Thông tư 86/2016/TT-BTC

CIRCULAR

GUIDING A NUMBER OF CONTENTS RELATING TO THE PROVISION FUND FOR ENVIRONMENTAL RISKS AND DAMAGE COMPENSATION AS REGULATED IN THE GOVERNMENT’S DECREE NO. 19/2015/ND-CP DATED FEBRUARY 14, 2015 DETAILING THE IMPLEMENTATION OF THE LAW ON ENVIRONMENTAL PROTECTION

Pursuant to the Law on enterprises No. 64/2014/QH13;

Pursuant to the Law on environmental protection No. 55/2014/QH13;

Pursuant to the Law on enterprise income tax No. 14/2008/QH12;

Pursuant to the Law No. 32/2013/QH13 regarding amendments to certain articles of the Law on enterprise income tax;

Pursuant to the Government’s Decree No. 218/2013/ND-CP dated December 26, 2013 detailing and guiding the implementation of certain articles of the Law on enterprise income tax;

Pursuant to the Government’s Decree No. 19/2015/ND-CP dated February 14, 2015 detailing the implementation of the Law on environmental protection;

Pursuant to the Government’s Decree No. 215/2013/ND-CP dated December 23, 2013 defining the functions, tasks, powers and organizational structure of Ministry of Finance.

At the request of Director of Corporate Finance Department,

Minister of Finance promulgates a Circular to provide guidelines on a number of contents relating to the provision fund for environmental risks and damage compensation regulated in the Government’s Decree No. 19/2015/ND-CP dated February 14, 2015 detailing the implementation of the Law on Environmental Protection.

Chapter I

GENERAL PROVISION

Article 1. Scope

This Circular provides for the setting aside, use and accounting of provision funds for environmental risks and damage compensation (hereinafter referred to as the Fund) as regulated in the Government’s Decree No. 19/2015/ND-CP dated February 14, 2015 detailing the implementation of the Law on Environmental Protection.

Article 2. Regulated entities

1. This Circular shall govern entities that carry out business and production activities in accordance with the Law on enterprises and must set aside provision funds for environmental risks and damage compensation while carrying out the following production or business activities or services:

a) Petroleum activities include the search, exploration and development of oilfields, and extraction of petroleum, including activities directly serving the said activities;

b) Production and trading of chemicals, petrol and oil;

c) Use of specialized ship for transport of petroleum, petroleum products or other dangerous goods within sea ports and coastal waters of Vietnam;

d) Storage, transport and treatment of dangerous waste or transport of dangerous goods.

2. Entities that have bought insurance against compensation for environmental damage, and enterprises that are governed by regulations on centralized environment funds shall not be governed by this Circular.

Article 3. Interpretation of terms

1. Environmental risks refer to environmental emergencies or hazards that cause or threaten to cause adverse effects on the surrounding environment during the production and business of an enterprise as regulated in the Law on environmental protection.

2. Environmental emergencies refer to accidents resulting from human-induced factors or natural changes that cause severe environmental pollution, degradation or changes.

3. The enterprise’s provision fund for environmental risks and damage compensation refers to the Fund that is set aside to compensate for partial or entire damages caused by environmental risks which occur during the production and business of that enterprise.

Chapter II

SETTING ASIDE AND USE OF PROVISION FUND FOR ENVIRONMENTAL RISKS AND DAMAGE COMPENSATION

Article 4. Principle for setting aside, sources of funding, setting time and management of the Fund

1. Principle for setting aside of the Fund:

a) Ensure stability of business, production and service provision of the enterprise;

b) Ensure the compensation for partial or entire environmental damages caused by the enterprise’s business and production activities.

2. Source of funding for setting aside the Fund: Appropriation taken from annual expenditures on business and production activities and service provision of the enterprise.

3. Time for setting aside the Fund: At the end of annual accounting period. The enterprise that must prepare irregular financial statements as regulated by the law may set aside provisions for environmental risks and damage compensation at the time when such irregular financial statements are prepared.

4. Fund management:

a) The enterprise must formulate and promulgate internal regulations for management and use of fund in association with regulations on environmental protection and risk preventive measures. Both objective and subjective causes must be defined upon the occurrence of environmental damages. Accordingly, the liability for material compensation of each department/individual must be determined if such environmental damages are caused by subjective factors.

b) Enterprise is not allowed to account provisions of which the grounds for setting aside are not satisfactory in its expenses for the purpose of reducing payment made to state budget.

Article 5. Amount of funding

1. Amount of funding: The enterprise shall appropriate 0.5% of its net revenue from good sale and service provision with respect to activities defined in Clause 1 Article 2 of this Circular provided that the appropriation shall not exceed 5% of annual pre-tax profit. In which, annual net revenue from good sale and service provision shall not include revenues from the sale of goods made between a parent company and its subsidiaries.

2. When the fund's balance equals to 10% of the enterprise’s charter capital, the appropriation for setting aside the Fund shall be ceased. In case the enterprise’s charter capital is increased as adjusted, the enterprise shall continue the appropriation for setting aside the Fund until the fund’s balance equals to 10% of the new rate of charter capital (after it is increased).

