Scope and subject of application
- The guidance of Circular 48 shall be used as a basis for determining deductible expenses for calculation of Corporate Income Tax (“CIT”).
- The preparation and presentation of the provisions on the financial statements must still comply with the Law on Accounting.
Regarding provisions for inventory
- Remove guidance that allows the company to set up provisions for work-in-progress of rendering services.
Provision for investment loss
- Enterprises are only allowed to make provision for domestic investments, not for overseas investments. In case a provision for foreign investments have been recorded, the enterprise must revert this provision and decrease expenses for financial year 2019.
- Supplement in more details the regulations to determine residual value of an investment.
Provision for doubtful debts
- In case of absence of debt reconciliation, it could be substituted by a request for debt confirmation or a debt collection request, which has been sent by the enterprise (with postmark or confirmation from mailing services suppliers), as a basis for provisions recognition.
- Supplement regulations that allow enterprises in telecommunication services and retailing business to make provision in a shorter time-frame.
- Supplement cases that can be recognized as irrecoverable debts: (i) where there has been notice of business suspension/dissolution of the debtor, which is confirmed or published on the business registration website of licensing or tax authorities; (ii) Receivable debts for which a provision have been made for 01 or 03 years, depending on the business activity, but has not been collected yet.
- Regarding the handling of irrecoverable debts, enterprises must maintain the dossiers and documents related to provisions made.
Provision for warranty
- Supplement regulations on recognizing provision for warranty of provided services.
We do trust the above points are notable and sufficient, but should you have any question or need a deeper discussion on this issue, please do not hesitate to contact us.
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