For newly arrived accountants in Vietnam, local rules can be both familiar and a little disconcerting at first. Vietnam accountants use Vietnam Accounting Standards (VAS), which is relatively similar to IFRS, with many peculiarities. Assets accounts are part of these peculiarities in Vietnam.
Viettonkin Audit accompanies business with their accounting, in full compliance with Vietnamese regulations. In this article, we introduce you to the first accounts group in the balance sheet - Assets accounts.
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Assets accounts in Vietnam

There are two types in this group named Short-term Assets and Long-term Assets.

Short-term Assets

Long-term Assets

For more details, the chart of accounts made by KPMG is a great resource for comprehensive information on Vietnamese accounting.

Steps to review your Assets Accounts

Step 1: Check the Cash On Hand account (Code 111)

• Check your cash details book and make sure this account is not negative at any time.
• The ending balance checking must match the cash inventory record on December 31.

Step 2: Check the Cash In Bank account (Code 112)

• Get sub-books of all bank accounts that the company has opened.
• Reconcile the derived amount and the balance at each time between the bank sub-book and account details book of account 112 and make sure they match.

For foreign currency monetary accounts, conduct revaluation of monetary items denominated in foreign currencies.

• If interests arise from exchange rates, record: Debit of accounts 1122 (Foreign currencies), Credit in Account 4131 (Difference of exchange rate).
• If losses arise from exchange rates, record: Debit in Account 4131, Credit in Account 1122.
• Closing entry the interests from exchange rate in the revaluation at the end of the fiscal year into revenue from financial activities, record: Debit in Account 4131, Credit in Account 515 (Turnover from financial activities).
• Closing entry the losses from exchange rate in the revaluation at the end of the fiscal year into financial expenses from financial activities, record: Debit in Account 635 (Financial expenses), Credit 4131.

Step 3: Check the Trade Securities account (Code 121)

• At the end of the year, check the bonds and stocks and the balance of the company’s securities depository and make sure they match.
• Proceeding with the provision for securities investments. Revaluation of these investments at market prices at 31 December.
• Closing entry: Debit in Account 635, Credit in Account 2291.

Step 4: Check the Held To Maturity Investment (Code 128)

• Conduct the reconciliation of the company's loan with other entities.
• Make a calculation of loan interest by period and issue VAT invoices (without tax rate).
• Financial income recognition.
• Closing entry: Debit in Accounts 131,138,111,112, Credit in Account 515.

Step 5: Check the Trade Receivable account (Code 131)

• Conduct the reconciliation of debts with customers and company. Ensure that debts between the two parties match.
• Take a note for the case of customers having liabilities on the Balance sheet: Accounting for lack of revenue, if customers deposited, advance should be clearly shown in the contract, record of debt reconciliation.
• Provisions for the provision of doubtful debts as prescribed (if any).
• Closing entry: Debit in Account 642, Credit in Account 2293.

Step 6: Check the Deductible VAT account (Code 133)

This account only has the balance in the Debit, reflecting the deductible input tax amount refundable but the State budget has not yet returned it.
At the end of each declaration period (month, quarter), the accountant shall determine the input VAT amount to be deducted from the output VAT amount when determining the payable VAT amount in the period, and record: Debit in Account 3331 (Payable VAT), Credit 133 (Deductible VAT).
The balance of Account 133 (if any) on December 31 must match with the target 41 "VAT not yet deducted at the end of this period" on declaration form 01 / GTGT in December or Q4.

Step 7: Check the Advances account (Code 141)

• Conduct the reconciliation of advances for employees and ensure that the balance between the two parties match.
• Set up the advanced reserves in case employees have quit their jobs and cannot claim them.

Step 8: Check the Tools and Supplies account (Code 153)

• Inventory the actual number of tools and instruments against the books and make sure they match.
• Check the distribution of tools and instruments with the numbers recorded on the accounting books.

