On August 8th, 2019, the Ministry of Finance promulgated Circular No.48/2019/TT-BTC guiding the making and handling of provisions at Enterprises. Accordingly, the Circular has some new points as follows:
The Scope
This Circular guides the making and handling of provisions as a basis for determining deductible expenses when determining CIT taxable income under regulations. Provisions made for making and presenting financial statements shall be complied with the law on accounting.
General principles
The Enterprise can make and refund the provisions when making the annual financial statements instead of at the end of the accounting year or the last day of the fiscal year.
Enterprises are not allowed to make provisions for foreign investments. The balance of the provision for foreign investments made by the enterprise prior to the effective date of this Circular shall be reversed and recorded as a cost reduction at the time of making the 2019 financial statement.
Provision for devaluation of inventories
Specifying the subjects for provisions including goods in transit, goods in transit for sale, goods stored in tax-protected warehouses instead of only regulating on inventory as previous guidances.
Provision for loss of investments
Changing the formula for calculating losses from investments;
It is not allowed to make provision in case the economic organization receiving the contributed capital does not make financial statements at the same time with the enterprise. If this economic organization has been terminated operation and is pending or permitted making financial statements at the other time, it shall be based on the latest quarterly financial statements of this economic organizations.
Provision for bad debts
Adding provisions for debts purchased from enterprises buying and selling debts;
Guiding on the provisions dossiers in case the enterprise does not have debt comparison. Accordingly, the enterprise is required to have a request for comparison and confirmation of the debt or the debt claim (with postmark or certification of the delivery business);
Supplementing the separate levels of provision for telecommunications service enterprises, retail business enterprises, receivables of telecommunications, information technology, postpaid television services and debts revenue from retailing goods in the form of deferred payment by debtors who are overdue.
This Circular takes effect from October 10th, 2019 and applies from fiscal year 2019.
This Circular aborts Circular No.228/2009/TT-BTC dated December 7th, 2009 of the Ministry of Finance guiding the regime of setting up and using provisions and other documents regulating the provisons contrary to the provisions of this Circular.
