Circular No. 180/2012/TT-BTC dated October 24, 2012 of the Ministry of Finance guiding the financial settlement of redundancy pays given to employees

THE MINISTRY OF FINANCE

Circular No. 180/2012/TT-BTC of October 24, 2012, guiding the financial settlement of job-loss allowance for enterprises’ employees

Pursuant to the June 23, 1994 Labor Code; the April 2, 2002 Law Amending and Supplementing a Number of Articles of the Labor Code; and the November 29, 2006 Law Amending and Supplementing a Number of Articles of the Labor Code;

Pursuant to the June 18, 2012 Labor Code;

Pursuant to the Government’s Decree No. 39/2003/ND-CP of April 18, 2003, detailing and guiding a number of articles of the Labor Code regarding employment;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Government’s Decree No. 122/2011/ND-CP of December 27, 2011, amending and supplementing a number of articles of the Government’s Decree No. 124/2008/ND-CP of December 11, 2008, detailing and guiding a number of articles of the Law on Enterprise Income Tax;

At the proposal of the director of the Corporate Finance Department;

The Minister of Finance promulgates the Circular to guide the financial settlement of job-loss allowance for enterprises’ employees:

Article 1. Subjects of application and scope of regulation

1. This Circular guides the financial settlement of job-loss allowance for employees of enterprises established and operating in Vietnam under law.

2. For joint-venture enterprises established under agreements signed between the Government of the Socialist Republic of Vietnam and foreign governments, if such agreements contain provisions on deduction for and payment of job-loss allowances which are different from those guided in this Circular, such agreements prevail.

Article 2. Grounds for determination of enterprises’ job-loss allowance amounts allowed to be accounted as expenses

1. For enterprises undergoing restructuring or technological renewal, job-loss allowance amounts payable to employees shall be determined under Clause 1, Article 17 of the 1994 Labor Code and Article 11 of the Government’s Decree No. 39/2003/ND-CP of April 18, 2003, detailing and guiding a number of articles of the Labor Code regarding employment.

2. Job-loss allowance amounts calculated based on employees’ working period at enterprises from December 31, 2008, backward shall be determined under the Ministry of Labor, War Invalids and Social Affairs’ Circular No. 39/2009/TT-BLDTBXH of November 18, 2009, guiding Article 12 of the Government’s Decree No. 39/2003/ND-CP of April 18, 2003, detailing and guiding a number of articles of the Labor Code regarding employment.

3. In case the above-mentioned documents are replaced by other documents at the effective time of Labor Code No. 10/2012/QH13 which was passed on June 18, 2012, by the XIIIth National Assembly of the Socialist Republic of Vietnam at its 3rd session, job-loss allowance amounts to be paid by enterprises shall be determined under such replacing documents.

Article 3. Financial settlement of job-loss allowance payment and balance of the job-loss allowance reserve fund at enterprises

1. Enterprises may account job-loss allowance amounts paid to laborers under this Circular as their management expenses which will be deducted when determining incomes liable to enterprise income tax.

Particularly for 2012, enterprises may use the balance of the job-loss allowance reserve fund for which deductions have been made under the Ministry of Finance’s Circular No. 82/2003/TT-BTC of August 14, 2003, through December 31, 2011, if any, to pay job-loss allowances to their employees. If the fund balance is insufficient or unavailable, enterprises may account the whole deficit amount as their management expenses at the time of making the annual financial statement, which will be deducted when determining incomes liable to enterprise income tax according to regulations. At the time of making the 2012 financial statement, if the job-loss allowance reserve fund (after being used to pay job-loss allowances in 2012) still has a positive balance which is accounted as an increase in other incomes in 2012, enterprises may not carry forward such fund balance to the subsequent year for use.

2. For enterprises undergoing restructuring or technological renewal with a large number of employees losing their jobs in the year, if a loss incurs when the job-loss allowance amounts paid to employees (after being cleared against the balance of the job-loss allowance reserve fund, if any) are fully accounted as expenses, enterprises may allocate the job-loss allowance amounts already paid to employees into its management expenses within the subsequent 3 years at most.

Article 4. Method of accounting job-loss allowance amounts for enterprises’ employees

The method of accounting job-loss allowance amounts for enterprises’ employees complies with the corporate accounting regime promulgated together with the Minister of Finance’s Decision No. 15/2006/QD-BTC of March 20, 2006, and the guidance in this Circular, specifically as follows:

a/ When paying job-loss allowance to employees with the balance of the job-loss allowance reserve fund on December 31, 2011, to record them as:

Debit of account 351 - Job-loss allowance reserve fund

Credit of accounts 111, 112, etc.

b/ To record job-loss allowance amounts paid to employees in the fiscal year which are accounted as management expenses as:

Debit of account 642 - Enterprise management expenses

Credit of accounts 111, 112, etc.

c/ In case the job-loss allowance amounts paid in the year are large, giving rise to a loss when being accounted as expenses, and enterprises are allowed to allocate them into their management expenses within the subsequent 3 years, after paying such amounts, to record them as:

Debit of account 242 - Long-term prepaid expenses

Credit of accounts 111, 112, etc.

When allocating such amounts, to record them as:

Debit of account 642 - Enterprise management expenses

Credit of account 242 - Long-term prepaid expenses.

d/ To record the balance of the job-loss allowance reserve fund (if any) which is accounted as an increase in other incomes of enterprises when making the 2012 financial statement as:

Debit of account 351 - Job-loss allowance reserve fund

Credit of account 711 - Other incomes.

Article 5. Effect

1. This Circular takes effect on December 10, 2012.

2. This Circular replaces the Ministry of Finance’s Circular No. 82/2003/TT-BTC of August 14, 2003, guiding the deduction for setting up, management, use and accounting of the job-loss allowance fund at enterprises.

3. Any problems arising in the course of implementation should be reported to the Ministry of Finance for study, amendment and supplementation.-

For the Minister of Finance
Deputy Minister
TRAN VAN HIEU