Step 9: Check the Inventory accounts (Code 151, 152, 154, 155, 156, 157)

This account just has the balance in Debit, reflecting the actual value of ending inventory.

• Make a list of the actual amount of inventory and make sure they match the numbers on the books.
• Check to see if the inventory is priced correctly (Commonly applicable method is a weighted average).
• Make provisions for devaluation of inventory in case there is a decrease in net realizable value compared to the cost of inventories.
• Closing entry: Debit in Account 632, Credit 2294.

Step 10: Check the Fix Assets and the Depreciation of Fixed Assets accounts (Code 211, 213, 214)

• Make a spreadsheet of fixed assets depreciation, fixed asset cards (fixed asset cards need accompanying documents: Sale and purchase contracts, documents on acceptance and handover, value added invoices and payment receipts);
• Compare the fixed asset depreciation spreadsheet with the arising amounts and balances of Accounts 211, 213 and 214.

Step 11: Check the Prepaid Expenses account (Code 242):

• Make a table of allocation of prepaid expenses.
• Compare the figures in this table with the derived amount and the balance of Accounts 242 and 153.

 
Want to know more about assets accounts peculiarities in Vietnam? Contact our experts at Viettonkin Accounting.

Vietnamese government has been more and more welcoming to foreign entrepreneurs wishing to establish their business in Vietnam. Regulations have been easing up the process, reducing points of contact and making all steps transparent. However, establishing a business can still be a daunting process if unprepared.
Viettonkin Consulting experts are here to assist you walk through the process of establishment a business in Vietnam.

Fundamental knowledge about legal entities in Vietnam

Limited liability company (LLC) and joint-stock company (JSC) are the two main legal entity types for a business to establish in Vietnam.
An LLC includes from 1 to 50 members known as owners or founders but no shareholders.
The other type is JSC which also known as a shareholding company or an incorporation. However, there are at least 3 limited shareholders to share the main revenue and responsibility in this company, which is the best suited for a medium to large size venture. Because the corporate structure is more complex compared to LLC’s one.
There are some other types of entities you can refer at Legal Entities in Vietnam.

Company set-up process

A basic process for all kinds of business to establish in Vietnam:

Step 1: Difficult choices require help to establish a business

Before setting up a business in Vietnam, you need to consider and prepare several information which can be mentioned below:

• Type of your entity (above-mentioned)
• Choose your company name which should be short, straightforward to remember and pronounce, and must not be resembled other enterprises’ names.
• Decide your headquarter place, choose a legal industry to register, determine authorized capital for your business, and select a title for company’s representative in law.

Of course, there are scores of different options you can choose depending on your company’ capacity. Meanwhile, a professional consulting firm will give you practical advices, with clear processes from start to finish, and guide you through the regulations must follow. Taking consulting service saves both time and money to establish a business in Vietnam.

Step 2: Business registration

Your company needs to prepare a dossier to submit to the Department of Planning and Investment and Business Registration Office then waits for getting the result.
A project dossier for establishing a company in Vietnam shall comprise:
For Investment procedures:

• Registration/Request for issuance of Investment Certificate
• A report on financial capability of the investor
• The joint-venture contract or Business Cooperation Contract (BCC) (if anny)
• Other documents required by Vietnam laws.
• Copy of the people’s identity card, passport or other lawful personal certification, for individual members
• Copy of the establishment decision, business registration certificate or other equivalent document, for member organizations
• Copies of the authorization document, the people’s identity card, passport or other lawful personal certification, for authorized representatives.

For forming a Company:

• Request for setting up a Company
• Draft of the company’s charter
• List of members of company
• Copies of the business registration certificates of the foreign member organizations must be authenticated within three months before the date of submission of the business registration dossier by agencies where such organizations are registered
• Written authorization of the investor in case investor is organization and valid copy of the lawful personal certification of the authorized representative. Documents in foreign languages must be translated into Vietnamese, notarized and legalized
• The joint-venture contract or Business Cooperation Contract (BCC) (if any)
• Other documents required by Vietnam laws.

