Based on Circular No. 49/1999/TT-BTC of May 6, 1999 of the Ministry of Finance guiding the application of the Law on Value Added Tax (VAT) to financial leasing activities, the Ministry of Finance hereby guides the accounting of VAT on financial renting activities as follows:

I. GENERAL PROVISIONS

1. This Circular shall apply to the enterprises with financial renting activities.

2. This Circular shall not apply to:

- The enterprises with financial leasing activities;

- Financial renting activities of credit institutions that currently apply banking and credit institutions� accounting system;

- Common property renting activities.

3. This Circular shall only provide guidance on points of amendments and/or supplements. Those points which are not guided in this Circular shall comply with current enterprise accounting regime.

II. SPECIFIC PROVISIONS

1. For units with financial renting (with fixed assets) for production and/or business activities which are liable to pay VAT by tax deduction method, when receiving the financial renting fixed assets and financial leasing service invoices from the lessor, accountant shall make entries as follows:

+ When receiving the financial-renting fixed assets, the accountant shall base him-/herself on financial leasing contracts and relevant vouchers to reflect the financial-renting fixed assets value according to the prices without input VAT (the input VAT is deductible), writing:

Debit: Account 212 - Financial-renting fixed assets

Debit: Account 133 - Deductible VAT

Credit: Account 342 - Long-term debts

+ At the end of the period, the accountant shall base him-/herself on the financial-leasing service invoices and the input VAT amount, as well as the output VAT amount, to determine the deductible input VAT amount in the period as prescribed by the tax regime so as to determine VAT amount to be paid in the period and the input VAT amount to be deducted in the period, writing:

Debit: Account 3331 - VAT amount to be paid (33311)

Credit: Account 133 - VAT amount to be deducted

2. For the units having financial-renting fixed assets used for production and/or business of goods and/or services either liable to VAT by direct method, or not liable to VAT, when receiving the financial-renting fixed assets, the accountant shall base him-/herself on the financial renting contracts and relevant vouchers to reflect financial-renting fixed assets value according to the prices with VAT (input VAT is not deductible), writing:

Debit: Account 212 - Financial-renting fixed assets

Credit: Account 342 - Long-term debts

3. Basing him-/herself on the financial leasing service invoices in each period, the accountant shall determine the amount to be paid to the lessor in the period, thereby to calculate and determine the rentals interest amount to be paid in the period, due long-term debts, writing:

Debit: Account 342 - Long-term debts (Total rentals amount to be paid in the period minus (-) rentals interest amount to be paid)

Debit: Account 642 - Enterprise management expenses (Rentals interest amount to be paid in the period)

Credit: Account 315 - Due long-term debts (Total rentals amount to be paid in the period)

+ When paying the fixed assets rentals to the lessor, writing:

Debit: Account 315 - Due long-term debts

Credit: Accounts 111, 112, ...

4. Fees for committing to use capital to be paid to the lessor, writing:

Debit: Account 642 - Enterprise management expenses

Credit: Account 342 - Long-term debts

Credit: Accounts 111, 112

5. At the end of the period, the accountant shall deduct financial-renting fixed assets depreciation into the production and/or business costs as prescribed, writing:

Debit: Accounts 627, 641, 642, ...

Credit: Account 2142 - Renting fixed assets depreciation

6. When returning the financial-renting fixed assets to the lessor, the accountant shall reflect the reduction of financial-renting fixed assets value, writing:

Debit: Account 214 - Fixed assets depreciation

Credit: Account 212 - Financial-renting fixed assets

7. In cases where the financial-renting contracts stipulate that the lessee only rents part of the property value then repurchases such property, when the property ownership right is transferred, the accountant shall reflect the reduction of financial-renting fixed assets and the increase of tangible fixed assets owned by the enterprise, writing:

Debit: Account 211 - Tangible fixed assets

Credit: Account 212 - Financial-renting fixed assets

And at the same time writing the conversion of depreciation value:

Debit: Account 2142 - Renting fixed assets depreciation

Credit: Account 2141 - Tangible fixed assets depreciation

8. In cases where money must be additionally paid for the repurchase of fixed assets, the accountant shall, together with inscribing the conversion of the financial-renting fixed assets into the enterprise-owned fixed assets (by 2 above-said entries), have to reflect the value increase of the repurchased fixed assets, basing him-/herself on final financial leasing service invoices and relevant vouchers, writing:

Debit: Account 211 - Tangible fixed assets

Credit: Accounts 111, 112, ...

III. IMPLEMENTATION ORGANIZATION

1. This Circular takes effect as from the effective date of Circular No. 49/1999/TT-BTC of May 6, 1999 of the Ministry of Finance. The earlier regulations which are contrary to those in this Circular are now annulled.

2. Any problems arising in the course of implementation shall be reported by the units to the Ministry of Finance for study and settlement.

For the Minister of Finance

Vice Minister