CIRCULAR

GUIDING THE IMPLEMENTATION OF THE ACCOUN-TING AND AUDITING WORK AT ENTERPRISES AND ORGANIZATIONS HAVING FOREIGN INVESTMENT IN VIETNAM

Pursuant to the Ordinance on Accounting and Statistics promulgated under Order No.6-LTC/HDNN-8 of May 20, 1988 of the Council of State of the Socialist Republic of Vietnam
Pursuant to the Statute of Organization of Accountancy of the State issued together with Decree No.25-HDBT of March 18, 1989 of the Council of Ministers (now the Government);
Pursuant to Article 37 of the Law on Foreign Investment in Vietnam adopted by the National Assembly on November 12, 1996 (hereafter called Foreign Investment Law for short) and Articles 65, 66, 67, 68 and 69 of Chapter VIII, Decree No.12-CP of February 18, 1997 of the Government providing details for the implementation of the Law on Foreign Investment in Vietnam(hereafter called Decree No.12-CP);
Pursuant to Article 23, Chapter III of Decree No.42-CP of July 8, 1995 of the Government on the Regulations on the Practice of Legal Consultancy of the Foreign Lawyers� Organization in Vietnam (hereafter called Regulations on Practice of Consultancy);
- Pursuant to Section V - Labor for the Foreign Organizations and Individuals in Vietnam, Foreign Laborers in Vietnam and Labor in Foreign Countries of the Labor Code of the Socialist Republic of Vietnam, issued under Order No.35-L/CTN of July 5, 1994 (hereafter called Labor Code for short).
The Ministry of Finance hereby defines and guides the implementation of the following accounting and auditing work at the enterprises having foreign investment and the Branches of the Foreign Lawyers Organization in Vietnam as follows:

I. SCOPE OF REGULATION

1. In this Circular the concept of Enterprise having foreign investment is construed as comprising the following subjects:

1.1-Enterprise having foreign investment; industrial area enterprise; export processing enterprise; the parties to a Business Cooperation Contract, to a Build-Operate-Transfer (BOT) Contract, to a Build-Transfer-Operate (BTO) Contract or a Build-Transfer (BT) Contract, conducting investment in three forms: business cooperation on the basis of business cooperation contract, joint venture enterprise, and enterprise with 100% foreign investment capital.

An enterprise having foreign investment may operate in all domains including insurance enterprise, banking enterprise and credit organization.

1.2. A branch of the Foreign Lawyers’ Organization in Vietnam operates according to the Regulations on the Practice of Legal Consultancy by Foreign Lawyers’ Organizations in Vietnam (hereafter called Lawyers’ Organization Branch for short).

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1. The enterprises having foreign investments shall have to conform with the regime of accountancy and auditing according to the Ordinance on Accountancy and Statistics, the Regulation on the Organization of State Accountancy, the current regulatory documents on accountancy and audit, Article 37 of the Law on Foreign Investment, Articles 65, 66, 67, 68 and 69 Chapter VIII of Decree No.12-CP, Article 23, Chapter III of the Regulation on the Practice of Consultancy and the provisions of this Circular.

2. An enterprise having foreign investment shall submit to the supervision and control of the finance agency and the specialized managerial agencies in the implementation of their accountancy work.

3. All enterprises having foreign investment have to register the system of Regimes of Applied Accountancy at enterprises and must have the approval of the Ministry of Finance before their implementation.

4. An enterprise having foreign investment shall have to conduct its accountancy according to the System of Regimes of Accountancy at Vietnam enterprises. If it has a legitimate reason for applying another common accountancy regime it must have a written approval of the Ministry of Finance.

5. An enterprise having foreign investment shall have to comply with the system of accountancy regimes already registered and approved by the Ministry of Finance for application at the enterprise (including those supplements and amendments to the regimes of accountancy already approved).

6. When the need arises to supplement and modify the System of Accountancy already registered and approved, an enterprise having foreign investment shall have to clearly explain the reason for such change and must get the written approval of the Ministry of Finance before carrying it out.

