Circular No. 57/2012/TT-BTC guides the pilot mechanism for raising funds to support anti-smuggling and anti-counterfeiting efforts concerning cigarette smuggling and counterfeit cigarette production and sales.

CIRCULAR

Guidelines on the pilot mechanism for raising funds to support anti-smuggled cigarette and counterfeit tobacco product work

combating cigarette smuggling and the production and sale of counterfeit cigarettes

___________________________

Pursuant to 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;

Pursuant to the Prime Minister's directive in Circular No. 290/VPCP-KTTH dated January 13, 2012;

The Ministry of Finance guides the implementation of the pilot mechanism for raising, managing, and using funds to support anti-smuggling and counterfeiting activities of cigarettes and tobacco products as follows:

Section I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular provides guidelines on the mechanism for raising funds from enterprises engaged in the production and trade of tobacco products to form a Support Fund for anti-smuggling and counterfeiting activities of cigarettes and tobacco products (referred to as the Fund); management and use of the Fund.

Article 2. Scope of Application

1. The entities contributing to the formation of the Fund are enterprises producing and trading in tobacco products that are members of the Vietnam Tobacco Association and other enterprises legally operating in Vietnam who voluntarily contribute to the Fund (referred to as enterprises).

2. The beneficiaries of the Fund include: functional forces directly implementing investigative, verification, inspection, seizure, and disposal activities of smuggled cigarettes and counterfeit tobacco products; the Central Steering Committee against Smuggling, Counterfeit Goods, and Commercial Fraud and its permanent office (referred to as the Central Steering Committee 127); the Provincial Steering Committee against Smuggling, Counterfeit Goods, and Commercial Fraud and its permanent office (referred to as the Local Steering Committee 127) directly implementing guidance and coordination with forces to seize and dispose of smuggled cigarettes and counterfeit tobacco products; The Management Board of the Fund of the Vietnam Tobacco Association.

Section 2

CONTENTS OF THE MECHANISM FOR MOBILIZING AND USING THE FUND

Article 3. Principles for Mobilizing Contribution Funds and Using the Fund

1. Principles for Mobilizing Contribution Funds for the Fund

a) The total annual contribution level to the Fund is determined based on the actual amount of smuggled cigarettes and counterfeit tobacco products seized and disposed of in the previous year; the forecast for the planning year and the current state regulations of the Government regarding the management and disposal of confiscated assets and means transferred to the State treasury due to violations of the law;

b) The contribution level of each enterprise to the Fund must be publicly disclosed, ensuring fairness and equality among enterprises; encouraging enterprises with favorable conditions to contribute more than the average level;

c) All funds contributed by enterprises to establish this Fund shall be deposited into a separate account at a bank under the name and management of the Vietnam Tobacco Association.

2. Principles for Managing and Using the Fund

a) The Fund shall be used to provide additional support to the beneficiaries mentioned in Clause 2, Article 2 of this Circular to carry out inspection, prevention, seizure, handling, and disposal of smuggled cigarettes and counterfeit tobacco products, and related coordination, training sessions, interim reviews, final summaries, commendations, and dissemination of laws on anti-smuggling and counterfeiting activities of cigarettes and tobacco products. The Fund shall not be used for purposes unrelated to these activities.

b) Payments to functional forces in anti-smuggling and counterfeiting activities of cigarettes and tobacco products shall be based on the actual quantity of cigarettes seized and destroyed recorded in the Seizure Decision of the seizing and violation handling agency and the Minutes of Destruction of Smuggled Cigarettes and Counterfeit Tobacco Products of the Disposal Committee.

c) The Fund must be strictly managed and used for its intended purpose; at the end of the fiscal year, the Vietnam Tobacco Association must submit a report on the situation of fund-raising and usage to the local Tax Bureau where the enterprise's main office is located.

d) Units utilizing the funds must separately track and account for the support funds; establish a fund usage regulation based on transparency and openness principles. The head of the unit utilizing the support funds shall decide specific expenditure levels based on the contents stipulated in Article 5 of this Circular, in accordance with the unit's work requirements, and bear direct responsibility before the superior supervisory authority. Unspent funds may be carried over to the next year for continued use.

đ) The source of support funds guided in this Circular does not replace existing funding sources for anti-smuggling, commercial fraud, and counterfeit goods activities. The handling of contraband and counterfeit tobacco products due to administrative violations shall be carried out according to the provisions of the law on the management and disposal of confiscated assets and means transferred to the State treasury due to administrative violations.

