– In paragraph 6, point a, Clause 4, Article 6 of Circular No. 48/2019/TT-BTC dated August 8, 2019 of the Ministry of Finance providing guidance on making and settlement of provisions for devaluation of inventory, losses of financial investments, bad debts and warranty at enterprises (Circular No. 48/2019/TT-BTC):
“4. Handling irrecoverable receivables:
– Receivables which are unable to be recovered after 03 year started from the day on which provision is fully made in accordance with paragraph 4 point a clause 2 of this Article.”
– In paragraph 4, point a, Clause 2, Article 6 of Circular No. 48/2019/TT-BTC stipulates:
“2. The levels of provision:
a) As for overdue receivables, the level of provision is:
…
– 100% of the value of a receivable which has been overdue for over 3 years.”
– At point b, Clause 4, Article 6 of Circular No. 48/2019/TT-BTC stipulates:
“b) The following documents are used to validate irrecoverable receivables prescribed in point a clause 4 of this Article:
– The accounting book and documents proving that the receivables are not yet recovered and, by the time of handling debts, the enterprise is reflecting such receivables on its accounting book, such as economic contracts, loan agreements, promissory notes, records of contract liquidation (if any), debt reconciliation (if any), requests for debt reconciliation or payment reminders (with confirmation of postal units); lists of liabilities and other related documents.
– As for business organizations:
+ In case debtors are bankrupt: Court decisions on declaration of enterprise bankruptcy under the Law on Bankruptcy.
+ In case debtors have terminated their operation or dissolved: written certification or online notification posted on official websites of the termination of operation or dissolution of the enterprise from the organization or agency which decided the establishment of such enterprise or the supervisory tax agency; court decisions and certification by law enforcement bodies for debtors who have no asset for execution.
+ In case debtors are granted permission to write off debts by a competent authority in accordance with provisions of law; the enterprise’s damages will be compensated by debt sale granted by the competent authority.
– As for individuals:
+ Death certificate (certified copy or copy from master registers) or certification of the local government of a debtor who is deceased.
+ Arrest warrants or certification by law enforcement bodies for debtors who have absconded, are prosecuted or serving sentences or certification by law enforcement bodies for debtors who no longer stay in their places or residence in case of recovering receivables of telecommunication service fee, information technology or postpaid television packages.
– Document proving that the debts mentioned in paragraph 4 Point a Clause 2 of this Article are yet to be collected after 03 years from the day on which provisions for such debts are fully made; Documents proving that the debts mentioned in paragraph 4 Point b Clause 2 of this Article are not yet to be collected after 01 year from the day on which provisions for such debts are fully made.”
Thus, for example, in the case where the Company handles the irrecoverable receivables in the case of paragraph 6, point a, clause 4, Article 6, there must be full documentation on the receivables (including debtors) according to the provisions of paragraph 1 and 4, point b, clause 4, Article 6 of Circular No. 48/2019/TT-BTC.
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