Thông tư 25/2014/TT-BTC

CIRCULAR

ON COMMON PRICING METHODS FOR GOODS OR SERVICES

Pursuant to the Law on prices No.11/2012/QH13 dated June 20, 2012;

Pursuant to the Government’s Decree No. 177/2013/NĐ-CP dated November 14, 2013 on guidelines for the Law on prices;

Pursuant to the Government's Decree No. 215/2013/NĐ-CP dated December 23, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Finance;

At the request of Director of Department of price management,

The Minister of Finance issues a Circular on common pricing methods for goods or services.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

1. This Circular promulgates common pricing methods for goods or services carried out by the State; goods or services included in the list of goods or services under price stabilization programs conducted by the State; goods or services subject to price negotiation, inspection of pricing factors and inspection of adherence to the law on prices.

2. If there is any specific regulation on methods of calculating product cost or pricing methods for goods or services issued by the competent agency as prescribed in Clause 1 of this Article, that regulation shall be applied.

Article 2. Regulated entities

1. Enterprises, public service agencies, cooperatives, agencies, units, or individuals who manufacture, carry on trade or provide goods or services (hereinafter referred to as business entities) as prescribed in Clause 1 Article 1 of this Circular.

2. Pursuant to regulations in this Circular, the price authority shall:

a) Assess plans for prices, decide prices of goods or services determined by the State; goods or services included in the list of goods or services under price stabilization programs carried out by the State, including specific prices, maximum prices, minimum prices or price bracket; decisions on price support.

b) Check Price registration forms; Dossiers on price negotiation; price declaration.

c) Inspect pricing factors of goods or services as prescribed in Article 26 of the Law on prices; inspect the adherence to the law on prices.

3. Any business entity other than those prescribed in Clause 1 Article 1 of this Circular may apply pricing methods in this Circular to calculate and determine prices of goods or services within their competence.

Article 3. Rules for common pricing

1. Cover reasonable production costs or business costs (hereinafter referred to as operating costs), earn profits equivalent to market prices and policies on socio-economic development having impact on prices of goods or services of the State in every period.

2. Promptly adjust prices when the pricing factors change.

Article 4. Basis for common pricing

1. Total product cost, quality of goods or services at the pricing time; expected profits; route to adjust the prices of goods or services approved by the competent agency;

2. Supply and demand of goods or services and the purchasing power of money; consumer solvency;

3. Domestic market prices, international market prices (if any) and competitiveness of goods or services at the pricing time; international commitments on price (if any).

Chapter II

COMMON PRICING METHODS FOR GOODS OR SERVICES

Section 1. Common pricing methods, selection of pricing methods

Article 5. Common pricing methods, selection of pricing methods

1. The common pricing methods for goods or services prescribed in this Circular include comparison method and cost-based method.

2. According to characteristics and value in use of every good or service, actual business condition, market, sale of specific goods or services, the business entity shall select the appropriate pricing methods for goods or services subject to pricing (hereinafter referred to as to-be-priced goods or services).

Section 2. COMPARISON METHOD

Article 6. Interpretation of terms

1. Comparison method means a pricing method for goods or service based on results of analyzing and comparing between the price and economic and technical characteristics having great impacts on the prices of a to-be-priced good or service with similar goods or services put on the domestic market; with reference to regional and international market prices (if any).

2. Similar good or service means any good or service which is identical or similar to the to-be-priced good or service in basic characteristics such as: use purposes, econo-technical characteristics, shape, size, structural principles, major technical parameters, quality, origin, and time of manufacture, production technology and legal characteristics,…

Article 7. Comparable factors

1. The factors having major impact on prices of the to-be-priced good or service which are used for analysis, comparison and adjustment include:

a) Market prices of similar goods or services in the ordinary condition (without economic crisis, natural disasters, hostility, conflagration, epidemic diseases) and in the time, transaction condition (market condition, trade condition, shipping, payment, exchange rates, consumer price index,…) and policies having impact on prices of goods and services of the State.

b) Basis characteristics of goods or services: econo-technical characteristics, using status , quality, origin, time of manufacture, shelf life, legal characteristics, use purposes and relevant comparison parameters.

