Circular No. 81-TC/HCSN of the Ministry of Finance guides the management and use of advertising revenue for investment in developing the Vietnamese television industry.

CIRCULAR

Guidelines for Managing and Using Revenue from Advertising to Invest in Developing the Television Industry in Vietnam

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Pursuant to Decision No. 605/TTg dated August 31, 1996 of the Prime Minister regarding "the permission for the television industry to use revenue from advertising to develop the industry," following consensus with the Central Television Station, the Ministry of Finance provides guidelines for managing and using this revenue as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Revenue from advertising services on television is a source of state budget revenue that the Government has permitted the Television Industry to manage and use for investment in development. After deducting reasonable expenses, the remaining amount must be remitted to the state budget and then allocated again for investment in building infrastructure and technical equipment according to the annual approved budget, within the "Master Plan for the Development of the Television Industry until 2000 and subsequent years" which has been approved by the Prime Minister.

2. The Finance Sector (Ministry of Finance, Department of Finance - Prices, Investment Development Bureau of localities) shall fully and promptly allocate the funds collected from advertising on television to implement projects that have been approved by competent authorities.

3. The Vietnamese Television Industry (Vietnamese Television Station, Local Radio and Television Stations) is responsible for managing and using these funds in accordance with the state regulations, effectively, and in line with the intended purpose for reinvestment in developing the industry.

II. SPECIFIC PROVISIONS

1. Content of Income and Expenditure:

a. Regarding income:

- Content of advertising income: The content of advertising service income of the Television Industry includes all revenues from such activities.

- Level of advertising income: Based on the state's price management regulations, the Central Television Station guides the level of advertising income on television to suit the operational conditions of the central station and local stations.

b. Regarding expenditure:

Content of expenditure: The content of advertising service expenditure includes the following items:

b.1. Production and quality improvement costs or program purchase: These are costs for producing advertising programs, supporting improvements in program quality to attract advertising, purchasing images, materials, sports and cultural art films to integrate advertising programs on television effectively...

b.2. Advertising promotion costs: These are costs for printing posters, pictures, promotional materials, and directly creating advertising sources on television.

b.3. Purchase and minor repair costs: These are costs for purchasing spare parts, materials, film tapes, small equipment, minor repairs, and maintenance of equipment directly serving the production of advertising programs on television.

b.4. Broadcasting fee costs: These are costs for paying broadcasting fees based on the duration of advertising broadcasts on television.

b.5. Management costs: These are costs for the management system that increases advertising revenue on television.

b.6. Business income tax is calculated based on business revenue at the statutory rate.

b.7. Other expenditures

- Level of expenditure: Based on current regulations and actual costs, the Ministry of Finance will coordinate with the Central Television Station to temporarily set the expenditure ratio (%) on revenue for advertising services on television for all radio and television stations nationwide across nine expenditure levels (including business income tax) as follows:

+ Revenue under 100 million VND 50%

+ From 100 million to 300 million VND 48%

+ Over 300 million to 500 million VND 46%

+ Over 500 million to 1 billion VND 45%

+ Over 1 billion to 5 billion VND 43%

+ Over 5 billion to 25 billion VND 41%

+ Over 25 billion to 70 billion VND 38%

+ Over 70 billion to 100 billion VND 35%

+ Over 100 billion VND 32%

This expenditure level is the maximum control limit applied from September 1, 1996 and piloted in 1997. At the end of 1997, the Ministry of Finance will review and adjust the expenditure level for application in 1998 and subsequent years. All expenditures must be recorded according to actual figures, in compliance with current financial regulations, with complete documentation but not exceeding the above control limit. In special cases, the Ministry of Finance will consult with the Central Television Station to make adjustments.

c. Television advertising revenue for reinvestment in the industry includes:

- Business income tax calculated on advertising revenue at the statutory tax rate.

- Profit tax (35% of taxable profit).

- Remaining profit after tax.

d. Mechanism for using advertising revenue:

- The entire revenue must be remitted 100% to the state budget:

+ Business income tax and profit tax must be paid into the state budget and distributed among different levels of budget according to the distribution ratio of each locality.

