Circular 45/2013/TT-BTC guiding the regime of management, usage and depreciation of fixed assets (“FAs”)

On 25 April 2013, the Ministry of Finance issued Circular 45/2013/TT-BTC (“Circular 45”) guiding the regime of management, usage and depreciation of FAs in order to replace Circular 203/2009/TT-BTC (“Circular 203”). Circular 45 shall be effective starting from 10 June 2013 and is applicable to fiscal year 2013 onwards.

The majority of provisions on management, usage and depreciation of FAs under Circular 45 remain unchanged in comparison with those per Circular 203. However, there are a few updates as follows:

Criteria for being qualified as Fixed Assets

 Minimum historical cost for qualification as fixed assets has increased to VND30million in comparision with VND10million as regulated in Circular 203.

 Under Circular 45, the land use right (“LUR”) qualified as intangible FA is now more comprehensively classified as: 

- LUR (of either finite or infinite term), which is granted by the State on the basis of collected land using fee (“LUF”), or legally transferred;

- LUR of land leased before the effective date of the Law on Land in 2003, of which the lease for the entire rental period has been fully paid in advance and the remaining pre-paid period is at least five (05) years

 In addition, Circular 45 also provides additional cases where LUR shall not be qualified as an intangible FA, such as LUR of land granted by the State without a collection of LUF; one-time full land leasing payment for the entire period (rental period starts after the effective date of 2003 Law on Land or no certificate for LUR is granted);

Historical Cost of Financial Lease Fixed Assets:

 According to Circular 45, the historical cost of financial lease fixed assets is only determined by the value of leased FA at the time when the lease starts plus certain direct expenses initially incurred in relation to the financial lease (Circular 45 removes the determination of historical cost that is based on the present value of minimum lease payments as regulated under Circular 203).

Principles on Depreciation of Fixed Assets

 Circular 45 provides further guidance for historical cost of construction items recorded at provisional value  and subsequently adjusted upon their finalization as follows:

- Enterprises are not required to adjust the depreciation expenses for the period prior to the approval of finalizing construction work; 

- Depreciation incurred subsequent to the finalization period is calculated by: the approved final value minus (-) accumulated depreciation up to the date of final approval then divided (:) by the remaining depreciable period of such construction items.

 With regard to fixed assets, which are currently managed and depreciated under Circular 203, but are unqualified as FA under Circular 45, the respective remaining value should be allocated over a period of maximum three (03) years from the effective date of Circular 45.

 Enterprises are required to determine the depreciation method and depreciable period of FA on a self-assessment basis and then notify the local tax authority before taking the depreciation. Previously, Circular 203 did not stipulate any regulations on notification or registration of the depreciable period of FAs.

Depreciable Period of Fixed Assets  
 Circular 45 introduces changes in the range of the depreciable period of certain types of fixed assets; specifically, it increases the range for machinery and equipment and supplements the depreciable period for port, dock slipway, and intangible FAs which were not regulated in the former Circular

 For fixed assets that have been in use before 1 January 2013, the remaining depreciable period is determined pursuant to the following formula:

Should you have any concerns regarding the implementation of these newly issued regulations, please do not hesitate to contact us.

Jenny Nguyen
Email: nguyenthisinhktkt85@yahoo.com
Handphone: 0906209572
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