CIRCULAR

PROVIDING ADDITIONAL GUIDANCE ON A NUMBER OF POINTS IN CIRCULAR No. 60-TC/CDKT OF SEPTEMBER 1, 1997 OF THE MINISTRY OF FINANCE ON THE ACCOUNTING AND AUDITING WORK AT FOREIGN - INVESTED ENTERPRISES AND ORGANIZATIONS IN VIETNAM

To ensure the observance of Article 37 of the Law on Foreign Investment in Vietnam, uniformly implement the provisions of Circular No.60- TC/CDKT of September 1st, 1997 of the Ministry of Finance and remove obstacles for foreign-invested enterprises and organizations in Vietnam in the registration and application of accountancy regimes, the Ministry of Finance hereby provides the following additional guidance:

1. Foreign - invested enterprises and organizations (hereafter referred to as enterprises and organizations for short) shall have to conduct the accounting and auditing work according to the law on foreign investment in Vietnam, the provisions of Circular No.60-TC-CDKT of the Ministry of Finance as well as guidance of this Circular .

2. On the system of applicable accountancy regimes:

2.1. Enterprises and organizations shall have to apply the Vietnam enterprise accountancy regime promulgated together with Decision No. 1141-TC/QD/CDKT of November 1st, 1995 and the Circulars amending and /or supplementing Decision No.1141-TC/QD/CDKT of Ministry of Finance.

As for insurance enterprises, the current accountancy regime set for insurance enterprises (Decision No.1296-TC/QD/CDKT of December 31st, 1996 of the Ministry of Finance) shall apply.

2.2. The Ministry of Finance shall consider and allow the newly-established enterprises and organizations or the operating enterprises and organizations to continue applying other common accountancy regimes in the following cases where:

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2.3. Enterprises and organizations entitled to delay the application of the Vietnam accountancy regime:

For enterprises and organizations which have not yet prepared all necessary conditions for the shift to the Vietnam accountancy regime (for example, they do not have due knowledge about the Vietnam accountancy regime, their accountants have not been trained or their computer software has not been rewritten yet), the Ministry of Finance shall consider and allow them to delay shifting to the Vietnam accountancy regime to the end of December 31, 2000 at the latest.

2.4. Enterprises and organizations shall be exempt from shifting to the system of the Vietnam enterprise accountancy regime if:

- Their operation duration in Vietnam is expected to terminate in 3 years, counted from January 1, 1999 due to the expiry of the investment licenses or the permits for the establishment of branches of foreign lawyers' organizations in Vietnam.

- They are expected to terminate their operation (due to the dissolution or bankruptcy...) within 6 months from January 1, 1999.

3. On the implementation of the accounting work:

3.1 . Accounting vouchers:

Accounting vouchers serving as bases for keeping account books must be the original ones with full factors as prescribed. Copies or faxes thereof shall not have the legal validity for keeping account books.

Forms of accounting vouchers to be made regularly outside Vietnam by the capital contributing parties must be registered in advance in the dossiers of accountancy regime registration while the names of such vouchers as well as the contents of relevant economic transactions must be translated into Vietnamese.

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a/ Enterprises and organizations where accountancy has not been computerized shall have to register the use of a ledger.

b/ Enterprises and organizations where accountancy has been computerized shall have to register the use of a ledger for handwritten entries of sum-up data of the accounting accounts.

The handwritten entries of data into the ledger which has been registered with the local tax agency shall be conducted on a quarterly and yearly basis, corresponding to the financial report-making period. The balance recorded at the beginning of the year in the ledger is the year end balance of the previous fiscal year, carried forward thereto. Quarterly, the amount arising on each account shall be recorded correspondingly to the total amount arising in such quarter. The quarter-end and year-end balances shall be determined on the principle of calculating the balances of each account.

c/ The local tax agency shall certify the number of the ledger's pages, and affix stamp adjoining the ledger�s pages before it is used by the concerned enterprise or organization.

3.3. Place of submitting financial reports: Financial reports of foreign-invested enterprises and organizations shall be submitted to the Ministry of Planning and Investment, the Ministry of Finance, the Departments of Taxation, the Departments of Statistics of the localities (where the enterprises are headquarters); the provincial Boards of Management of Export Processing Zones, Industrial Parks and High-Tech Parks (for enterprises operating in the export processing zones, industrial parks and high-tech parks) and the parties contributing capital to joint ventures.

4. On the currency used in making accounting records:

The currency used in accountancy recording shall be Vietnamese dong. Foreign-invested enterprises may also use foreign currency(ies) (the convertible ones) for making entries in account books and accounting reports, provided that such foreign currency(ies) is(are) registered in the applicable accountancy regimes and approved in writing by the Ministry' of Finance before it(they) is(are) used.

The currencies other than the approved official ones must be recorded in their original values and converted into the official currency(ies) according to the actual exchange rates of the relevant economic transactions or the actual average buying/ selling rates on the inter-bank foreign exchange market, announced by the State Bank at the time the relevant economic transactions arise.

The exchange rate differences shall be dealt with according to the provisions of Circular No.74-TC/TCT of October 20, 1997 of the Ministry of Finance guiding the implementation of the tax-related regulations applicable to different forms of investment under the Law on Foreign Investment in Vietnam.

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Enterprises and organizations shall have to use Vietnamese language in accountancy recording and making financial reports. In cases where enterprises and organizations use two languages or more, one of such languages must be the Vietnamese.

6. Enterprises and organizations which apply the system of the Vietnam enterprise accountancy regime shall have the following rights and responsibilities:

6.1. To choose on their own the forms of accounting vouches, account books and accounting accounts, suited to their activities; they may also open level-two accounts in the system of unavailable accounts (where there are only level-one accounts), level-three and level-four accounts of all kinds...; detailed account books; and accounting reports on business administration according to the requirement for the management of enterprises (without having to register them with the Ministry of Finance).

6.2. In cases where they wish to add level-one accounts; rename the accounts; supplement the entry contents of the accounts; or supplement the accounting vouchers, they shall have to give the reasons therefor and explain in detail such changes in the dossiers of registration of the applicable accountancy regimes, and can effect such changes only after they are approved in writing by the Ministry of Finance.

7. On the time for shifting to the application of the Vietnam accountancy regime:

The time for shifting to the application of the Vietnam accountancy regime shall be January 1, 1999 for enterprises and organizations with their fiscal year being the calendar year: and shall be the time when the 1999 fiscal year begins, for enterprises with their fiscal year being other than the calendar year.

8. Procedures for registration of the applicable accountancy regimes:

8.1. Registration for the first time:

a/ If the enterprises and organizations strictly follow the Vietnam enterprise accountancy regimes (without any amendment or supplement thereto), they shall only have to send official dispatches for registration to the Ministry of Finance, together with the copies of their investment licenses or operation permits and the dossiers of the chief accountants according to the regulations prescribed in Point 3.1.1 through Point 3.1.4 of Circular No.60-TC/CDKT.

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c/ If they wish to apply other common accountancy regimes, they shall have to clearly state in their registration dossiers the reasons therefor as well as the whole contents of the accountancy regime they want to apply (under the guidance of Point 3, Section D, Part III- Circular No.60-TC/CDKT).

8.2. Registration of accountancy regime shifting:

a/ Enterprises and organizations which want to shift from foreign accountancy regimes to Vietnam�s enterprise accountancy regimes without replacing their chief accountants, shall only have to send an official dispatch registering the accountancy regime shift (according to the form in Appendix No.1 of Circular No.60-TC/CDKT) and a copy of the official dispatch approving the previously applied accountancy regime, clearly stating the serial number of the granted investment license or operation permit.

b/ Enterprises and organizations which, register the accountancy regime shift with proposed amendments and/or supplements to the to-be-applied accountancy regimes or the replacement of their chief accountants shall, in addition to an official dispatch requesting the shift, have to submit a written explanation of the reasons therefor as well as the contents of the amendments and/ or supplements, and documents related to the chief accountants as prescribed.

8.3. Request for the delayed application of the Vietnam accountancy regime:

Enterprises and organizations shall have to send official dispatches clearly stating the reasons for delaying the accountancy regime shift, together with the copies of their investment licenses or operation permits as well as the documents approving their previously applied accountancy regimes, to the Ministry of Finance. Enterprises and organizations shall have to commit to proceed with necessary procedures to ensure the shift to the Vietnam accountancy regime within the time-limit approved by the Ministry of Finance.

8.4. Cases of exemption from shifting to the application of the Vietnam accountancy regime:

Enterprises and organizations shall have to submit official dispatches clearly stating the reasons for the shift exemption, together with the copies of their investment licenses or operation permits as well as the document approving their previously applied accountancy regimes, to the Ministry of Finance, with certification by the investment licensing agencies or the operation permit issuing agencies (in case of the termination of their operation due to the dissolution or bankrupcy).

9. On the procedures for accountancy regime registration and registration dossier filing at export processing zones, industrial parks or high-tech parks.

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- A dossier of registration of accountancy regime shall be made in accordance with the regulations stated in Point 3.1.1 through Point 3.1.4 of Circular No.60-TC/CDKT of September 1, 1997 (4 complete sets bound in a book).

- After an accountancy regime has been approved for application to an enterprise, the dossier of that accountancy regime shall be filed as follows:

+ 01 set - at the registering enterprise;

+ 01set - at the tax agency;

+ 01 set - at the Ministry of Finance; and

+ 01 set - at the management board of the export processing zone, industrial park or high-tech park.

10. The Ministry of Finance requests enterprises and organizations to take active measures to shift to the application of the Vietnam accountancy regime. Concretely as follows:

- To organize study of and training and fostering courses for the chief accountants, accountants and managerial officials on the Vietnamese State's current regulations on the accounting and auditing work at foreign-invested enterprises and organizations as well as on the system of Vietnam enterprise accountancy regime.

- To well prepare material conditions on the accounting systems and accounting books, write new or rewrite computer software suited to the application of the Vietnam accountancy regime.

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12. This Circular takes effect 15 days after its signing.

In the course of implementation of this Circular, if any problems arise, they should be reported to the Ministry of Finance for study and settlement.

FOR THE MINISTER OF FINANCE
VICE MINISTER




Tran Van Ta