+ The remaining profit after paying profit tax and deducting the maximum employee incentive allowance (equal to three months' average basic salary) must be remitted 100% to the state budget according to the state budget classification (100% distributed to the local budget for local television stations, 100% distributed to the central budget for the Central Television Station).

- Using television advertising revenue:

+ Localities should balance their budgets to reinvest in local television development projects approved by competent authorities based on the following sources:

* Revenue from business income tax and profit tax distributed to the local budget from local television stations.

* 100% of the remaining profit after paying profit tax and deducting the maximum employee incentive allowance (equal to three months' average basic salary) of local television stations.

+ The central government should balance its budget to reinvest in central television and regional television development projects approved by competent authorities from the following sources:

* Revenue from business income tax and profit tax distributed to the central budget from the Central Television Station.

* 100% of the remaining profit after paying profit tax and deducting the maximum employee incentive allowance (equal to three months' average basic salary) of the Central Television Station.

All revenue taxes and income taxes paid by local television stations to the central budget for regulation; all revenue taxes and income taxes paid by the Central Television Station to the local budget for regulation are returned to be invested in developing the television industry according to projects approved by competent authorities in mountainous provinces, the Central Highlands, and some provinces that truly face difficulties.

2. Planning work:

a. At the local level: each year, the Radio-Television Stations of provinces and centrally-administered cities shall prepare budgets for revenue and expenditure according to the State Budget Law, while also preparing detailed budgets and explanations for revenues and expenses from advertising service activities and development investment projects using advertising revenues on television to be sent to the Provincial Departments of Finance and Prices, Provincial Planning and Investment Departments for balancing and preparing the provincial budget revenue and expenditure report, which will be submitted for approval by the competent authority and simultaneously sent to Vietnam Television for consolidation into the television industry development plan.

b. At the central level: Along with annual budget preparation, in accordance with general state regulations, Vietnam Television has the responsibility to consolidate budgets for revenue and expenditure from advertising activities throughout the industry (separated between the Central Television Station and each provincial and municipal television station) and investment projects according to the industry's development planning, utilizing advertising revenues from provincial and municipal radio-television stations, and reporting to the Ministry of Planning and Investment, Ministry of Finance for balancing into the state budget revenue and expenditure plan and consolidating into the annual plan for submission to the competent authority for approval.

3. Management and allocation of advertising revenue:

When collecting, Radio-Television Stations must use invoices issued by the Ministry of Finance (General Department of Taxation).

All expenditures must be carried out in accordance with approved budgets and current financial management regulations of the state. Construction projects are subject to Decree No. 42/CP dated July 16, 1996 of the Government on the issuance of the Investment and Construction Management Regulations; Decree No. 43/CP dated July 16, 1996 of the Government on the issuance of the Bidding Regulations, and related guiding documents.

Based on the approved budget for advertising activities, Vietnam Television and local Radio-Television Stations are responsible for allocating plans for revenue and expenditure and assigning tasks for revenue and expenditure to subordinate units according to annual investment projects.

The Financial Sector (Ministry of Finance, Provincial Departments of Finance and Prices, Local Investment Development Agencies, National Treasury Authorities) shall allocate the aforementioned revenue collected from advertising activities on television by Vietnam Television and provincial and municipal radio-television stations, after confirmation by the National Treasury and completion of necessary procedures, according to approved projects and the progress of work of the Central Station and local stations.

Vietnam Television and local Radio-Television Stations are responsible for coordinating with the Ministry of Finance, Provincial Departments of Finance and Prices, and tax authorities at all levels to inspect revenues, usage, and management of revenues from advertising information activities aimed at developing the entire television industry according to the planning approved by the Government.

4. Accounting system and final settlement reports:

Vietnam Television and local Radio-Television Stations must organize accounting work for advertising services in accordance with current regulations.

Annual review and audit of final settlements for projects funded by advertising revenues shall be conducted in accordance with Decree No. 42/CP dated July 16, 1996 of the Government and related implementing documents.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect from September 1, 1996.

In the course of implementation, if there are any difficulties, units are requested to report to the Ministry of Finance for timely supplementation and amendment.