7. In case a joint enterprise hires a Managerial Organization to manage its business activities: in all cases, the joint enterprise shall take responsibility before law for the activities of the Managerial Organization in the execution of the contract as well as for the statistics of the financial report. The Managerial Organization shall have to carry out the provisions of this Circular as a subject of Point 1.1, Part I - Scope of Regulation.

8. The fiscal year of an enterprise having foreign investment must coincide with the tax year which may be a calendar year or a year of 12 consecutive months registered by the enterprise.

9. The annual fiscal report of an enterprise having foreign investment must be audited by an independent audit company which operates lawfully in Vietnam.

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11. Requirements of accountancy work:

The accountancy work of an enterprise having foreign investment must ensure truthfulness, completeness, accuracy, timeliness, continuity and systematicness on: the existing volume and the change of the properties, capital sources, expenditures, production cost, service cost, labor cost, turnover, profit in business operation; the execution of the Law Tax and other obligations toward the Vietnamese State according to the Investment License (for enterprises having foreign direct investment) or Operating License (for a branch of the Lawyers’ Organization).

12. When an enterprise having foreign investment terminates its operation for whatever reason, it must inform the Ministry of Finance in writing and send it a fiscal report up to the time when it terminates its operation.

III. CONCRETE STIPULATIONS

A. STIPULATIONS ON THE IMPLEMENTATION OF THE SYSTEM OF ACCOUNTANCY REGIMES

1. An enterprise having foreign investment using the Regime of Accountancy of Vietnam or any other Common Regime of Accountancy shall have to observe the following regulations:

1.1. An enterprise having foreign investment must apply the system of accountancy suited to its line or branch of business and its area of operation.

1.2. The currency unit used in its accountancy listing is the Vietnam Dong. It may use a foreign currency unit to list its accounts and write its accountancy report but it must register in the accountancy regime applied for use and must get the approval in writing from the Ministry of Finance before carrying it out.

Monetary units other than the one officially approved must be written in their original currencies and converted into the official monetary unit according to the exchange rate of the arising economic business, or the rate announced by the Vietnam State Bank at the time of the arising of the economic business.

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1.4. The listing of accounts in Arabic and Vietnamese or simultaneously in Vietnamese and another popular foreign language must be stated in the Statute of the enterprise having foreign investment and in the registration of the accounting regime.

2. Fiscal year:

2.1. The fiscal year of an enterprise having foreign investment must coincide with the tax year stipulated in Article 60 of Decree No.12-CP. The fiscal year may be the calendar year or a year of 12 consecutive months beginning on the first day of the quarter and registered in the regime of accountancy applied for use.

2.2. The first fiscal year is counted from the date of the granting of the Investment License (or the Permit to set up a branch of the Lawyers� Organization) up to the closing day of the approved fiscal year.

2.3. Accountancy term in a fiscal year:

- Month: from the 1st to the last day of the month.

- Quarter: from the 1st day of the first month of the quarter to the last day of the last month of the quarter.

3. Time limit for submitting and making public the fiscal report:

- Quarterly report: 15 days from the end of the quarter at the latest.

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4. Place for submitting the fiscal report:

The fiscal report of an enterprise having foreign investment shall be submitted to the Ministry of Planning and Investment, the Ministry of Finance, the General Statistical Department, the local tax office (where the enterprise has its head office) and the party contributing to the capital of the joint venture.

5. Auditing the fiscal report:

Before being submitted and made public, the annual fiscal report of an enterprise having foreign investment must be audited by an independent audit company of Vietnam or another independent audit company allowed to operate legally in Vietnam. The audit report shall be attached to the annual fiscal report, signed by the auditor and the certificate of auditor issued by the Ministry of Finance, or by a national auditor certificate of the concerned country which the Ministry of Finance of Vietnam recognized to be among the list of auditors having registered with the Ministry of Finance; the signature of the Director of the company and the seal of the audit company. The name and number of the audit certificate (diploma) of the auditor must be put under the signature of the auditor.

6. Organizing the accountancy work:

6.1. An enterprise having foreign investment must carry out the contents of the accountancy work including: the regime of accountancy vouchers, the system of accountancy accounts, the regime of accountancy book, the system of fiscal reports, the regime of accountancy document files.