If the fund’s balance is lower than 10% of the enterprise’s charter capital before the reduction of charter capital, the enterprise shall base on the new rate of its charter capital to determine the fund’s balance and make appropriation to ensure that the fund’s balance equals to 10% of the new rate of charter capital (after it is reduced).

Article 6. Purposes of the Fund

1. The Fund is set aside to prevent, respond and compensate for environmental emergencies that occur during the enterprise’s business and production, including:

a) The pollution, serious or especially serious pollution of water environment (including the surface water, groundwater and seawater) serving the preservation, living, entertainment, production and other purposes;

a) The pollution, serious or especially serious pollution of soil environment serving the preservation, production and other purposes;

c) The degradation of a natural ecosystem belonging or not belonging to the wildlife sanctuary;

d) Biodiversity offsets at the region where the enterprise’s production and business activities are performed or used to compensate for biodiversity impacts arising from the enterprise's production and business activities;

dd) The pollution of air environment serving human's health and life, and other subjects.

2. If environmental emergencies occurring in the course of the enterprise’s production and business are caused by subjective factors or violation deliberately committed by the enterprise against the law on environmental protection, expenses for handling such environmental emergencies shall not be covered by the Fund and not be accounted in deductible expenses upon the calculation of enterprise income tax.

Determination of the causes of environmental emergencies, which are subjective factors or willful violation against the law, shall comply with regulations in Chapter X and Chapter XI of the Law on environmental protection No. 55/2014/QH13 and other regulations instructed by Ministry of Natural Resources and Environment.

Article 7. Accounting

1. Provisions for environmental risks and damage compensation shall be included in the cost price and accounted in the enterprise’s expenses for production and business activities. To be specific:

- Provisions set aside for environmental risks and damage compensation shall be recorded as follows:

Dr 627 (154) – Manufacturing overhead costs (Unfinished production, business costs)

Cr 352 – Provision for payables

- Expenses relating to the compensation for environmental damages shall be recorded as follows:

Dr 352 – Provision for payables

Dr 133 – Deductible VAT (if any)

Cr 111, 112, 331,... – Cash, Bank deposits, Payables to sellers,…..
2. In case the fund’s balance is not enough to compensate for significant environmental risks, expenses for compensation for such significant environmental risks may be accounted in the enterprise’s expenses for business and production activities.

In case of significant environmental risks, if the enterprise has used up the fund’s balance and accounted expenses for damage compensation in its expenses for business and production activities resulting in losses, the enterprise may account expenses for damage compensation in its expenses for business and production activities in the next 5 years from the year in which such significant environmental risks occur. The amount and appropriation percentage shall be subject to the enterprise’s business and production results during the year provided that the enterprise shall not incur loss during the year.

3. In case the enterprise stops engaging in business sectors defined in Clause 1 Article 2 of this Circular, the unused balance of the fund for environmental risks and damage compensation shall be accounted in other incomes of the enterprise. Accounting entries of the enterprise shall be recorded as follows:

Dr 352 – Provision for payables

Cr 711 – Other incomes

Article 8. Reporting

1. When ending a financial year, the enterprise shall make reports on the setting aside and use of the fund’s balance at the same time when annual financial statements are prepared (Using form stated in the Annex enclosed to this Circular). Financial statements are prepared in accordance with prevailing laws. Enterprises must have sufficient documents to use as the basis for making statement of expenses covered by the Fund’s balance.

2. Explanation about the setting aside, management and use of the Fund must be included in the Notes to financial statements of the enterprise. The report on use of the Fund must include detailed explanation about the appropriation from the fund’s balance to compensate for environmental damage caused by the enterprise’s business and production activities.

If there are many items of expenses covered by the fund's balance during the year, the enterprise must make a separate report enclosed to the Notes to financial statements of the enterprise.

Article 9. Inspection of setting aside and use of the Fund

1. The enterprise’s director shall be responsible for formulating and announcing regulations for setting aside, management and use of the fund, and monitoring and expediting the inspection of setting aside, management and use of the Fund in compliance with regulations in this Circular.

2. Annually, the enterprise (including state-owned enterprises, state-invested enterprises, foreign-invested enterprises and enterprises of economic sectors) shall prepare and send report on setting aside and use of the enterprise’s Fund as regulated in this Circular to Department of Finance, Department of Taxation and Department of Natural Resources and Environment of province where the enterprise’s head office is located.

3. A state-owned enterprise affiliated to a ministry/regulatory body (other than enterprises prescribed in Clause 2 of this Article) shall make and send reports on setting aside and use of the Fund as regulated in this Circular to its owner, Ministry of Finance (General Department of Taxation, Corporate Finance Department) and Ministry of Natural Resources and Environment.

Chapter III

IMPLEMENTATION

Article 10. Effect and implementation responsibility

This Circular takes effect as of August 05, 2016 and applies as of the financial year 2016.

Entities participating in business and production activities are responsible for implementing regulations in this Circular.

In case legislative documents referred to in this Circular are amended, supplemented or replaced, the new ones shall govern.

Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance for consideration./.