2. The latest market price of a similar good or service collected in comparison with the pricing time shall be based on one of following materials:

a) Information sources provided by competent agencies or business entities; decisions on prices of business entities within their competence; specific prices of successful transactions of business entities;

b) Import price stated in the customs declaration or provided by customs authority; price stated in the Sales invoices as prescribed;

c) Successful bid; price determined by a valuation organization ;

d) Registered price; declared price; posted price;

dd) Prices on quotations of at least 03 providers; budget estimates for manufacture of goods or services approved by the competent agency;

e) Reference prices from official information provided on the Internet, means of mass media, or Vietnam commercial counselor in other countries by the provided as prescribed in Vietnamese law;

g) Market prices in the survey results conducted by business entities. If a business person carries the research, it is required to make a Report on survey enclosed with this Circular. If business organizations cooperate in carrying out the survey, it is required to make a Report on survey with all signatures of the organizations.

The results of analysis, comparison and adjustments to the prices based on comparable factors of similar goods or services shall be used to determine the prices of to-be-priced goods or services.

4. When using comparison method, organizations or individuals may refer to Vietnam price valuation standards.

Article 8. Comparison method procedures

Step 1. Determine general information of the to-be-priced good or service (quantity, type, econo-technical characteristics and parameters, shelf life, status at the pricing time and other details); determine comparable factors having great impact on price of the good or service; hire an organization to assess econo-technical condition and quality of the to-be-priced good or service (if necessary).

Step 2. Research market, collect information about prices and relevant information about prices of similar goods or services on the market from the information sources prescribed in Article 7 of this Circular; analyze the information sources then select at least 03 similar comparable goods or services (if any). If there are not enough 03 comparable goods or services, the collected similar goods or services shall be used for comparison.

Step 3. Analyze the prices and relevant information about similar goods or services, analyze comparable factors having great impact on the prices of to-be-priced good or service.

If it fails to determine the adjusted rates and adjusted prices of comparable factors, a description of calculation basis and a conclusion on prices of to-be-priced good or service are required.

If it may determine the adjusted rates and adjusted prices of comparable factors, the adjustments to prices shall follow the rules below:

a) Set to-be-priced good or service as a standard to adjust the prices of comparable goods or services according to the characteristics of to-be-priced good or service;

b) The adjustments to prices shall be carried out according to the difference of every comparable factor and disregard for remaining comparable factors (treating as they are the same), each adjustment of every comparable factor must be proved by the information collected from the market, in particular:

- If the comparable factors of comparable goods or services are inferior to to-be-priced good or service, the prices shall be increased (according to the standard unit of comparable goods or services);

- If the comparable factors of comparable goods or services are superior to to-be-priced good or service, the prices shall be decreased (equivalent to the standard unit of comparable goods or services);

- The adjustments to the difference of comparable factors may be carried out according to amount of money or increasing/decreasing rate (%) in comparison with market prices of comparable goods or services.

- The total net adjusted value of comparable goods or services shall the sum of adjusted amount of every comparable factor with "-" (decreasing adjustment) and "+" (increasing adjustment).

- The prices of goods or services after adjustment shall equals (=) prices of comparable goods or services plus (+) or minus (-) total net adjusted value of that comparable goods or services.

c) The price of to-be-priced good or service shall equal (=) the price representing all comparable goods or services or the average price of comparable goods or services after adjustment:

The price representing comparable goods or services is the price after adjustment of every comparable good or service which is selected according to the following standards:

- The comparable good or service having the least number of adjustments to prices.

- The comparable good or service having the smallest adjusted rate of every comparable factor.

- The comparable good or service having the smallest total net adjusted value.

Table 1: Table of price adjustment according to comparable factors and determination of price of to-be-priced good or service

Section 3. COST-BASED METHOD

Article 9. Interpretation of terms

Cost-based method means a pricing method based on operating costs, expected profits (if any) equivalent to market prices and policies of the State having impact on prices of goods or services.

Article 10. Good or service pricing

1. Domestically-produced goods or services:

Price of a domestically-produced good or service shall be determined according to following formula:

a) Total product cost (Z) shall be determined as prescribed in Article 11 of this Circular.

b) Expected profit shall be determined as prescribed in Article 13 of this Circular.

c) Special excise tax, VAT or other taxes (if any) shall be determined as prescribed in regulations on the law on taxation in force.

2. Imported goods or services:

Price of an imported good or service shall be determined according to following formula:

a) Import cost price (G_V) shall be determined according to following formula:

Where:

- Buying price at Vietnam’s checkpoint (CIF) equals (=) [Actual buying price on foreign market plus (+) costs to bring goods to Vietnam (including international insurance premium, international freight) plus (+) additional costs as prescribed (if any) minus (-) costs as prescribed (if any) deducted from value of imported goods subject to import tax as prescribed] multiplied by (x) currency exchange rates.

