Vietnamese Accounting Standards (VAS)
In addition to the Accounting Law, local and international companies are obligated to adhere to the Vietnamese Accounting Standards (VAS), which has been developed by the Vietnamese Ministry of Finance, when documenting financial transactions. The VAS provides the guidelines for bookkeeping, financial reporting, and financial statement preparations.
There are industry-specific accounting guidelines for businesses engaging in insurance, securities, as well as funds management.
Foreign investors should be well aware of unique fundamental characteristics of VAS to fully comprehend compliance requirements and make informed investment decisions. 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 government aims to replace VAS and adopt the International Financial Reporting Standards (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.
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.
Penalties for non-compliance
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.