CIRCULAR

GUIDING THE GOVERNMENT'S DECREE NO. 53/2006/ND-CP OF MAY 25, 2006, ON POLICIES TO ENCOURAGE THE DEVELOPMENT OF NON-PUBLIC SERVICE ESTABLISHMENTS

Pursuant to the Government's Decree No. 53/2006/ND-CP of May 25, 2006, on policies to encourage the development of non-public service establishments, the Finance Ministry guides the implementation of these policies as follows:

I. SUBJECTS OF REGULATION SPECIFIED IN ARTICLE 1 OF DECREE NO. 53/2006/ND-CP OF MAY 25, 2006 (HEREAFTER CALLED DECREE NO. 53 FOR SHORT) INCLUDE THE FOLLOWING:

1. Non-public establishments licensed by competent agencies to operate in the domains of education and training; healthcare; culture and information; physical training and sports; science and technology; environment; social affairs; population, family and child protection and care, including:

a/ Non-public establishments set up and operating in accordance with the Government's Decree No. 53, including people-founded and private establishments (or private schools in education and training) in the domains of education and training; healthcare; culture; sports; science and technology; environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification), population, family and childcare.

b/ Non-public establishments set up and operating under the Government's Decree No. 73/1999/ND-CP of August 19, 1999.

2. Organizations and individuals setting up enterprises in the domains of education and training; healthcare; culture; sports; science and technology; environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification) and child protection and care shall not be governed by this Circular.

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1. Non-public establishments are establishments set up by social organizations, socio-professional organizations, economic organizations, individuals, groups of individuals, households or population communities, which invest in the building of their material foundations, self-finance their operations with non-state budget capital and operate in accordance with law.

2. Non-public establishments shall be set up in accordance with law, have the legal person status, conduct independent cost- accounting, have their own seals and bank accounts to be opened at commercial banks or state treasuries.

3. Non-public establishments shall be set up under the State's planning and plans for the development of education and training, healthcare, culture, physical training and sports, science and technology, environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification), population, family, child protection and care.

III. OPERATION PRINCIPLES OF NON-PUBLIC ESTABLISHMENTS DEFINED IN ARTICLE 3 OF DECREE NO. 53 ARE GUIDED IN DETAIL AS FOLLOWS:

1. Non-public establishments operate on the principle of self-financing.

2. The State and society appreciate and treat equally operations as well as products and services of non-public establishments as those of public ones. Non-public establishments may participate in the provision of public services financed or ordered by the State; participate in bidding for performance of contracts or projects funded with domestic or foreign capital sources in conformity with their operation functions and tasks provided for by law.

3. Non-public establishments may enter into joint ventures or partnerships with domestic or foreign organizations under the provisions of law in order to mobilize capital, human resources and technologies and raise the service quality.

4. Assets of non-public establishments include assets of individuals and collectives contributing capital to the establishments upon their foundation and assets created in their operation process; of which assets donated, presented or given as non-refundable aids in the course of operation of non-public establishments must not be divided to individuals and may be used only for the sake of the establishments and community.

5. When non-public establishments cease their operations and must be dissolved, the bankruptcy order and procedures provided for in the Bankruptcy Law shall apply.

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1. Non-public establishments are given priority to rent houses and infrastructures for the supply of service products in the domain of education and training, healthcare, culture, physical training and sports, science and technology, environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification), population, family, child protection and care in accordance with local and state plannings and plans.

a/ Based on the existing housing fund and infrastructures, provincial/municipal People's Committees shall create conditions for, and encourage concerned agencies to invest in, the improvement and upgrading of the housing fund and infrastructures for long-term lease to non-public establishments at preferential rates.

b/ Based on local socio-economic development plannings and plans, provincial/municipal People's Committees shall consider and decide on the building of new houses or infrastructures for long-term lease to non-public establishments at preferential rates.