Example: In the state budget plan for 2012, the Market Management Service of Province A was allocated 400 million VND for anti-smuggling, commercial fraud, and counterfeit goods activities. Assuming that 1.2 million packs of smuggled cigarettes and counterfeit tobacco products were seized in 2012, the Market Management Service of Province A would still receive the funding allocated by the state budget for anti-smuggling, commercial fraud, and counterfeit goods activities according to current regulations, in addition to the support funds provided under Article 5 of this Circular.

Article 4. Establishing the Budget Estimate and Announcing Contribution Levels to the Fund

a) Annually, based on the actual situation of cigarette smuggling and counterfeit tobacco product production and trade, the plans for organizing cooperation and implementing anti-smuggling and counterfeiting activities of cigarettes and tobacco products by the Central Steering Committee 127, and the forecast of the number of cigarettes seized and destroyed and the required support funds calculated per actual seized pack of cigarettes, the Vietnam Tobacco Association will coordinate with tobacco-producing and trading enterprises to prepare the total fundraising budget for the Fund.

Based on the annual cigarette production plan and the fundraising budget for the Fund (after deducting voluntary contributions exceeding the general contribution level), the Vietnam Tobacco Association will determine the planned contribution rate applicable to all enterprises.

Example: The revenue plan for cigarette production in the tobacco industry in 2012 is 15 trillion VND, of which Enterprise A's sales are 5 trillion VND. The total fundraising budget for the Fund is 45 billion VND, with Enterprise A voluntarily contributing 50%, thus the remaining amount needed to be raised in 2012 to determine the general contribution rate for the remaining enterprises is 22.5 billion VND. The planned contribution rate (%) applicable to the remaining enterprises is calculated as follows:

22.5 billion VND / (15,000 - 5,000) billion VND = 0.225%

c) The Vietnam Tobacco Association publicly notifies enterprises about the projected total amount of funds to be raised for the Fund and the contribution rate (%) applicable uniformly to all enterprises.

Based on each enterprise's planned revenue for the year, the Vietnam Tobacco Association determines the projected annual contribution level for each enterprise (according to Form No. 01 issued together with this Circular) and informs the enterprises to serve as a basis for implementation, while also sending it to the Ministry of Finance (General Department of Taxation) and the local tax authority where the enterprise's main office is located for monitoring.

d) Quarterly, based on the uniform contribution rate announced by the Vietnam Tobacco Association and the actual revenue achieved in the previous quarter, enterprises proactively calculate the amount of funds to be contributed for that quarter (for enterprises voluntarily contributing more than the uniform rate, the contribution amount will be according to the agreed rate with the Vietnam Tobacco Association) and transfer the money to the Vietnam Tobacco Association within the first ten days of each quarter. The funds used during the year to support anti-smuggling efforts against counterfeit cigarettes and illegal cigarette production and sales, allocated by the Vietnam Tobacco Association to contributing enterprises, shall be accounted for as reasonable expenses when determining corporate income tax.

Article 5. Use of the Fund

The Fund shall be used to support the following expenditures:

1. Additional support costs for functional forces directly implementing anti-smuggling activities against counterfeit cigarettes and illegal cigarette production and sales, including the following expenditures:

a) Costs for apprehending, night shift allowances, overtime pay, processing and destroying smuggled counterfeit cigarettes;

b) Costs for purchasing equipment to directly support anti-smuggling activities against counterfeit cigarettes and illegal cigarette production and sales, if sufficient financial resources are available. Equipment purchases are decided by the Minister of Public Security, the Minister of National Defense, or the head of relevant ministries involved;

c) Rewards for collectives and individuals with outstanding achievements in anti-smuggling efforts against counterfeit cigarettes and illegal cigarette production and sales.

The support funding for direct forces is determined based on the number of seized counterfeit cigarettes and illegal cigarettes destroyed (recorded in the Decision on Seizure and Destruction of Smuggled Counterfeit Cigarettes and the Record of Destruction of Smuggled Counterfeit Cigarettes).

The support funding rate is VND 1,000 per pack, regardless of the value of the cigarettes (high-end or low-end). An additional VND 100 per pack is provided for destruction costs, encouraging the use of environmentally friendly and locally appropriate destruction methods.