6.2. To carry out its accountancy work, the enterprise having foreign investment shall organize its own accountancy apparatus, or it may hire an independent and legal accountancy service organization in Vietnam.

6.2.1. In case the enterprise having foreign investment has its own independent accountancy apparatus:

a/ There must be enough accountants under the titles and criteria stipulated for accountants. The accountants shall be assured professional independence to carry out the accountancy work. An accountant must not cumulate the task of protecting properties and the function of accountant in carrying out accountancy work.

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- The chief accountant of an enterprise having foreign investment shall be selected and appointed in writing by the Managing Board (for a joint venture), or the General Director or his mandated permanent representative in Vietnam (for an enterprise with 100% foreign capital). In case of a change of the chief accountant, the enterprise having foreign investment shall formally notify the Ministry of Finance within 20 days.

- The chief accountant must have a professional level (graduation diploma) in accountancy or finance from the intermediary level upward; must have gone through a foster class for chief accountants (for Vietnamese), and the necessary knowledge in economics, techniques and finance; must have the capability of organization, guidance, direction, control, and analysis of the financial, accountancy, statistical, economic information and economic planning work. The person assigned to this post must have been at least three years in the accountancy work (for those with university degree) and five years (for those with intermediate degree).

- The chief accountant must submit to the control and supervision in the profession of finance and accountancy of the financial agency of Vietnam.

c/ Accountants (including the chief accountant) who are Vietnamese recruited by and having signed the labor contract with an enterprise having foreign investment must have been trained in the profession of finance and accountancy and be recommended by a job placement service organization set up according to Vietnamese law (stipulated in Article 132 of the Labor Code).

Accountants (including the chief accountant) at the enterprise having foreign investment must sign labor contracts with the enterprise and comply with Articles 131, 132 and 133 of Section V of the Labor Code; they must demonstrate their professional qualifications as provided for in Points 6.2.1.b and 6.2.1.c before a competent managerial agency of the State.

d/ An enterprise having foreign investment must have a plan to train its accountancy cadres and staff so that they can meet the requirement of the accountancy work of the unit according to the Vietnam accountancy regime, including the other common accountancy regimes accepted by the Ministry of Finance.

6.2.2. In case of the hiring of accountancy service organizations operating independently and legally in Vietnam, in order to conduct accountancy on the basis of an economic contract signed between the two sides, the supply accountancy service must comply with the same stipulations on accountancy work as in the case when the enterprise conducts its own accountancy work according to the stipulations for the enterprise accountancy regime and the stipulations of this Circular.

7. Conduct of accountancy work:

7.1. Initial recording: All economic activities arising in the business activities of an enterprise having foreign investment must be entered into accountancy papers according to the registered form.

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7.2. An enterprise having foreign investment has only one system of official accountancy books set up according to the system of accountancy regimes already registered. Accountancy documents are the basis for listing accounts. The book of accounts must be clearly written, continued and systematic and have no erasures.

7.3. An enterprise having foreign investment must register for the use of the book of accounts with the local tax agency (where it registers for tax payment) two books of accountancy: the Book of Original Entry and the Diary Book, or the Register of Vouchers (with number of pages and the contiguity seal).

The Book of Original Entry and the Diary Book, or the Register of Vouchers of the enterprise which is not confirmed by the local tax agency shall not be accepted as legal.

7.4. An enterprise having foreign investment which conducted accounts listings on a readymade accountancy book must have the continuity seal and the signatures of the book keeper and the legally responsible person of the enterprise on all the pages of the book used in the fiscal year.

7.5. In case the accounts listings are made on the computer:

- The enterprise has to record by handwriting the concluding data according to the fiscal year on the integrated accounts on the Book of Original Entry already registered with the local tax agency.

- At the end of the accountancy term and year (after listing and completion of the fiscal report), an enterprise having foreign investment shall have to print the accountancy book, bind it into volumes, and use the continuity seal and get all the signatures of the drafters and the legally responsible persons of the enterprise on the whole of the accountancy book used in the fiscal year. At the end of a month, after fully reporting the arising business, the accountant shall record all the listings in the accountancy book into a CD (at least two copies) and seal it as prescribed by the rules on sealing of documents.