There are the two most important certificates that international investors are obliged to obtain named Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC). The former is from the Department of Planning and Investment, the latter is from local Business Registration Office.
The timeline to register includes 3 basic periods:

Step 3: Register the sample of seal

After notifying the licensing authority, your company may have one or several corporate seals that sample are published on the national business registration website as your work requirements.

Step 4: Tax registration

The last important step is register your tax declaration. The good news is your company can register the tax declaration, filling, payment or refunds through the Internet thank to the Circular No. 110/2015/TT-BTC on electronic transaction in Tax Administration.

Especially for foreign-invested business

• Foreign investors must follow the procedures for issuing an Investment Certificate when establishing a foreign-invested company when the company has between 1% and 100% of the capital contributed by the foreign investor from the beginning
• Foreign-invested companies (companies that have been granted investment registration certificates in Vietnam) continue to set up more economic organizations:
  • If the Foreign-invested companies owned from 51% to 100% of the target company's charter capital: The investor must carry out the procedures for the grant of an investment certificate when set up new economic organizations and carry out the procedures of getting the approval from investment authority (approval notification) when purchasing shares or capital contributions;
  • investment in a BCC contract must carry out the procedures applied for foreign investors in case of the Foreign-invested companies owned from 51% to 100% of the company's charter capital;
• Cases in which foreign investors contribute capital or purchase shares in Vietnamese companies that already have business registration certificates (including cases where up to 100% of the companies' contributed capital) are not required to be implemented procedures for issuance of Investment Registration Certificates, except for companies doing business in the field of education and training, if foreign investors purchase beyond 1% of the contributed capital, they also need to carry out procedures for granting Registration Certificates. invest.
• For companies doing business in the field of retailing goods to consumers or retail establishments, they need to apply for more business licenses base on the specific cases;

Note: Currently, in terms of foreign investors who contribute capital with Vietnamese people to set up companies, for example: joint ventures between Vietnam and foreign investors, the optimal and reduced plan Minimum procedures should follow the step-by-step as follows:

• Step 1: Establishing Vietnamese companies;
• Step 2: Apply for a qualified license for conditional professions;
• Step 3: Transfer of capital contribution to foreign investors;
• Step 4: Applying for a business license (Business license issuance procedure only applies to companies doing business in the field of retailing goods to consumers or setting up retail establishments) and others sub-licenses according to the local regulations.

Viettonkin Consulting stands by your side with international know-how and local knowledge for the fast-growing companies throughout the region. If you have any questions, please feel free to contact us via email: info@viettonkin.com.vn or hotline: +84 918 866 858.

Vietnam acquisition and merger (M&A) market is bound to take a growing place in Vietnam economy in 2020, up to the importance of traditional segments such as real estate, industrial production and construction materials.

State of M&A in Vietnam

Margin of M&A activities in Vietnam over the years has spread across many fields, though real estate and finance activities remain the bulk of it. In the past years, the value of M&A deals in Vietnam reached USD 6.4 billion, including 42% for real estate deals. Partners from Korea and Singapore account for two-thirds of all deals.

Vietnam becomes more attractive both in terms of opportunities and regulation for M&A

Vietnam continues to be an attractive destination for investors seeking high growth, as Vietnam converges very attractive factors such as GDP is forecast to fain the stable growth for the next 5 years, a country with the third largest population in Southeast Asia with a young, dynamic population and high consumption spending. In addition, the improvement of domestic investment and business environment also creates an attraction for Vietnam market.
Another attractive point for foreign investors is that, although the process of equitisation and divestment in state-owned enterprises has been behind schedule in the past few years, the Government Vietnam is speeding up this process, bringing great opportunities for foreign investors.

What to expect in 2020?

