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On 8 August 2019, the Ministry of Finance issued Circular 48/2019/TT-BTC (“Circular 48”)providing guidance on the accounting and tax treatment of provisions for devaluation of inventories, losses on investments, doubtful debts and warranties for products, services and construction work, all of which have an impact on the deductibility of related expenses for Corporate Income Tax (“CIT”) purposes.

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Client Alert, September 2019 - Circular 48/2019/TT-BTC on Accounting for Provisions in Vietnam


Who is Subject to the Circular?

Circular 48 applies to all enterprises established and operating under Vietnamese laws.

Credit institutions and foreign bank branches are also required to follow this Circular, (replacing the specific requirements for credit institutions as stated in the previous Circular), other than for credit risk provisions which are subject to specific guidance from the State Bank of Vietnam and the Ministry of Finance.

Enterprises operating in a certain specific fields (insurance, securities, capital investment, debt trading, retailing of deferred / installment goods) are also subject to the guidance in Circular 48, however they are also subject to separate regulations issued by the Ministry of Finance.


When are Provisions to be Made or Revised?

Provisions are to be made, settled or revised when preparing the Annual Financial Statements (Clause 2, Article 3), instead of at the end of the financial year according to the previous regulations.


Significant Changes in Circular 48

Provisions for Decreases in Carrying Values of Inventories

Enterprises are now permitted to make provisions for decreases in the carrying value of inventories that are stored outside of the enterprise’s warehouse, such as goods in transit and consignment goods for sale (Clause 1, Article 4).

Removing Provisions for Losses/Devaluation of Offshore Investments

A significant change in Circular 48 is that enterprises are no longer permitted to make provisions for losses/devaluation of offshore investments (Clause 2, Article 2 and Clause 4, Article 3). Existing provisions for offshore investments (if any) that enterprises carried forward up to the effective date of the Circular are to be reversed and recorded as a decrease in expenses at the time of preparation the 2019 financial statements (Clause 5, Article 8).

Provisions for Doubtful Debts

• Circular 48 applies a “Provisioning Rate” scheme for determining the provision for doubtful debts due from individual customers. Telecommunication and retail enterprises can now make a provision for 100% of a doubtful debt if the balances are overdue by 12 months, instead of three years as prescribed in previous regulations.

Provisioning Rate Telecommunication and Retail Enterprises Other Enterprises
30% of the value of the debt 3 months - less than 6 months 6 months - less than 1 year
50% of the value of the debt 6 months - less than 9 months 1 year - less than 2 years
70% of the value of the debt 9 months - less than 12 months 2 years - less than 3 years
100% of the value of the debt ≥1 year ≥3 years


• Enterprises are not allowed to make provisions for doubtful debts that arise from the payment of profits or dividends from capital contributions to other enterprises.

• Documents required for proving doubtful debts have been simplified and are regulated at Clause 1, Article 6.

Provisions for Losses on Investments

The formula to determine provisions for devaluation of securities and provisions for losses of financial investments are also revised (Point b, Clause 1, and Point b, Clause 2, Article 5, and Clause 1 of Article 4).

Provisions for Warranties

In addition to the provisions for warranties that can applied for products, goods and construction projects, Circular 48 also introduces the ability to apply warranty provisions for services.


The Circular takes effect from October 10, 2019 and applies for the 2019 financial year.


Circular 48 replaces Circular 228/2009/TT-BTC dated 7 December 2009, Circular 34/2011/TT-BTC dated 14 March 2011 and Circular 9/2013/TT-BTC dated 28 June 2013, along with other documents stipulating the appropriation and use of provisions contrary to the provisions of this Circular.


Please contact Domicile if you would like us to undertake a review of your current Capital Account structures and ongoing requirements, together with recommendations to ensure compliance with Circular 06, investment laws, and your future corporate needs.




For further information contact:


Matthew Lourey, Managing Partner

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Jason Turnbull, Partner

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Vo Thi Thanh Phuong, Head of Licensing

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