2. Preferential rent rates applicable to non-public establishments are specified as follows:

The rent rates are exclusive of land rentals, compensations for ground clearance (if any) and interests on loans for construction of houses or infrastructures under approved projects. The rent rates for the lease of houses or infrastructures to non-public establishments are decided by provincial/municipal People's Committees in conformity with local conditions. Specifically:

a/ For existing houses and infrastructures, the rent rates are determined on the basis of revaluation of assets in accordance with current regulations on asset management.

b/ For newly built houses and infrastructures, the rent rates are determined as equal to the construction costs (inclusive of taxes payable by construction units), exclusive of land rentals, compensations for ground clearance and interests on loans for construction.

Provincial/municipal People's Committees shall base themselves on local specific situation and budget capacity to promulgate regulations on partial or full loan-interest support for repair or construction to agencies, units or organizations leasing houses or infrastructures to non-public establishments.

Provincial/municipal People's Committees shall decide on bases for providing loan-interest support for agencies, units or organizations dealing in houses or infrastructures.

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4. Provincial/municipal People's Committees shall create favorable conditions on administrative procedures, grant of construction permits and relevant procedures for non-public establishments to make investment in construction or repair of their material foundations in accordance with plannings.

5. For non-public establishments which build houses or material foundations liable to the payment of construction charges, provincial/municipal People's Committees shall decide on the exemption or reduction of construction charges for those establishments for application in localities.

6. When non-public establishments build houses or material foundations under projects or in new urban centers where infrastructures have been built and have to pay infrastructure construction costs, provincial/municipal People's Committees shall base themselves on local budget capacity to promulgate regulations on partial support of infrastructure construction costs for those establishments.

The dossiers and procedures for consideration of support of infrastructure construction costs for non-public establishments comply with the guidance of provincial/municipal People's Committees.

V. LAND ASSIGNMENT AND LAND LEASE PROVIDED FOR IN ARTICLE 5 OF DECREE NO. 53 ARE GUIDED AS FOLLOWS:

1. Non-public establishments operating in the domains of education and training, healthcare, culture, physical training and sports or provision of public services shall be assigned land by the State without the collection of land use levy.

2. Non-business establishments operating in the domains of science and technology; environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification), population, family and child protection and care in service of public welfare and other public facilities may opt for the form of land assignment with exemption of the land use levy or land rent with exemption of land rentals for the duration of land assignment or lease by the State.

3. Non-public establishments mentioned at Points 1 and 2 of this Section V shall pay compensations and provide land support according to the provisions of law on compensations and resettlement support (if any), which shall be accounted into the investment capital of projects.

Provincial/municipal People's Committees shall, based on the size and importance of investment projects and local budget capacity, promulgate regulations on partial support of these expenses for non-public establishments or partial or full interest-rate support for non-public establishments which borrow or mobilize capital for performance of the tasks mentioned in this Section.

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5. Non-public establishments operating in the domains of education and training, healthcare, culture, physical training and sports, science and technology; environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification), population, family, child protection and care shall use land for proper purposes; failing to do so, they shall have the land recovered under the provisions of the land law and, at the same time, pay all the exempted land rentals according to the land prices applicable at the time of recovery for the duration of using land for improper purposes, and shall also repay the preferences they have enjoyed under the provisions of Decree No. 53/2006/ND-CP.

6. The procedures for, and order of, land assignment, land lease and compensation in support of ground clearance, exemption of land use levy or land rentals, transformation of assets associated with land use rights from public or semi-public into non-public ones comply with the provisions of the land law and guiding documents.

7. Non-public establishments which are assigned land by the State without the collection of land use levy or with the exemption of land use levy or which are leased land with the exemption of land rentals shall exercise their rights and perform their obligations in accordance with the provisions of the Land Law; and may not calculate the existing land use right value into their assets upon the pledge of those assets to borrow capital.

VI. THE HANDLING OF ASSETS ON LAND UPON THE TRANSFORMATION OF PUBLIC OR SEMI-PUBLIC ESTABLISHMENTS INTO NON-PUBLIC ONES SPECIFIED IN ARTICLE 6 OF DECREE NO. 53 IS GUIDED AS FOLLOWS:

1. Assets on land of public or semi-public establishments which are transformed into non-public ones (or enterprises) under decisions of competent state agencies shall be handled as follows:

a/ When competent agencies issue decisions permitting public or semi-public establishments to be transformed into non-public ones (or enterprises), those establishments shall inventory all of their assets; revaluate those assets in accordance with law at the time of inventory; elaborate and report asset-handling plans to immediate superior managing agencies for sum-up reports to the Finance Ministry (for centrally managed assets) or to provincial/municipal People's Committees (for locally managed assets).

