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Guidance on finance treatment of retrenchment allowance

Guidance on finance treatment of retrenchment allowance

The Ministry of Finance issued Circular No.180/2012/TT-BTC dated 24 October 2012 guiding on financial treatment in terms of retrenchment allowance as follows:

· Retrenchment allowance expenses shall be accounted as enterprise management expenses and deductive expenses for CIT purpose.

· With respect to 2012, enterprises are entitled to use the balance of retrenchment allowance provision fund as of 31 December 2011 to pay retrenchment allowances (if any) to employees.

· The unused balance of the retrenchment allowance fund (after use for payment of the retrenchment allowance in 2012 if any) as at 31 December 2012 shall not be carried forward but shall be recorded as other incomes in 2012.

· In case there is a change in enterprise structure resulting in a significant loss of jobs, then the enterprise suffers from losses after the payment for retrenchment allowance is accounted fully as enterprise management, the business establishment are entitled to account and allocate the amount used for paying retrenchment allowance into management expense in the following years, however, the allocation period should not exceed three years.

Circular No.180/2012/TT-BTC takes effect from 10 December 2012 and supersedes Circular No. 82/2003/TT-BTC dated August 08, 2003.