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In Vietnam, the Accounting Law is the highest accounting regulation issued by the National Assembly. Accounting issues are further governed by various decisions, decrees, circulars, official letters, and Vietnamese Accounting Standards.

The accounting framework in Vietnam is mainly rules-based rather than principles-based. The Vietnamese Accounting Standards (VAS) is effectively a book-keeping and financial reporting manual that provides a standard chart of accounts, financial statements template, accounting books and voucher templates, as well as detailed guidance on accounting double entries for specific transactions.

There are industry-specific accounting guidelines for credit institutions, insurance companies, securities companies, fund management, investment funds, oil and gas operators , lottery companies, regulatory bodies, and public sector entities. The accounting guidelines for credit institutions are issued by the State Bank of Vietnam.

[tips title="Important Tip"]For companies investing in foreign jurisdictions, taxes, and other payments to governing authorities are among the most important cost considerations, and Vietnam is no exception to this. Understanding the regulation of accounting and bookkeeping can go a long way towards developing an efficient business strategy that minimizes costs and ensures compliance.[/tips]

Vietnam employs a unified set of accounting and bookkeeping standards that guide how expenses and revenues of companies operating within the county should be recorded. These generally accepted accounting principles (GAAP), known within the country as Vietnamese Accounting Standards (VAS), act as the primary set of guidelines on the way accounts and books are prepared and recorded.

Framework for Vietnam Accounting Standards

Local and foreign-invested companies doing business in the country are required by law to comply with Vietnam Accounting Standard (VAS) when recording their financial transactions. Foreign companies may choose to manage two accounting records; one based on the VAS and another compiled specifically for the overseas head office.

In practice, many foreign companies maintain an accounting system according to VAS and only covert financial statements into the International Financial Reporting Standards (IFRS) on a quarterly basis for the foreign parent company’s reference.

Any business operating in Vietnam, whether foreign-invested or local, which mainly conduct transactions (including sales, purchase, and provision of goods and services) with foreign currencies are permitted to choose a monetary unit in accounting and must notify relevant tax authorities of this choice.

Once a foreign currency is selected as an accounting currency unit, an enterprise cannot change it except for special circumstances, such as when there are significant alterations in the company’s transactions. It is also important to be aware that besides preparing a financial statement in the selected foreign currency, an enterprise must convert the statement into Vietnamese dong before publishing and submitting it to appropriate regulatory authorities.

In a nutshell, the VAS requires that accounting records:

  • Are in the Vietnamese language, or can be combined with a commonly used foreign language;
  • Use Vietnamese Dong (VND) as the accounting currency, but foreign-invested enterprises (FIEs) are allowed to select a foreign currency as their accounting currency;
  • Comply with the Vietnam chart of accounts; and
  • Include numerous reports specified by VAS regulations, printed monthly and signed by the General Director and affixed with the company seal.

Accounting period timeline

An accounting period in Vietnam is generally determined according to the calendar year, i.e. January 1 to December 31. However, a 12-month period beginning the first day of each quarter, e.g. April 1 to March 31 of the following year; July 1 to June 30 of the following year; or October 1 to September 30 of the following year, can also be adopted after registering with the Tax Department.

Annual reports

Enterprises under foreign ownership must have their financial statements audited by an independent audit firm operating in Vietnam. Such statuary audits are performed in accordance with VAS and every organization is required to have a Chief Accountant, as annual financial statements must be approved by the chief accountant and the legal representative. 

The company should sign with the independent auditing company no later than 30 days before the end of the fiscal year, with the company also being responsible for providing accurate and adequate information to the auditors. If the company is a credit institution, they are required to rotate their audit firms every five years, whereas non-credit institutions have to change their auditors every three years.

The accounting records should be maintained in the Vietnamese language although this can be combined with another commonly used foreign language, such as English. 

Additionally, the Vietnamese Dong must be used as the accounting currency, however, entities that receive and pay with foreign currency can select that said foreign currency in their accounting records and financial statements. For statutory reporting, the foreign currency must be converted to the Vietnamese Dong equivalent. 

For ROs, the annual reports must include: 

  • Basic information – contact information, such as office address, telephone numbers, and primary bank contacts. Investors should note that the address should match to that written in the RO license;
  • Human resource report – ROs must document their policies with regards to salaries, bonuses, insurance, and other benefits. The personal information and position of every employee should also be included; and
  • Activities report – ROs must document their activities for the preceding year, which includes information, such as market research activities, advertising activities, participation in trade fairs, and the promotion of service agreements, among others.  

Compliance is crucial

All foreign-invested entities are required to have their annual financial statements audited by an independent auditing firm. Statutory audits in Vietnam are performed in accordance with the Vietnam Standards on Auditing.

Foreign companies need to be aware of a new Decree 05/2019/ND-CP on internal audit in Vietnam that went into effect on April 1, 2019. The new decree applies to state-owned authorities, public service organizations as well as private listed companies to implement and adopt internal audit (IA) practices.

Audited financial statements and tax finalization filing must be done within 90 days from the end of each financial year. After fulfilling these obligations and giving notice to local managing tax offices at least seven working days in advance, foreign investors may remit profits abroad.

Penalties for non-compliance

Companies are advised to double-check their accounting system, taking care to spot possible VAS non-compliance issues.

Under the government’s New Penal Code, which was issued in 2018, businesses that fail to adhere to the compliance laws can now be held criminally responsible.

If the tax authorities find discrepancies in the financial reports, after an audit, a 20 percent tax will be imposed on the amount that is under-declared. There is also a 0.03 percent daily interest rate for the late payment of tax.

In addition, tax authorities can penalize companies for VAS non-compliance through the disallowance of input VAT credits and withdrawal of CIT incentives.

Move towards IFRS by 2025 – Plan ahead

Vietnam’s government currently has 26 VAS accounting standards based on IFRS. To provide guidance for local and foreign enterprises in Vietnam on these standards, the Ministry of Finance (MoF) recently issued Circulars, No. 200/2014/TT-BTC and No. 202/2014/TT-BTC, which enhance the comparability and transparency of corporate financial statements and bring the two systems closer. 

The Vietnamese government is further moving towards adopting the International Financial Reporting Standards (IFRS), which will replace VAS. The government hopes to implement IFRS by 2025, which has been a demand from listed companies and FDI firms. The move is significant as this is in line with international best practices, enhancing transparency and effectiveness in corporate governance.

The government aims make the transition to the IFRS by 2025 through a draft IFRS roadmap, published in 2019. The roadmap divides the IFRS implementation into three stages: 

Stage 1 (2019-2021)

The MoF makes necessary preparations for the implementation of the roadmap, such as the publication of the Vietnamese translation of IFRS standards, training and the preparation of guidelines for IFRS implementation. Companies that will adopt IFRS from 2022 onwards will receive special support. 

Stage 2 (2022-2025)

The MoF selects certain pilot companies, in particular state-owned enterprises, listed companies, and (large) non-listed companies, to implement IFRS in practice. Foreign companies can adopt IFRS for their individual financial statements on a voluntary basis. 

Stage 3 (from 2025)

IFRS will be mandatory for the consolidated accounts of all state-owned companies, listed companies, and (large) non-listed companies. All other companies can adopt IFRS for their individual financial statements on a voluntary basis.

 

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