8. Fiscal report:

- The fiscal report of an enterprise having foreign investment must be duly made and submitted in time to the subjects stipulated in Point 4, Section A, Part III.

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-The fiscal report must be complete, truthful, accurate, comparative and easy to understand and must have the signatures of all the legal responsible persons of the enterprise (General Director or Director and chief accountant).

9. Inventorying the properties:

- In the accountancy year, an enterprise having foreign investment must inventory its properties at least once and must inventory all the existing properties of the enterprise at the conclusion of the fiscal year.

- The results of the inventory shall be reflected in the inventory report and the overall report on the inventory results.

- The overall report on the inventory results must be attached to the fiscal report.

- An enterprise having foreign investment shall have to always ensure that the real value of property (inventory data) match the data recorded on the accountancy book, the accountancy report and the fiscal report.

10. An enterprise having foreign investment is strictly forbidden to:

- Counterfeit accountancy vouchers, make untruthful accountancy listings and reports;

- Annul accountancy vouchers, books and reports before the end of the term for preservation and file keeping as currently prescribed;

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- To leave outside the book of accounts in any form: properties, materials, turnover from sales of goods, other incomes....

B. REGISTERATION AND PROCEDURES OF REGISTERING THE REGIME OF ACCOUNTANCY

1. An enterprise having foreign investment must register with the Ministry of Finance the system of Accountancy Regimes to be applied at the enterprise and must have the written acceptance of the Ministry of Finance before its implementation.

1.1. Before registering the Accountancy Regime, the enterprise having foreign investment shall have to choose and determine the accountancy regime it shall apply to the line of activities and the business domain according to the division of economic branches of the national economy.

1.2. An enterprise having foreign investment must register the system of Accountancy Regimes within the prescribed term from the date when the Investment License or the Operating Permit is issued. From the effective date of the Investment License or the Operating Permit, all arising economic activities of the enterprise having foreign investment must be recorded in the accountancy book.

1.3. If an enterprise having foreign investment wants to change anything in the contents already registered and accepted Accountancy Regime, it must propose in writing to the Ministry of Finance and can carry out such change only after having got written acceptance from the Ministry of Finance.

2. Time limit of registration and acceptance of the Accountancy Regime

2.1. Time limit for application for registration and registration extension:

2.1.1. Within 90 days from the date it is granted an Investment License or Operating Permit an enterprise having foreign investment must register for the system of Applied Accountancy Regimes with the Ministry of Finance.

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The enterprise having foreign investment must urgently complete the procedures for registering for the system of Accountancy Regimes within the time-limit of the extension.

2.2. Time-limit for the settlement of the registration dossier:

2.2.1. Within 20 days from the date it receives the valid dossier of registration for the system of Accountancy Regimes of the enterprise having foreign investment, the Ministry of Finance shall give its formal opinion in writing about the registration for the system of Accountancy Regimes of the enterprise.

2.2.2. In case the documents in the dossier of registration for the system of Accountancy Regimes of the enterprise having foreign investment are not complete or clear as currently prescribed, the Ministry of Finance shall ask the enterprise having foreign investment to explain and supplement the documents. The time for this explanation and supplement shall not be accounted for in the timelimit for the answer as stipulated in Point 2.2.1, Section B.

3. Dossier of registration

3.1. When registering the system of Accountancy Regimes with the Ministry of Finance, the enterprise having foreign investment shall submit a dossier of registration composed of :

3.1.1. The official dispatch registering the accountancy regime.

3.1.2. The investment license (a notarized copy or a copy certified by the Ministry of Planning and Investment).

3.1.3. The decision of the Managerial Board or the General Director to appoint the chief accountant; the labor contract signed between the chief accountant and the General Director or Director of the enterprise.

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The diploma of professional qualification in a foreign language which must be certified by the notary public.

3.1.5. The documents explaining the Regime of Applied Accountancy (in case of supplement, condensation or amendment to the system of Vietnam Enterprise Accountancy Regimes or application for use of another common regime of accountancy).