Asset-handling plans must fully indicate the quantity and value of existing assets; demand for use of assets; quantity of assets sold to non-public establishments (or enterprises); assets leased to non-public establishments (or enterprises); assets transferred or returned to the State.

b/ Methods for revaluation of assets are as follows:

- Assets which have newly been purchased, installed or built and put to use shall be revaluated on the basis of their actual purchase prices stated in invoices and accepted for payment or the installation and construction prices under the approved final settlements or settlements upon completion of work items (for incomplete works).

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The remaining value of each asset (VND) = The remaining quality percentage of each type of asset x The purchase price or new construction cost of each asset at the time of revaluation (VND)

+ The remaining quality percentage of each asset shall be determined on the basis of assets, their use durations and the durations for which they have been used. Particularly for houses and architectures, such determination shall comply with the regulations in Part II of Joint Circular No. 13/LB-TT of August 18, 1994, of the Ministry of Construction, the Ministry of Finance and the Government Pricing Committee.

+ The purchase price of an asset is the price of assets of the same type on the market at the time of revaluation.

The new construction cost of houses or construction works is calculated as follows:

The new construction cost of a house or construction work = The unit price of one square meter of new construction x The construction area of the house or construction work.

The unit price of one square meter of new construction is applied according to the standard construction unit price table used for the approval of final settlements of similar works of the same type at the time and venue of revaluation under the guidance of construction management agencies.

- The total remaining value of all assets subject to valuation is the remaining value of each asset added together.

2. Assets invested by the State and sold to non-public establishments (or enterprises) under decisions of competent agencies are handled as follows:

a/ Based on the results of asset revaluation conducted by organizations functioning to revaluate state assets and reports of superior managing agencies (if any), heads of ministries, central agencies or mass organizations shall decide to sell state assets to non-public establishments after obtaining written opinions of the Finance Ministry (for centrally managed assets). Presidents of provincial/municipal People's Committees shall decide to sell state assets to non-public establishments (for locally managed assets).

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- Setting up councils for sale and liquidation of state assets:

Heads of ministries, central agencies or mass organizations or presidents of provincial/municipal People's Committees shall decide on the establishment of councils for sale and liquidation of state assets to non-public establishments. Heads of immediate superior agencies shall act as presidents of such councils whose members are:

+ Representatives of accounting and financial sections of the agencies.

+ Representatives of sections directly managing assets.

+ Experts knowledgeable about characteristics and technical properties of assets on sale.

- Organizing the sale of state assets to non-public establishments

After completing the sale of state assets to non-public establishments (or enterprises), agencies directly managing assets and agencies managing the establishments may record the reduction of assets and their value according to their quantity and value stated upon settlement in accounting books at the time of their sale or liquidation.

d/ All proceeds from the sale of assets, after paying expenses for asset sale or liquidation according to current financial spending regime, are handled in accordance with law.

3. Assets invested by the State and subleased to non-public establishments are handled as follows:

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- Non-public establishments (or enterprises) shall sign contracts on the lease of state assets with state organizations functioning to lease state assets or finance agencies of the same level (where organizations functioning to lease state assets do not exist). The annual asset rentals are paid under signed contracts and handled according to law.

- The lease prices of assets are determined according to their value re-determined by organizations functioning to valuate state assets at the time of transfer, the remaining use duration of assets of each type for determination of the lease prices and decided by provincial/municipal People's Committees (for locally managed assets); or by the Finance Ministry (for assets managed by units under ministries or central branches) at the proposal of asset-managing ministries or branches.

For state assets leased to a non-public establishment (or enterprise), if, upon the expiration of the lease term under the signed contract, the non-public establishment no longer has demand for lease, or if, during the valid term of the contract, the establishment uses those assets for improper purposes, i.e., transferring or sub-leasing them to other units without consent of the agency having signed the contract, the agency having signed the lease contract shall recover assets without paying any compensation. In the course of use, if the assets are irreparably damaged or become unusable upon the expiration of their use duration, the non-public establishment (or enterprise) shall send a written request to asset-managing agencies for sale or liquidation of those assets under current regulations.

