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1 At a glance... In August, the Ministry of Finance (“MoF”) released Circular 48/2019/TT-BTC, providing guidance on several types of provisions. Circular 48 will take effect from 10 October and will apply for fiscal year 2019 onwards. Circular 48 replaces Circular 228/2009/TT-BTC and its amendments. PwC Vietnam NewsBrief 27 August 2019 www.pwc.com/vn 27 Aug 2019 New Circular on making provisions PwC In detail… 2 Circular 48 states that its guidance on provisions is the basis to determine deductible expenses for corporate income tax purposes. Provisions for the purposes of preparing financial statements are made in accordance withaccounting regulations. Some notable points are highlighted below: ● Banks will also need to follow Circular 48 regarding making provisions, except for provisions for credit risks, which will be made under the guidance of the State Bank of Vietnam and the MoF. Other specialised industries, such as insurance, securities, capital investment, debt trading or retail, will also be governed by this Circular, but can also be subject to separate guidance by the MoF (if any). ● In terms of provisions for bad debts, some changes were introduced in Circular 48, such as: A separate scheme for making provisions by telecommunications and retail companies has been introduced. Specifically, these companies can make a 100% provision for bad debts due from individual customers, when they are overdue by 12 months, instead of three years as generally applied. Enterprises are not allowed to make provisions for overdue dividends. Irrecoverable debts which are qualified to be written off now include bad bebts for which 100% provisions have been made and could not be recovered within 3 years (or 1 year for certain cases). Conditions and required supporting documents for provisions for bad debts are clearer and more reasonable under Circular 48. For instance, companies can now only need evidence of a request for debt collection or a request for debt reconciliation, instead of the debt reconciliation itself. PwC 3 Some notable points are highlighted below: ● Enterprises are now allowed to make provisions for the devaluation of inventories not currently in a warehouse, such as goods in transit and goods in bonded warehouses. ● Previously, provisions for warranty could be made for products, goods and construction projects only. Now, provisions for warranty can also be made in relation to service which has been provided. ● Enterprises are no longer allowed to make provisions against foreign investments. Brought forward provisions must be reversed when preparing the 2019 financial statements. ● Circular 48 also provides new guidance on making provisions against government bonds, corporate bonds and government-guaranteed bonds. In detail… PwC 4 Contact us This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. For further information, please reach out to us. Nguyen Thanh Trung Partner +84 28 3823 0796 Ext. 1513 nguyen.thanh.trung@pwc.com Nguyen Huong Giang Partner n.huong.giang@pwc.com +84 24 3946 2246 Ext. 1502 Ho Chi Minh City office: Hanoi office: At PwC Vietnam, our purpose is to build trust in society and solve important problems. We’re a member of the PwC network of f irms in 158 countries with over 250,000 people who are committed to delivering quality in assurance, advisory, tax and legal services. Find out more and tell us what matters to you by visiting us at www.pwc.com/vn. ©2019 PwC (Vietnam) Limited. All rights reserved. PwC refers to the Vietnam member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further structure. facebook.com/pwcvietnam youtube.com/pwcvietnam www.pwc.com/vn linkedin.com/company/pw c-vietnam