Currency exchange rates shall be determined according to actual rates paid to the banks by the business entities (where they conduct transactions) when they apply for loans or buy foreign currencies to buy goods. If they have not paid to the banks, the selling rates of commercial banks where they applied for loans or bought foreign currency at the pricing time shall be chosen.

With regard to the plan for maximum buying prices, minimum selling prices of national reserve goods made by the General department of State reserves, the currency exchange rates shall be determined according to selling rates of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) announced at the pricing time or nearest the pricing time.

- c) Special excise tax, VAT or other taxes (if any) prescribed in regulations on the law on taxation in force.

- Other monetary costs as prescribed (if any).

b) Selling costs, administrative costs, financial costs (if any) shall be determined as prescribed in Article 11 of this Circular.

c) Expected profits shall be determined as prescribed in Article 13 of this Circular.

d) VAT or other taxes (if any) prescribed in regulations on the law on taxation in force.

Table 2. Table of costs and total product prices of imported goods or services:

Article 11. Determination of costs and total product prices of domestically-produced goods or services

The operating costs and total product prices used as basis for pricing shall be determined according to the following costs:

Table 3. Total product prices of domestically-produced goods or services

The above costs shall be determined in accordance with current regulations of law, in particular:

1. Direct materials costs:

Direct materials costs shall include costs of materials, tools, fuel or energy,… (hereinafter referred to as materials cost) which are determined according to materials consumption and materials prices:

Materials cost = materials consumption x materials price

a) Materials consumption shall be determined according to econo-technical quotas as follows:

- If the product is imposed econo-technical quota by competent agency, that quota shall be applied.

- If the product is not imposed any econo-technical quota by competent agency, the quota issued by the Board of Directors or the Board of members (if any) or General Director (Director) of enterprise or Head of organization shall be applied. They shall take legal responsibility for the accuracy of the quota.

- With regard to tools used in manufacture and business having major value and shelf life above 1 year, their consumption shall be allocated to operating costs.

b) Materials prices shall be determined as follows:

- If a to-be-manufactured product is subject to VAT using credit-invoice method, its materials price shall not be included VAT.

- If a to-be-manufactured product is not subject to VAT or subject to VAT using subtraction method, its materials price shall be included VAT.

- The materials price used to determine the price of a product shall be determined in conformity with their standards, types and quality of used materials and manufacturer In particular:

+ Materials whose prices determined by the State: equals (=) price determined by the State plus (+) reasonable cost * (if any);

+ Outsourcing materials: If there are not adequate documentary evidence or invoices as prescribed, the lowest price from information sources (market prices provided by competent agency or quotations provided by manufacturers, prices provided by service providers) shall be chosen; if there are adequate documentary evidence or invoices as prescribed, the prices of other products having similar standards or quality in the same administrative divisions; or buying prices on invoices; or successful bids, or posted prices plus (+) reasonable delivery cost (sending materials to depot of enterprise, if any) shall be considered to choose.

Materials directly imported to manufacture: equals (=)  import cost price prescribed in Point a Clause 2 Article 10 of this Circular plus (+) reasonable delivery cost (sending materials to the depot of enterprise, if any).

+ Home-made materials: equals (=) ex works price plus (+) actual cost (incurred when putting materials into operation, if any).

+ Materials under processing agreement: equals (=) actual ex works price under processing agreement plus (+) processing costs plus (+) reasonable delivery costs (sending materials to the depot of enterprise, if any)

Prices of materials and costs of processing, delivery, preserve or purchase,...must be stated in invoices as prescribed. If the materials are agricultural, forest or aquatic products directly bought without any invoice, the buyer must make a list of products having name and address of the seller, quantity of products, unit price, amount; signature of the seller and head of unit, or General Director (Director) of enterprise shall decide as prescribed in law on accounting, statistics, taxation and relevant regulations of law.

2. Direct labor costs

a) Direct labor costs mean amounts payable paid to direct labor including salaries, wages and other allowances *, social insurance, health insurance, unemployment insurance and union funding,...as prescribed in the Labor Code and relevant regulations of law.

Direct labor costs in the product price shall be determined according to labor quotas and unit prices of salaries or wages.

Direct labor cost = Labor quota x Unit price of salary or wage.

- Labor quota:

+ If the product is imposed labor quota by a competent agency, that labor quota shall be applied.

+ If the product is not imposed any labor quota by competent agency, the labor quota issued by the Board of Directors or the Board of members (if any) or General Director (Director) of enterprise or Head of organization shall be applied. They shall take legal responsibility for the accuracy of the quota.