4. The procedures for, and order of, transformation of public or semi-public establishments into non-public ones (or enterprises) in each domain shall comply with the guidance of branch- or domain-managing ministries.

VII. THE APPLICATION OF ENTERPRISE INCOME TAX PROVIDED FOR IN ARTICLE 8 OF DECREE NO. 53 IS GUIDED AS FOLLOWS:

1. Non-public establishments operating in the domains of education, healthcare, culture, sports, science and technology; environment (environmental sanitation, water supply and drainage and other environmental activities), social affairs (care for lonely elderly or disabled people, drug detoxification), population, family, child protection and care, which conduct the activities of teaching; vocational education; preventive medicine, medical examination and treatment, functional rehabilitation, and family planning; traditional art performance and film projection; collection, conservation, development and popularization of traditional culture; exhibition and physical training and sport activities; research and development; care for elderly people, children and disabled people, shall enjoy the enterprise income tax rate of 10% throughout their operations.

2. Non-public establishments which conduct activities other than those mentioned at Point 1 of this Clause shall pay enterprise income tax according to the provisions of the Enterprise Income Tax Law currently in force and guiding documents.

3. Non-public establishments are entitled to enterprise income tax exemption or reduction according to the provisions of the Enterprise Income Tax Law currently in force and guiding documents. The order, procedures and methods of determining exempted or reduced enterprise income tax amount shall comply with the current provisions of tax law.

VIII. THE MOBILIZATION OF INVESTMENT CAPITAL SPECIFIED IN ARTICLE 9 OF DECREE NO. 53 IS GUIDED AS FOLLOWS:

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a/ Non-public establishments may borrow capital to invest in projects in the domains of education and training or healthcare and enjoy the state's preferential development investment credit in accordance with the provisions of law.

b/ Non-public establishments may borrow capital from economic organizations or individuals for investment in development of their material foundations and shall use and repay the loan capital under agreements. Expenses for payment of loan interests shall be accounted as non-public establishments' expenditures.

c/ Non-public establishments may mobilize capital in form of equities or capital contributions of their employees, and mobilize other lawful capital sources through cooperation or partnership with domestic and foreign enterprises, economic organizations, financial institutions or individuals for investment in construction of their material foundations. The interests on contributed equities shall be paid with their after-tax profits.

d/ The interest rate applicable to capital mobilization shall be agreed upon by non-public establishments and lending organizations in accordance with law. The capital mobilization interest rates must be stated in loan agreements or contracts.

2. Responsibilities for use and repayment of borrowed and mobilized capital

In capital mobilization and borrowing, economic efficiency should be taken into account. The borrowed and mobilized capital must be used for proper purposes already committed with lending organizations or individuals. The borrowed or mobilized capital must be strictly managed and efficiently invested. Non-public establishments shall pay both principals and interests according to their commitments made upon capital mobilization.

Chairmen of the managing boards (or school councils) or heads (of non-public establishments without managing boards) shall approve capital mobilization plans. If capital mobilization plans are infeasible, leading to the loss of assets or other losses, chairmen of the managing boards (or school councils) or heads of non-public establishments shall take responsibility therefor under the provisions of law.

3. Provincial/municipal People's Committees shall, based on the local actual conditions and budget capacity, decide on the partial or full loan-interest support for non-public establishments which have invested in construction of works in the domains mentioned in Clause 1, Section I of this Circular. The modes of support shall comply with the Finance Ministry's Circular No. 51/2001/TT-BTC of June 28, 2001, guiding the implementation of the Prime Minister's Decision No. 58/2001/QD-TTg of April 24, 2001, on post-investment interest rate support; the interest rate used for calculation of supports shall not exceed the investment and development bank's lending interest rate applicable at the same point of time.

IX. PERSONNEL TRAINING SPECIFIED IN ARTICLE 11 OF DECREE NO. 53 IS GUIDED AS FOLLOWS:

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2. Expenses for domestic or overseas training of laborers (whose wages are paid by non-public establishments) shall be counted into reasonable expenses of non-public establishments according to regulations.