Vietnam M&A market in 2020 will continue to be mostly represented by foreign investors, with big players from Singapore, South Korea, Japan and Thailand. However, in 2020, domestic investors should become more and more prominent and more active in the battle fighting for market share.
In terms of M&A attraction, real estate will continue to be a big magnet for investors. In addition, other industries and fields such as industrial production, services, construction and construction materials are also major attraction of M&A activities in 2020 thanks to the relocation of production from abroad into Vietnam to take advantage of free trade agreements signed by Vietnam and to "avoid" the US-China trade war..
The increasing domestic demand due to the rapid population growth and rapid urbanization also has significantly impacted on the attraction of M&A activities in the field of services and consumer goods.

Gaining trust from foreign investors –Singapore experience

The M&A wave of Singaporean businesses in Vietnam will increase in the coming time as Singapore people always look for investments with a very simple reason: Singapore is a small island, based on capital - the capital here is not only cash in hand, but also capital mobilization and financing. Singapore businesses tend to look for investment and the regional markets are always the prior destination. Meanwhile, Vietnam's domestic market is larger than Singapore.
The trend of Singapore real estate businesses entering into Vietnam market will continue to increase, but this is only one of the sectors that suit the taste of Singapore businesses, in fact, a number of retail businesses have increased the penetration into the Vietnamese market in the context that the demand of many consumers is higher and the demand for good quality goods has increased.
“Fintech is expected to occupy the large wave in Vietnam M&A market in the near future, especially the investment source from Singapore. Finishing the legal framework for Fintech will facilitate M&A activities in this area. Currently, Fintech businesses began to contribute to the Vietnamese economy, ” Chor said.
Suggestions on successful M&A model for foreign enterprises entering Vietnam market, Mr. Chor said that there will be many successful models, that depends on M&A of each industry and field. "However, with more than 20 years of experience and observation, the form of joint venture may be the model that can ensure the most success," Mr Chor concluded.

Indonesia government has lowered the income tax rate for small and medium-sized businesses (SMEs) in July 2018, making it easier to open up business in Indonesia. According to Government Regulation (PP-23) effective in July 2018, the reduced income tax rate in Indonesia is 0.5% from previous 1%.
In this article, we provide you all the information you need to know about reduced income tax for small and medium-sized enterprises (SMEs) and how to apply for it.

Who is eligible to apply reduced income tax?

According to the PP-23, individual taxpayers, as well as companies with gross income below IDR 4.8 billion per year (~ USD 340,000), can apply for reduced income tax rate in Indonesia. Individual taxpayers can enjoy the reduced tax rate for seven years, whereas companies can enjoy for three years.
If your company’s annual income exceeds IDR 4.8 billion during this period, you need to pay the income tax according to the general tax rates (12.5-25% of the profit). Moreover, you also cannot proceed with the reduced tax rate.
Even if your annual income does not exceed IDR 4.8 billion, the new government regulation PP-23 allows you to choose between two income tax rates:

•         Income tax rate (0.5% of the revenue/gross income)
•         General tax rate (12.5-25% of the profit)

What if your company gross income greater than IDR 4.8 billion per year?

The answer for this question is, you can set up several legal entities in Indonesia to keep the income per company below the required IDR 4.8 billion. If you have two legal entities in Indonesia, you can have a total income of IDR 9.6 billion. This method would allow you to still pay the reduced income tax rate in Indonesia, as long as you divide the income between the companies.
Please note that to use this method, you will have to pay attention to the status of each entity. If one entity is registered as a branch office and the other as the headquarter, the income should be combined, therefore you cannot apply for reduced income tax. If the companies are independent (not registered as part of the branch of one another), then these incomes can be separated. This also means that reducing tax pay is possible.

When to apply for reduced income tax?

Companies that complete their tax registration starting from 1 January 2019 must send the notification letter to the tax office during the tax ID registration. Keep in mind that you also need to send a notification letter to the tax office if you prefer the standard tax rate instead of the final income tax. The deadlines are the same as in the table above.

How to apply for reduced income tax?