- Unit price of salary or wage:

+ The unit price shall comply with the law on salaries in force.

+ The wage shall be paid to employees according to labor contract or collective bargaining agreement (if applicable).

b) According to actual condition and requirements, salary costs shall be determined according to salary funds and total turnover quota or total turnover minus (-) cost without salary or profit or product unit or according to other efficiency business standards in conformity with the operation of business entities as prescribed in regulations of the Ministry of Labor, War Invalids and Social Affairs.

3.  Depreciable costs of direct machinery

Comply with regulations of the Ministry of Finance on regulations on management of use and depreciation of fixed assets and route to include depreciable costs in product prices regulated by competent agency (if any).

In case the depreciable costs of direct machinery are included in the general production costs of enterprise that cost shall not be included others.

4. Operating costs according to specific industries or fields (excluding above Point 1, Point 2 and Point 3)

The determination of operating costs according to specific industries or fields (such as costs of draft, printing, composing, plays, performance, compilation of materials, food in husbandry, fertilizers in farming,…) shall comply with regulations of specialized law.

5. General production costs of enterprises

a) General production costs include costs serving the general operation in workshops, departments or teams,...to manufacture products or provide services, including:

- Workshop's employee costs: salaries or allowances paid to managers of workshops, departments or teams; their meal break costs; deductions from social insurance, health insurance, unemployment insurance and trade union funding which are calculated according to regulations on salaries payable to employees of workshops, departments, or teams,...

- Materials costs used in workshops including materials used for repair or maintenance of fixed assets, tools under management of workshops, temporary rent cost,..

- Tool costs: used for management of workshops, departments, teams,…

- Depreciable costs of fixed assets directly used in manufacturing and providing services and fixed assets commonly used in the operation of workshops, departments or teams,... (if it is determined as prescribed in Clause 3 of this Article, it shall not be determined again).

- Outsourcing costs serving the operation of workshops, departments  or teams: repair costs of fixed assets, outsourcing costs, costs of electricity, water, phone, fixed assets rent, contractor cost (if any).

- Other monetary costs other than costs serving the operation of workshops, departments, teams,…

b) Methods of determining some costs in general production costs

- Costs of materials or tools and labor cost shall be determined as prescribed in Clause 1 and Clause 2 of this Article.

- The depreciable costs of fixed assets shall be determined as prescribed in regulations of the Ministry of Finance on regulations on management of use and depreciation of fixed assets.

6. Selling costs

a) Selling costs include costs actually incurred (if any) when selling goods or providing services:

- Costs payable to selling employees, packaging employees, delivering employees, product-preserving employees, including salaries, wages, meal break costs and deductions from social insurance, health insurance, unemployment insurance and union funding,...

- Costs of materials, packages used for preserve and consumption of products including costs of packaging materials, cost of materials, fuel used for storage, loading, transporting products in the consumption process, materials used for repair and preservation of fixed assets ... for the sales department.

- Costs of tools serving the consumption process including measuring instruments, computing facilities, working equipment,…

- Depreciable costs of fixed assets in preservation department or sales department including warehouses, shops, wharves, loading and unloading vehicles, transportation vehicles , measuring instruments, quality control instruments, ...

- Costs of product warranty.

- Outsourcing costs serving the sales including outsourcing costs to repair fixed assets serving the sales department, depot rents, stevedore rents, commission paid to sales agents, or export trustees,…

- Other monetary costs incurred in the sales process other above costs including entertaining cost in the sales department, the cost of product introduction, advertising, offers, and customer meeting cost, ...

 In above selling costs, if any cost is imposed econo-technical quotas by the competent agency or as prescribed in policies of the State or regulations of law (taxation, accounting and relevant law provisions) and its price is determined by the State, that regulations shall be applied. + If the cost is not imposed any quota by competent agency, the labor quota issued by the Board of Directors or the Board of members (if any) or General Director (Director) of enterprise or Head of organization shall be applied and valid invoices or documentary evidence as prescribed are required.

With regard to national reserve goods, public services provided by the State from government budget, the following costs shall not be included: advertisement, marketing, sales promotion, commission for brokers.

b) Methods of determining some costs in selling costs

- Costs of materials or tools and labor cost shall be determined as prescribed in Clause 1 and Clause 2 of this Article.

- Depreciable costs of fixed assets shall comply with Clause 3 of this Article.

7. Financial costs

Financial costs determined in the plan for prices are loan interest costs (if any) related to the to-be-priced product and exchange differences (if any) when buying materials or goods and they shall be allocated to each product unit.