- In case of a proposal for supplement or modification or concretization of the system of Vietnam Enterprise Accountancy Regimes applied at the enterprise having foreign investment to make it conform with the characteristics of the production and business activities, the enterprise must attach it with detailed documents on the proposal for supplement or modification (the system of accountancy vouchers, system of accountancy accounts, system of accountancy books, method of accountancy accounting, system of fiscal reports). This document must comprise the following parts: classified list of each content of accountancy regimes proposed to be supplemented or modified attached with the form and explanations.

- In case of application of another regime of common accountancy: when registering a system of another common Accountancy Regime, the enterprise having foreign investment must clearly explain the reason for this selection , at the same time send together with it a set of documents on the whole system of accountancy that the enterprise having foreign investment asks to apply, including the documents defined in Point 3, Section D - case of application of another common regime of accountancy.

3.2. The dossier sent to the Ministry of Finance comprising 4 sets (bound into books):

1 set : to be kept at the Ministry of Finance

1 set: to be submitted to the local tax agency.

2 sets: to be kept at the enterprise.

The dossiers of registration for the system of Accountancy Regimes which has been accepted shall be affixed with the registration seal before being put into circulation.

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1. An enterprise having foreign investment which applies the system of enterprise accountancy regime of Vietnam must comply with and carry out all the current regimes concerning accountancy vouchers, system of accountancy accounts, regime of accountancy book, system of fiscal reports, and accountancy file keeping as prescribed.

2. When the need arises to supplement, condense or modify the content or method of accountancy to conform with the characteristics of production and business activities, the enterprise must ask the Ministry of Finance for examination and acceptance. All supplement, condensation or modification must comply with and respect the common principles of the system of Vietnam Enterprise Accountancy Regimes. The enterprise having foreign investment can carry out the supplemented, condensed or modified system of Vietnam Enterprise Accountancy Regimes only with the written approval of the Ministry of Finance.

The documents submitted to the Ministry of Finance for supplementation, condensation or modification of the Vietnam accountancy regime for application shall comply with the stipulations in Point 3.1.5 - Section B - Party III.

3. An enterprise having foreign investment which registers for application of the Vietnam accountancy regime shall be given favorable conditions and guidance in the process of registration and organization of implementation.

D. APPLICATION OF ANOTHER COMMON ACCOUNTANCY REGIME

1. The Ministry of Finance shall consider and accept the application of another common accountancy regime (outside the system of Vietnam Enterprise Accountancy Regimes) in one of the following cases:

- An enterprise with 100% foreign capital can prove that it cannot or is not well disposed to run the enterprise according to the Vietnam Enterprise Accountancy System, and therefore had to choose another common accountancy system.

- An enterprise having foreign investment conducting business activities in special domains for which there have not yet been stipulations and guidance in accountancy in Vietnam.

2. An enterprise having foreign investment which proposes the application of another common accountancy regime must comply with the following principles:

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2.2. It must comply with and carry out the general principles of the system of the Vietnam Enterprise Accountancy Regimes concerning the regime of accountancy vouchers and the regime of accountancy books.

3. The document on the Accountancy Regime asked for application (attached to the set of dossiers of registration for the system of Accountancy Regimes as stipulated in Point 3.1.5. - Section B - Part III) must include the following contents:

- The policies, principles and norms of accountancy applied at the enterprise having foreign investment.

- The list of applied accountancy vouchers classified according to 6 norms: labor and salary, commodities in stock, sales of goods, monetary, fixed assets, and production and business; attached with the forms of vouchers applied for formal use.

With regard to the receipts of sales printed by itself, they must not only be included in the Dossier of registration for the system of accountancy regimes but also be sent by the enterprise to the General Tax Office for registration and accepted.

- The list of the systems of accountancy of accounts (codes, names, character) classified exactly according to the principle of classification of accounts, attached to the explanatory documents on their contents, the method of accounting of the accounts, the relations among the accounts and the general accountancy on the use of the system of accounts (together with the accounts reflecting the main economic businesses concerning assets, and business capital sources and the report on the result of the production and business activities).