2. Support costs for the Central Steering Committee 127 and local Steering Committees 127 in organizing, directing, and inspecting the implementation of measures to prevent and combat smuggling of counterfeit cigarettes and illegal cigarette production and sales, including the following expenditures:

a) Costs for developing plans, strategies, and combat proposals for preventing and combating smuggling of counterfeit cigarettes and illegal cigarette production and sales;

b) Expenditures for organizing specialized conferences, seminars, and training sessions to implement plans and coordinate measures among ministries, sectors, and relevant agencies;

c) Costs for implementing publicity, mobilization, and dissemination of laws related to preventing and combating smuggling of counterfeit cigarettes and illegal cigarette production and sales;

d) Costs for organizing regular or spot inspections to prevent and combat smuggling of counterfeit cigarettes and illegal cigarette production and sales in local areas;

đ) Costs for summarizing, concluding, rewarding, and motivating organizations and individuals with outstanding achievements in anti-smuggling efforts against counterfeit cigarettes and illegal cigarette production and sales.

The maximum support funding for the operations of the Central Steering Committee 127 and local Steering Committees 127 shall not exceed 10% of the support funding for direct seizure forces mentioned in Clause 1, Article 6 of this Circular, with 3% allocated to the Central Steering Committee 127 and 7% allocated to local Steering Committees 127 where counterfeit cigarettes and illegal cigarettes have been seized and destroyed.

3. Support costs for the Management Board of the Fund of the Vietnam Tobacco Association

a) Subsidies for travel expenses incurred when working in areas with smuggled cigarettes;

b) Expenses for staff and experts of the Association for inspection, supervision, and enforcement of destruction of smuggled cigarettes in key regions;

c) Some expenditures for purchasing information about the activities of smuggling organizations to provide to functional forces;

d) Equipment costs for the Management Board such as photocopiers and computers.

These expenditures must comply with current state expenditure regulations and shall not exceed 5% of the support funding for direct seizure forces mentioned in Clause 1, Article 6 of this Circular.

Article 6. Procedure for Implementing Financial Support from the Fund

The Vietnam Tobacco Association shall provide financial support for anti-smuggling activities and the production and sale of counterfeit cigarettes according to the following procedure:

1. For the direct enforcement forces responsible for apprehending and disposing of smuggled and counterfeit cigarettes:

Based on the notification from the 127 Steering Committee at the local level regarding the actual quantity and types of smuggled and counterfeit cigarettes seized and destroyed, the Vietnam Tobacco Association will determine the amount of financial support for these direct forces.

The transfer of financial support to the direct forces will be carried out in batches of seized and destroyed cigarettes through the local 127 Steering Committees in two steps as follows:

Upon receiving the notification from the local 127 Steering Committee regarding the quantity and types of cigarettes seized (accompanied by the Decision on Seizure and Confiscation of Smuggled and Counterfeit Cigarettes), the Vietnam Tobacco Association will temporarily allocate 50% of the determined financial support for the batch of seized cigarettes.

Upon receiving the notification from the local 127 Steering Committee regarding the quantity and types of cigarettes seized and destroyed (accompanied by the Record of Destruction of Smuggled and Counterfeit Cigarettes), the Vietnam Tobacco Association will settle the remaining 50% of the financial support.

Within no more than 10 working days from the date of receipt of the notification from the local 127 Steering Committee and accompanying documents, the Vietnam Tobacco Association will transfer the funds to the account of the local 127 Steering Committee.

Upon receiving the funds transferred by the Vietnam Tobacco Association, the local 127 Steering Committee is responsible for temporarily allocating or settling the funds for the direct enforcement forces responsible for seizing and destroying smuggled and counterfeit cigarettes.

2. For the Central 127 Steering Committee and local steering committees:

Based on the results of seizures and destructions of smuggled and counterfeit cigarettes each quarter, the Vietnam Tobacco Association will transfer funds to the Central 127 Steering Committee and local steering committees where smuggled and counterfeit cigarettes were seized and destroyed within the first ten days of the next quarter.

Article 7. Settlement of the Fund

At the end of each year, the Vietnam Tobacco Association shall be responsible for settling the situation regarding the collection, management, and utilization of the Fund and informing enterprises to serve as the basis for implementation, specifically including the following contents:

- Total actual funds raised during the year, detailed by contributing enterprises;

- Quantity and types of smuggled and counterfeit cigarettes seized and destroyed during the year; the level of financial support calculated per pack of cigarettes.

- Total actual funds provided to the direct enforcement forces and the Central 127 Steering Committee and local steering committees, detailed by the type of recipient (according to Form No. 02 issued together with this Circular).