3. In case of necessity, based on training plans for standardization of the training and retraining of basic knowledge for personnel of non-public establishments, People's Committees at all levels shall, depending on local budget capacity, consider to provide funding supports for personnel training of such establishments.

- Supports shall cover:

+ Payment of remunerations to lecturers; expenses for traveling, meals and accommodations of lecturers.

+ Expenses for study materials.

+ Expenses for organization of training courses: rentals of meeting halls, classrooms, study equipment; compilation of teaching programs and courses; expenses for making exam questions, organizing and marking exams; expenses for electricity, water, stationery, services, motorbike and car keeping; expenses for organizing surveys and practices for trainees; expenses for common medicaments for trainees; expenses for meals and accommodations for class administrators of training establishments when courses are organized far from non-public establishments.

- Modes of support:

+ Based on the annual estimated support levels notified to them, non-public establishments shall advance training expenses to their salaried laborers when sending them to training. Based on their actual personnel training expenses, non-public establishments shall make quarterly and annual reports to be sent to finance agencies of the same level, requesting the latter to provide training expense supports.

+ Finance agencies at all levels, including the Finance Ministry, provincial/municipal Finance Services and finance sections, shall, based on the requests of non-public establishments, propose competent authorities to grant funding supports for those establishments in accordance with the state's current regime.

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The annual budget support estimates for non-public establishments shall be publicized and notified to eligible establishments.

X. REVENUE SOURCES OF NON-PUBLIC ESTABLISHMENTS SPECIFIED IN ARTICLE 13 OF DECREE NO. 53 IS GUIDED AS FOLLOWS:

1. Based on the revenues specified in Decree No. 53, non-public establishments shall take the initiative in managing the use of their revenue sources, ensuring the implementation of social polices for policy beneficiaries in accordance with the state regulations.

2. With regard to charge and fee revenues prescribed by the State, revenues from the provision of goods and other services, profits from joint-venture and cooperation activities; interests on bank deposits or bonds, non-public establishments shall strictly oversee and record them in accounting books in accordance with law.

3. For charges and fees for which the State does not set collection rates, non-public establishments may themselves decide on those rates, which, however, must be published.

4. With regard to funds granted by the State (if any), non-public establishments shall separately oversee and account them in accordance with the state regulations on reporting and final settlement, including:

- Funds for the performance of tasks ordered by the State;

- Funds in support of the execution of scientific and technological research projects;

- Funds for the implementation of national target programs;

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- Financial aids and interest rate supports.

- Other funds.

5. Revenues from donations, financial aids, presents and gifts must be monitored and publicized according to operation regulations of non-public establishments.

XI. THE DISTRIBUTION OF FINANCIAL RESULTS OF NON-PUBLIC ESTABLISHMENTS, PROVIDED FOR IN ARTICLE 14 OF DECREE NO. 53, IS GUIDED AS FOLLOWS:

1. Based on their annual financial results, after paying all expenses, loan interests and taxes to the state budget under legal provisions, non-public establishments shall distribute their incomes for setting up of funds and division of profits to capital contributors.

2. Non-public establishments shall decide on contents and levels of expenses by themselves in compliance with the state regulations on reasonable expenses so as to have a basis for determination of their enterprise income tax. Breakdowns of expenses must be monitored and reflected fully in accounting books of non-public establishments.

3. The appropriations for setting up of funds, the levels of income paid to laborers and profits divided to capital contributors shall be decided by the Managing Boards (or school councils) or the heads (of establishments without managing boards) for decision in accordance with organization and operation charters of the establishments.

XII. RESPONSIBILITY OF NON-PUBLIC ESTABLISHMENTS, SPECIFIED IN ARTICLE 15 OF DECREE NO. 53, IS GUIDED AS FOLLOWS:

1. When operating, non-public establishments shall register with tax offices. Quarterly and annually, they shall make professional operation reports to be sent to branch-managing agencies (licensing agencies); financial operation reports to be sent to branch-managing agencies and finance agencies of the same level (financial reports shall comply with current reporting regime applicable to non-public units); and organize accounting and statistical work in accordance with law.