- The list of the system of books of applied accountancy (classified according to the system of integrated accountancy books and the system of detailed accountancy books) attached with the formal form of book applied for use; the schema of explanation of the process of recording from the original vouchers to the integrated book of accountancy books, the detailed accountancy book and the making of the fiscal report; the explanation of the method of recording and the relations between the system of integrated accountancy books and the system of detailed accountancy books.

Concerning the form of accountancy books applied for use, only one of the four forms of accountancy now in common use in Vietnam (diary of original entry, vouchers of records, common diary and diary � vouchers).

- The list of systems of fiscal reports, attached with the form and explanation of the method of calculation and the elaboration of norms in the fiscal reports.

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E. AUDITING WORK AT THE ENTERPRISES HAVING FOREIGN INVESTMENT

1. With regard to the enterprises having foreign investment:

1.1. All enterprises having foreign investment have to conduct auditing, including auditing of the observance of the regulations on accountancy work and fiscal reports.

1.2. The fiscal report of an enterprise having foreign investment must be audited by an independent audit company of Vietnam or another independent audit company which is allowed to conduct legal operations in Vietnam as prescribed by the legislation on auditing before they are sent to the specialized agencies and must be made public.

1.3. The audit report must be attached with the annual fiscal report of the enterprise having foreign investment when it is sent to the specialized agency and when the fiscal report is made public.

1.4. The audit report shall comprise the following main contents:

1.4.1. Certification of the objectivity, truthfulness and rationality of the fiscal report and the accountancy data.

1.4.2. Observation and evaluation of the conduct of the audit work; the execution of the system of the accountancy regimes already registered and already accepted by the Ministry of Finance; the observance of the law, regimes and accountancy regulations.

1.4.3. Proposals.

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2. With regard to an independent audit company when auditing the annual fiscal report of an enterprise having foreign investment:

2.1. An independent audit company is allowed to audit the accountancy documents of an enterprise having foreign investment according to the accountancy regime already registered and accepted by the Ministry of Finance for application at the enterprise.

2.2. An independent audit company which conducts or supply audit service in the elaboration of the fiscal report for an enterprise having foreign investment is not allowed to conduct audit on the same fiscal report.

2.3. An independent audit company conducting audit of the fiscal report of an enterprise having foreign investment must have an independent legal status and must ensure truthfulness and objectivity when conducting audit at the enterprise having foreign investment.

2.4. An independent audit company shall take responsibility before law for the independence, objectivity and truthfulness of the audit result.

IV. REGULATIONS ON THE CHANGE OF THE REGIME OF APPLIED ACCOUNTANCY

1. An enterprise having foreign investment which has registered the system of Vietnam Accountancy Regimes before January 1st, 1996 shall have to change for application of the current Regime of Enterprise Accountancy issued together with Decision No.1141-TC/QD/CDKT of November 1st, 1995 of the Ministry of Finance.

2. An enterprise having foreign investment which has registered and are allowed to apply another common accountancy regime and is not a subject of Section D - Part III, shall, after one year (after the effective date of this Circular) have to change to the system of Vietnam Enterprise Accountancy Regime and must re-register the Regime of Applied Accountancy at Enterprises with the Ministry of Finance as prescribed by this Circular.

3. An enterprise having foreign investment, which has been granted an Investment License or an Operating Permit but which has so far not registered the accountancy regime with the Ministry of Finance, must quickly complete the necessary procedures and register the Regime of Applied Accountancy as prescribed by this Circular.

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This Circular replaces Circular No.84-TC/CDKT of October 23, 1993 of the Ministry of Finance and takes effect on the date of its signing.

The subjects mentioned in Point 1.1 and 1.2 - Part I - Scope of Regulation of this Circular shall have to seriously and fully implement the stipulations of this Circular. All violations of the stipulations of this Circular shall be dealt with according to the Ordinance on Accountancy and Statistics of May 10, 1988 and the Regime of Administrative Sanctions of the State of the Socialist Republic of Vietnam.

The specialized State agencies shall have to guide, direct and control the enterprises under their management as prescribed by this Circular.

During the process of implementation of this Circular, should any difficulty or unclear point arise, they should be reported to the Ministry of Finance for timely settlement.

FOR THE MINISTER OF FINANCE
VICE MINISTER




Vu Mong Giao