With regard to national reserve goods, public services provided by the State from government budget and other goods or services provided by the State or other organizations providing total funding, the loan interest cost shall not be included.

8. Administrative costs

a) Administrative costs include:

- Manager costs including amounts payable to administrative officers including salaries, allowances, social insurance, health insurance, unemployment insurance and union funding of Director Board, managers of departments.

- Materials costs used for management such as stationery, materials used for repair of fixed assets or tools,...

- Stationery costs used for management.

- Common depreciable costs of fixed assets: offices, warehouses, structures, means of transport, transmission, machinery and equipment used in office management.

- Taxes, fees and charges: license tax, land rents,…and other fees or charges.

- Provisional costs (if any) including the provision for bad debts, provision payable included in operating costs

- Outsourcing costs serving the management; costs of buying and using technical documents or patents,… (not qualified for fixed assets) shall be included in administrative costs; fixed asset rents, costs paid to contractor (if any).

- Other monetary costs under common management other than above costs including: costs of meeting, entertaining, business trips, travel, women labor, research, training, fees for participation in association and other reasonable costs.

In administrative costs, if there is any cost which is imposed econo-technical quota or policies issued by competent agency or prescribed in regulations of law (taxes, accounting, statistics and relevant regulations of law) and having prices determined by the State, that regulations shall be applied; with regard to the costs which are not imposed econo-technical quota and rules for spending, the Chairperson of the Executive Board/the Chairperson of the Board of members or General Director (Director) or head of organization shall approve and take responsibility for their decisions.

b) Methods of determining some costs in administrative costs

- Costs of materials or tools and labor costs shall be determined as prescribed in Clause 1 and Clause 2 of this Article.

- Depreciable costs of fixed assets shall comply with Clause 3 of this Article.

9. Cost allocation

The common costs and undivided costs related to multiple products such as depreciation of fixed assets; salaries, social insurance, health insurance, unemployment insurance and trade union funding; Selling costs, administrative cost,…must be collected and allocated according to criteria in accordance with regulations of law for every product.

10. Production costs allocated to by-products in the same manufacturing process with primary products

The by-product costs must be allocated according to the rules below: the costs of by-products produced in the manufacturing process whether for sales or use as raw materials for manufacture of other products must be allocated to production costs in order to eliminate it from production costs of primary products. If the by-products shall not be produced for sales or use, their costs shall not be allocated.

Article 12. Expenses not accounted as reasonable expenses for determining product prices

1. Expenses not accounted as reasonable expenses for determining products prices shall comply with regulations of law in force on non deductible expenses subject to taxable income to determine corporate income tax and expenses not included in production costs and product prices as prescribed.

2. Expenses ensured by government budget; expenses included in prices of other products or services.

Article 13. Expected profits

1. Pursuant to Article 3 of this Circular, a business entity shall estimate a profit ratio or reasonable profit amount, if any, to ensure that the determined selling price of a good or service must not exceed its market price (for goods or services with available market prices).

Profit ratio is a percentage % of profits to the total product price; or selling price; or turnover; or equity capital or state investment capital assigned by the owner's representative (allocated to each product, goods or service unit).

2. Methods of determining reasonable profit amounts

a) With regard to goods or services which are sold on the market or have similar goods or services produced and sold on the market, their maximum expected profit amount or profit ratio shall be determined according to financial statement which is audited or declared nearest to the pricing time of the business entities providing similar goods or services or based on preceding years’ data of the relevant sector or actual figures of the business entity.

b) With regard to goods or services (home-made or imported) provided under the State's orders or plans which have not yet been sold in the market or have not any similar good or service produced and sold on the market, their expected profit amount, after paying enterprise income tax must be enough for setting up a welfare fund and a reward fund according to regulations of law in force; or shall be determined based in the actual profit ratio (already audited or declared) of other goods and services traded by the business entity at the latest time with the pricing time.

Chapter III

IMPLEMENTATION

Article 14. Implementation

1. The Ministry of Finance shall take charge and cooperate with relating agencies in guidance and inspection of implementation of this Circular and relevant regulations of law.

2. The Service of Finance of central-affiliated cities and provinces shall take charge and cooperate with relating agencies in implementation and inspection of implementation of this Circular in the local governments.

Article 15. Effect

This Circular shall take effect from April 15, 2014 and replace the Circular No. 154/2010/TT-BTC dated October 1, 2010 of the Minister of Finance on issuance of Regulations on pricing of assets, goods and services.

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