- The balance of the Fund as of December 31 each year.

Enterprises are responsible for sending their actual revenue results for the year to the Vietnam Tobacco Association no later than January 15th of the following year for consolidation of industry-wide revenue results.

Based on the actual fund usage of the Fund and the industry-wide revenue results for the year, the Vietnam Tobacco Association will calculate and determine the actual contribution ratio for all enterprises, the actual fund usage recorded as reasonable expenses, and the excess or shortfall compared to the budgeted contributions of each enterprise for the year (according to Form No. 03 issued together with this Circular) and notify the enterprises for their knowledge and as a basis for recording reasonable expenses when determining corporate income tax; simultaneously send to the Ministry of Finance (General Department of Taxation) and the local tax authority where the enterprise is headquartered for monitoring.

If the amount recorded as reasonable expenses exceeds the budgeted contribution at the beginning of the year, the enterprise must make up the shortfall to the Fund. If the amount recorded as reasonable expenses is less than the budgeted contribution at the beginning of the year, the excess can be carried forward to offset the contribution to the Fund in the following year.

The notification of the Vietnam Tobacco Association according to Model No. 03 issued together with this Circular is a legitimate document to determine the reasonable expenses of each enterprise.

Article 8. Destruction of Smuggled and Counterfeit Cigarettes

The destruction of smuggled and counterfeit cigarettes shall be carried out periodically under the supervision of the Vietnam Tobacco Association, as follows:

- The agency or unit issuing the decision to confiscate smuggled and counterfeit cigarettes shall prepare a destruction plan and send it to the Steering Committee 127 of the relevant localities where smuggled and counterfeit cigarettes have been seized and destroyed, to notify the Vietnam Tobacco Association to dispatch representatives and representatives of other cigarette manufacturing and trading enterprises to witness the destruction of smuggled and counterfeit cigarettes. Notifications about the destruction of smuggled and counterfeit cigarettes must be sent to the Vietnam Tobacco Association at least 7 days before the destruction takes place.

- The destruction of smuggled and counterfeit cigarettes shall be conducted monthly; in cases where the quantity of seized cigarettes is large, multiple destructions may be organized within the month.

- The organization of the destruction of smuggled and counterfeit cigarettes shall be carried out by the Destruction Disposal Council and must prepare a record with signatures from all members of the Council in accordance with Circular No. 12/2010/TT-BTC dated January 20, 2010, issued by the Ministry of Finance, guiding the handling of administrative violation evidence that is easily damaged goods and items.‎- Attention shall be paid to the amount of money obtained from the disposal of confiscated property and means of transportation that are transferred to the state treasury due to administrative violations.

Article 9. Responsibilities of the Vietnam Tobacco Association

1. The Vietnam Tobacco Association is responsible for mobilizing, managing, and using the Fund in accordance with this Circular and bears legal responsibility for the accuracy of the figures reported in Article 7 of this Circular.

2. For smuggled and counterfeit cigarettes seized but not yet destroyed due to the advance payment of 50% of the support funds to the direct forces, the Vietnam Tobacco Association has the responsibility to request the seizing authority to expedite the destruction of the confiscated smuggled and counterfeit cigarettes. In cases where there are no cigarettes available for destruction, the Vietnam Tobacco Association shall recover the temporarily advanced support funds and inform the Central Steering Committee 127 and take appropriate action.

3. Annually, the Vietnam Tobacco Association shall report on the situation of mobilizing, managing, and using the Fund to the Ministry of Finance and the Ministry of Industry and Trade.

Section 3

IMPLEMENTATION

Article 10. Effective Date

1. This Circular shall take effect 45 days from the date of signature and shall apply from January 1, 2012, until December 31, 2013. Annually, the Ministry of Finance shall lead and coordinate with the Central Steering Committee 127 and the Vietnam Tobacco Association to conduct mid-term reviews and evaluations of the implementation results of this pilot mechanism.

2. This Circular replaces Circular No. 75/2007/TT-BTC dated July 5, 2007, issued by the Ministry of Finance, guiding the pilot mechanism for mobilizing funds to support anti-smuggling efforts of smuggled cigarettes and the production and sale of counterfeit cigarettes, and Circular No. 78/2009/TT-BTC dated April 20, 2009, issued by the Ministry of Finance, amending and supplementing Circular No. 75/2007/TT-BTC.

In the course of implementation, if any difficulties arise, agencies and units are requested to report to the Ministry of Finance for coordination in resolving them./.