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MEKONG COUNSEL

Circular guiding the handling of redundancy pays to employees

On October 24, 2012, the Ministry of Finance issued Circular No. 180/2012/TT-BTC guiding the handling of redundancy pays to employees. Accordingly, enterprises established and operated in Vietnam as regulated by laws where redundancy pays arise due to structural or technological change as regulated shall be permitted to credit to enterprise management expenses and deduct from incomes for corporate income tax.

 

Specifically in 2012, enterprises shall be permitted to use the reserved Provisions for Redundancy Pays as regulated (if any) for making redundancy pays to employees. If the Provisions for Redundancy Pays are not enough or have no balance, a part or a whole of the shortage shall be credited to the enterprise management expenses at the time of making the fiscal financial statements and deducted from taxable incomes for corporate income tax as regulated. In case the Provisions for Redundancy Pays, after paying all redundancy pays in 2012, have positive balance, enterprises, when making the fiscal financial statements for year 2012, shall credit it to other incomes in 2012, but shall not transfer the positive balance to the following year.

 

If in the year of structural and technological change which results in a big redundancy rate and redundancy pays made to the employees after being credited (minus the positive balance of the Provisions for redundancy pays, if any) become negative, enterprises shall be permitted to credit the redundancy pays made to the employees to the enterprise management expenses of the following years, but not more than 3 years.

 

This Circular shall be effective from December 10, 2012 and supersede Circular No. 82/2003/TT-BTC dated August 14, 2003 of the Ministry of Finance guiding reserving, management, use, and credit of the Provisions for Redundancy Pays in enterprises.