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3. Annually, non-public establishments shall publicize their operations and financial situation. The managing boards (or school councils) or heads (for establishments without managing boards) of non-public establishments shall conduct the publicization according to operation charters of the establishments. Particularly, the following must be publicized:

- Charge and fee rates.

- Support levels and state budget money amounts provided as supports for non-public establishments.

- Their remittances to the state budget.

5. Non-public establishments set up by organizations or individuals shall register their professional operations with competent state management agencies in localities and operate in accordance with the provisions of law; and register operations with tax offices in order to have bases for entitlement to preferences or calculation of enterprise income tax.

XIII. THE STATE MANAGEMENT OF NON-PUBLIC ESTABLISHMENTS, DEFINED IN ARTICLES 16 AND 17 OF DECREE NO. 53, IS GUIDED AS FOLLOWS:

1. Ministries, branches and provincial/municipal People's Committees shall assign tasks to specialized state management agencies on the domain basis so that the latter arrange personnel to monitor and manage non-public establishments, thereby assisting ministers and presidents of provincial/municipal People's Committees in performing the state management of non-public establishments.

Quarterly and annually, state management agencies in charge of specific domains shall make reports summing up operations of non-public establishments and send them to provincial/municipal People's Committee presidents and ministries or branches managing those domains.

Annually, ministries, branches and provincial/municipal People's Committees shall assess and report in writing the situation of socialization in the domains under their respective management to the Finance Ministry, specialized ministries and concerned agencies.

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Branch-managing agencies of non-public establishments shall send sum-up reports on operation situation of non-public establishments to the General Statistics Office (for establishments set up by central agencies) or to local Statistics Departments (for establishments set up by local agencies).

2. Finance agencies and state agencies managing non-public establishments shall coordinate with concerned agencies in enhancing the examination and inspection of quality of products and services and handling violations of non-public establishments in their operation.

3. Non-public establishments which commit serious violations in operation shall be suspended from operation. The authority which licenses operation of a non-public establishment shall issue decision to suspend operation of that establishment.

Agencies which issue decisions to suspend or dissolve non-public establishments shall be held responsible before law for their decisions.

4. Provincial/municipal People's Committees shall have the responsibility:

- To adopt local land use plannings, give priority to the reservation of land funds for non-public establishments operating in the domains of education and training, healthcare, culture, physical training and sports, science and technology, environment, social affairs, population, family, child protection and care.

- Based on the specific guidance in this Circular and guiding circulars of ministries under the provisions of Article 20 of the Government's Decree No. 53/2006/ND-CP of May 25, 2006, on policy to encourage the development of non-public service establishments, to promulgate specific preferential regime on land assignment, land lease and interest rate supports suitable with the size and forms of operation as well as types of non-public establishment; and compatible with development requirements of each domain in localities.

- Based on the actual local conditions and budget capacity, to report to provincial-level Peoples Councils for promulgation of additional preferential policies for non-public establishments; arrange funding sources for implementation of supportive policies for non-public establishments and to incorporate their funds in the annual local budget estimates.

- With regard to regimes and policies to be promulgated by provincial/municipal People's Committees which provide preferences mentioned in Sections IV, V and XIII of this Circular, provincial/municipal People's Committees shall report them to the People's Councils before promulgation.

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XIV. ORGANIZATION OF IMPLEMENTATION

1. This Circular takes effect 15 days after its publication in "CONG BAO" and replaces the Finance Ministry's Circular No. 18/2000/TT-BTC of March 1, 2000, guiding a number of articles of the Government's Decree No. 73/1999/ND-CP of August 19, 1999, on the financial incentives applicable to non-public establishments in the domains of education, healthcare, culture and sports.

2. Non-public establishments operating in the domains of education, healthcare, culture and sports which were set up under the Government's Decree No. 73/1999/ND-CP of August 19, 1999, shall reregister with tax offices in order to further enjoy preferences under the provisions of the Government's Decree No. 53/2006/ND-CP of May 25, 2006.

3. Ministries, branches and provincial-level People's Committees are requested to report all problems arising in the course of implementation to the Finance Ministry for prompt settlement.