according to the formula below:

- The monthly average depreciation rate equals the total annual depreciation divided by twelve months.

2. In cases where the depreciation period or the original cost of fixed assets changes, the enterprise must recalculate the average annual depreciation rate of the fixed assets by dividing the remaining book value by the recalculated depreciation period or the remaining depreciation period (determined as the difference between the registered depreciation period minus the already depreciated period) of the fixed assets.

3. The depreciation rate for the last year of the depreciation period of fixed assets is determined as the difference between the original cost of the fixed assets and the cumulative depreciation already performed up to the year before the final year of the fixed assets.

4. Example of calculation and depreciation of fixed assets:

Example: Company A purchases a fixed asset (new 100%) with an invoice price of 119 million VND, purchase discount of 5 million VND, transportation cost of 3 million VND, installation and testing cost of 3 million VND.

a. Knowing that the technical life of the fixed asset is 12 years, the enterprise estimates the depreciation period of the fixed asset to be 10 years (in accordance with the provisions in Appendix 1 issued together with Circular No. 45/2013/TT-BTC), the asset was put into use on January 1, 2013.

Original cost of the fixed asset = 119 million VND - 5 million VND + 3 million VND + 3 million VND = 120 million VND

Annual average depreciation rate = 120 million VND : 10 years = 12 million VND/year.

Monthly average depreciation rate = 12 million VND : 12 months = 1 million VND/month

Annually, the enterprise will allocate 12 million VND as depreciation expense of the fixed asset into operating expenses.

b. After five years of use, the enterprise upgrades the fixed asset with a total cost of 30 million VND, the estimated useful life is reassessed at six years (one year longer than the initial registration), the completion date for use is January 1, 2018.

Original cost of the fixed asset = 120 million VND + 30 million VND = 150 million VND

Accumulated depreciation = 12 million VND (x) 5 years = 60 million VND

Remaining book value = 150 million VND - 60 million VND = 90 million VND

Annual average depreciation rate = 90 million VND : 6 years = 15 million VND/year

Monthly average depreciation rate = 15,000,000 VND : 12 months = 1,250,000 VND/month

From 2018 onwards, enterprises shall deduct a depreciation expense of 1,250,000 VND per month for fixed assets that have just been upgraded.

5. Determining the depreciation rate for fixed assets put into use before January 1, 2013:

a. Method to determine the depreciation rate:

- Based on accounting records and asset files to determine the remaining book value of the fixed asset.

- Determine the remaining useful life of the fixed asset according to the following formula:

Where:

T Remaining useful life of the fixed asset

T₁ Useful life of the fixed asset determined in accordance with Circular No. 203/2009/TT-BTC.

T₂ Useful life of the fixed asset determined in accordance with Circular No. 45/2013/TT-BTC.

organize credit institutions, foreign bank branches are responsible for organizing the implementation of this Circular.₁ Actual time already depreciated of the fixed asset

- Determine the annual depreciation rate (for the remaining years of the fixed asset) as follows:

- The monthly average depreciation rate equals the total annual depreciation divided by twelve months.

b. Example of calculating and deducting depreciation of fixed assets:

Example: An enterprise uses a mining machine with an original cost of 600 million VND from January 1, 2011. The useful life determined in accordance with Appendix 1 issued together with Circular No. 203/2009/TT-BTC is 10 years. The actual usage period of the mining machine up to December 31, 2012 is 2 years. The accumulated depreciation is 120 million VND.

- The remaining book value of the mining machine is 480 million VND.

- The enterprise determines the useful life of the mining machine as 15 years according to Appendix I of Circular No. 45/2013/TT-BTC.

- Determine the remaining useful life of the mining machine as follows:

- The average annual depreciation rate = 480 million VND ÷ 12 years = 40 million VND/year (according to Circular No. 45/2013/TT-BTC)

Monthly average depreciation rate = 40 million VND ÷ 12 months = 3,333 million VND/month

From January 1, 2013 to December 31, 2024, the enterprise shall deduct depreciation of the mining machine into business expenses at 3,333 million VND per month.

II. Depreciation method based on reducing balance with adjustment:

1. Content of the method:

The depreciation rate of fixed assets under the reducing balance method with adjustment is determined as follows:

- Determine the useful life of the fixed asset:

Enterprises determine the useful life of the fixed asset in accordance with Circular No. 45/2013/TT-BTC of the Ministry of Finance.

- Determine the annual depreciation rate of the fixed asset in the initial years according to the following formula:

Where:

The accelerated depreciation rate is determined according to the following formula:

The straight-line depreciation rate of the fixed asset is determined as follows:

Adjustment factor determined according to the useful life of the fixed asset specified in the table below:

In the final years, when the annual depreciation amount determined under the reducing balance method mentioned above equals (or is lower than) the average depreciation between the remaining value and the remaining years of use of the fixed asset, then from that year, the depreciation amount is calculated by dividing the remaining value of the fixed asset by the remaining years of use of the fixed asset.

- The monthly depreciation amount is equal to the total annual depreciation divided by 12 months.

2. Example of calculating and deducting depreciation of fixed assets:

Example: Company A purchases a new production equipment for electronic components with an original cost of 50 million VND. The useful life of the fixed asset determined in accordance with Appendix 1 (issued together with Circular No. 45/2013/TT-BTC) is 5 years.

Determine the annual depreciation rate as follows:

- The annual straight-line depreciation rate of the fixed asset is 20%.

- The accelerated depreciation rate under the reducing balance method is 20% x 2 (adjustment factor) = 40%

- The annual depreciation rate of the fixed asset is specifically determined as follows:

Unit: VND

Where:

+ The depreciation rate of fixed assets from the first year to the third year is calculated by multiplying the remaining value of the fixed asset by the accelerated depreciation rate (40%).

+ From the fourth year onwards, the annual depreciation rate is calculated by dividing the remaining value of the fixed asset (at the beginning of the fourth year) by the remaining years of use of the fixed asset (10,800,000 ÷ 2 = 5,400,000). Because in the fourth year: the depreciation rate under the reducing balance method (10,800,000 x 40% = 4,320,000) is lower than the average depreciation between the remaining value and the remaining years of use of the fixed asset (10,800,000 ÷ 2 = 5,400,000).

III. Depreciation method based on quantity or volume of products:

1. Content of the method:

Fixed assets in enterprises are deducted for depreciation under the quantity or volume of products produced as follows:

- Based on economic and technical files of the fixed asset, enterprises determine the total quantity or volume of products produced according to the design capacity of the fixed asset, abbreviated as the design capacity output.

- Based on actual production conditions, enterprises determine the actual quantity or volume of products produced monthly and annually by the fixed asset.

- Determine the monthly depreciation rate of the fixed asset according to the following formula:

Where:

- The annual depreciation rate of the fixed asset is equal to the total monthly depreciation rate of 12 months in a year, or calculated according to the following formula:

In case the design capacity or original cost of the fixed asset changes, enterprises must re-determine the depreciation rate of the fixed asset.

2. Example of calculating and deducting depreciation of fixed assets:

Example: Company A purchases a bulldozer (new 100%) with an original cost of 450 million VND. The design capacity of this bulldozer is 30m³/hour. The design capacity output of this bulldozer is 2,400,000 m³.³per hour. The production capacity of this excavator according to its design is 2,400,000 mᶟ.³The volume of products achieved in the first year of this bulldozer is:

The depreciation rate according to the quantity-based depreciation method for this fixed asset is determined as follows:

- Average depreciation rate per 1 m³ of earth moved = 450 million VND : 2,400,000 m³ = 187.5 VND/m³

- The monthly depreciation rate of the bulldozer is calculated as follows: