Thông tư 201/2009/TT-BTC

CIRCULAR

GUIDING THE HANDLING OF EXCHANGE RATE DIFFERENCES IN ENTERPRISES

Pursuant to the 2008 Law on Enterprise Income Tax;
Pursuant to the Government's Decree No. 124/2008/ND-CP of December 11, 2008, detailing and guiding a number of articles of the
Law on Enterprise Income Tax;
Pursuant to the Government's Decree No. 118/2008/ND-CPof November27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
Pursuant to the Government's Decree No. 09/ 2009/ND-CP of February 5, 2009, promulgating the Regulation on financial management of state companies and management of state capital invested in other enterprises;
To realize the directing opinions of Deputy Prime Minister Nguyen Sinh Hung in the Government Office's Official Letter No. 2225/VPCP-KTTH of April 9, 2009, on the handling of foreign exchange rate differences, the Ministry of Finance guides the handling of exchange rate differences in enterprises as follows:

Part A

GENERAL PROVISIONS

Article 1. Subjects and scope of application

This Circular applies to enterprises estab­lished and operating in Vietnam under law. It does not apply to foreign currency trading enterprises.

For enterprises established on the basis of treaties concluded between the Government of the Socialist Republic of Vietnam and governments of foreign countries and containing provisions on the handling of exchange rate differences different from this Circular's guidance, these treaties prevail.

Article 2. Terms referred to in this Circular are construed as follows:

1. "Foreign currency" means a currency different from the currency used in accounting activities of an enterprise.

2. Foreign currency operations'* means revenue and expenditure operations in foreign currencies and for pricing.

3. "Foreign exchange rale" means an exchange rale between two currencies (below referred to as exchange rate).

4. "Foreign exchange rate difference" means the difference between a booked exchange rate and an exchange rate for conversion of the same foreign currency at the lime of adjustment.

Article 3. Enterprises that conduct foreign currency operations shall account foreign exchange rate differences under current accounting regulations.

Exchange rates for conversion of foreign currencies into Vietnam dong must comply with the Finance Minister's Decision No. 15/2006/QD-BTC of March 20, 2006, promulgating enterprise accounting regulations.

Article 4. Foreign currencies of which exchange rates for conversion into Vietnam dong are not publicly announced by the State Bank of Vietnam will all be converted through the US dollar at exchange rates applied by banks at which enterprises open their accounts at the time when the balances of monetary items of foreign-currency origin actually arise or are revaluated at the end of a period.

Part B

SPECIFIC PROVISIONS

Article 5. All foreign exchange rate differences arising from production and business activities in a period, including also capital construction investment activities (of enterprises engaged in both production and business activities and capital construction investment activities) shall be immediately accounted as financial expenditures or turnover from financial operations in the period.

Article 6. Handling of foreign exchange rate differences

1. Handling of foreign exchange rate differences of foreign currency operations in a period:

1.1. At the stage of construction investment for forming fixed assets of newly established enterprises:

At the stage of construction investment for forming fixed assets of newly established enterp­rises, foreign exchange rate differences arising in the settlement of monetary items of foreign-currency origin for construction investment and those arising from the revaluation of monetary items of foreign-currency origin at the end of a fiscal year shall be recorded accumulatively and separately on the balance sheet. When fixed assets are completely formed and put into use, foreign exchange rate differences arising at the stage of construction investment shall be incrementally allocated to incomes or production and business expenses, specifically:

- For positive foreign exchange rate differences, they shall be incrementally allocated to financial incomes of enterprises, and the duration of allocation must not exceed 5 years after works arc put into operation.

- For negative foreign exchange rate differences, they shall be incrementally allocated to Financial expenses of enterprises, and the duration of allocation must not exceed 5 years after works are put into operation.

1.2. At the stage of production and business operation of enterprises:

At the stage of production and business operation, covering construction investment for forming fixed assets of operating enterprises, the foreign exchange rate difference arising in the settlement of monetary items of foreign-currency origin shall be accounted as incomes or expenses in the fiscal year, specifically:

a/ For receivable debts:

- Positive foreign exchange rate differences shall be accounted as financial incomes in the period.

- Negative foreign exchange rate differences shall be accounted as financial expenses in the period.

b/ For payable debts:

- Negative foreign exchange rate differences shall be accounted as financial incomes in the period.

- Positive foreign exchange rate differences shall be accounted as financial expenses in the period.

1.3. At the stage of enterprise dissolution and liquidation:

a/ For receivable debts:

- Positive foreign exchange rate differences shall be accounted as incomes from enterprise liquidation.

- Negative foreign exchange rate differences shall be accounted as expenses for enterprise liquidation.

b/ For payable debts:

Negative foreign exchange rate differences shall be accounted as incomes from enterprise liquidation.

Positive foreign exchange rate differences shall be accounted as expenses for enterprise liquidation.

1.4. For foreign exchange rate differences arising from foreign currency trading in the period:

- Positive foreign exchange rate differences shall be accounted as financial incomes in the period.

- Negative foreign exchange rate differences shall be accounted as financial expenses in the period.

2. Handling of foreign exchange rate differences arising from the revaluation of the foreign-currency balance at the end of a period:

At the end of an accounting period, enterprises shall convert their balances in cash, deposits, sums of money in transfer, receivable and payable debts of foreign-currency origin into Vietnam dong at exchange rates specified in Article 3 of this Circular. The difference between the post-conversion exchange rate and the booked exchange rate shall be handled as follows."

2.1. Foreign exchange rate differences arising from the revaluation of the year-end balances being in cash, deposits, in-transfer sums of money and short-term debts (of a term of 1 year or less) of foreign-currency origin at the time of making financial statements shall not be accounted as expenses or incomes but shall be retained as balances on financial statements and recorded, at the beginning of the next year, as reverse book entries to wipe out the balances.

2.2. Foreign exchange rate differences arising from the revaluation of the year-end balances of long-term debts (of a term of more than one year) of foreign-currency origin at the time of making financial statements shall be handled as follows:

a/ For long-term receivable debts:

For debts receivable in foreign currencies, companies shall revaluate the year-end balances of foreign-currency amounts, and handle exchange rate differences after clearing as follows:

- Positive differences shall be accounted as financial incomes in the year.

- Negative differences shall be accounted as financial expenses in the year.

b/ For long-term payable debts:

For debts receivable in foreign currencies, companies shall revaluate the year-end balances of foreign-currency amounts, and handle exchange rate differences after clearing as follows:

- Positive foreign exchange rate differences shall be accounted as Financial expenses in the year and as reasonable expenses upon enterprise income tax calculation. In case the accounting of positive foreign exchange rate differences as expenses leads to business losses, part of these differences may be carried forwarded to the subsequent year in order to prevent companies from suffering from losses provided that the amounts accounted as expenses in the year must be at least equal to the exchange rate differences of the payable long-term foreign-currency balances in the year. The remaining exchange rate differences shall be further monitored and allocated to expenses of the subsequent five years at most.

- Negative foreign exchange rate differences shall be accounted as financial incomes.

Upon liquidation of each receivable or payable long-term debt, if the exchange rate actually used in payment is higher or lower than the booked one. the arising foreign exchange rate difference shall be handled under Point 1.2. Clause 1, Article 6 of this Circular.

Part C

IMPLEMENTATION PROVISIONS

Article 7. This Circular takes effect 45 days from the date of its signing and replaces the Ministry of Finance's Circular No. 44/TC-TCDN of July 8, 1997, guiding the handling of exchange rate differences in state enterprises, and Circular No. 44-TC/TCDN">38/2001/TT-BTC of June 5, 2001, amending and supplementing Circular No. 44/TC-TCDN of July 8, 1997.

Any difficulties or problems arising in the course of implementation should be promptly reported to the Ministry of Finance for consideration and settlement.-