To apply for the 0.5% income tax, you need to obtain a statement letter first. You can do that by sending an application to the tax office in which you received your tax ID. Below are the requirements to apply for reduced income tax:

•         The Director of the company has to sign the application letter
•   You need to submit the latest annual tax report (except newly-registered companies or companies that are not obliged to file a yearly tax report)

The tax office will then issue a statement letter or a rejection letter within three working days after the complete application is received. If the tax office rejects your claim, you can re-apply for a new statement letter. The validity period of a statement letter starts from the day of issuance up to the limit of the final income tax period or until you decide to use the general tax rate (12.5-25%).

When to pay income tax?

The monthly payment of the final income tax is the 15th day of the month. However, the deadline for paying the withholding and employee taxes is the 10th day of each month.
Still have your question unanswered? You can contact us anytime at info@viettonkin.com.vn. Our qualified accountants are always ready to assist you. For more information about Indonesia, consult our local blog!

The National Center for Socio-Economic Information and Forecast - NCIF (Ministry of Planning and Investment) has just released Vietnam economic growth forecast for 2020 with 2 scenarios. In particular, the basic scenario is that GDP growth in 2020 will gain 7.01%, a slight decrease compared to 2019, the lower growth scenario is that GDP growth will be only 6.76%. All in all, the expectations remain ambitious, setting objectives slightly higher than 2019.GDP growth is expected to remain between 6.76 and 7.02%

International trends go in favor of Vietnam

“Vietnam GDP growth forecast in 2020 provided by NCIF is not optimistic, nor pessimistic. It is based on the results achieved in 2019, as well as the results that are expected to gain in 2020. They take into account both objective and subjective factors ”, PhD. Luu Quang Khanh, Director of NCIF said.
The results achieved in 2019 are the factor for the 2020 GDP to increase from 6.76% to 7.01%, according to PhD. Dang Duc Anh, Deputy Director of NCIF.
Foreign investment capital continues to shift from the Chinese market. The proportion of indirect investment through M&A increased sharply. Indeed, in 2019, $38 billion of foreign investment capital have been attracted to Vietnam. Purchase by foreign investors' share reach a total value of capital contribution of USD 15.5 billion, up 56.4% compared to 2018.
Consumption maintained a high growth rate thanks to the increase of middle class; Monetary policy is carefully controlled by the State Bank, so although the serious influence by African swine fever, the inflation in 2019 is only at 2.79%. Interest rates and exchange rates are controlled and adjusted at a low level, which is premise for macroeconomic stability and economic growth.

Limitations and unbalance affects economic growth

“However, in 2019, inherent limitations and weaknesses of the economy have not been overcome, that is the supporting industry is underdeveloped, the processing nature is still great. Industrial production has not been much involved in the global production and value chains.” Mr. Duc Anh analyzed.
“Exports still depend on a group of commodities: electronics, phones, computers and components. The $263.45 billion export are mostly done by foreign-invested enterprises. In 2019, mobile phones and components industry turnover gained USD 51.8 billion, accounting for 19.7% of total export turnover. Electronics, computers and components industry turnover gained USD 35.6 billion. Finally, the export of agricultural and fishery products encounters many difficulties, hard to access to markets, which require quality and food safety" continued Mr. Duc Anh.
In addition, there are quite a few shortcomings and limitations of 2019, which will be updated by NCIF in the 2020 Economic Prospects Report that will be submitted to the appropriate authorities for research. It is the ability to expand the export market in difficulty, increasing export markets mainly from trade diversion.
The contribution of high value-added services such as finance, banking, insurance, etc. is low, especially the cost of logistics services is very high, reducing the competitiveness of domestically produced goods.
“Disbursement of basic construction investment capital, divestment and equitization of state-owned enterprises in 2019 are lower than previous years. The infrastructure in many localities is overloaded, as well as the shortage of skilled workers has been to be a barrier for the economy to maintain the growth rate around 7% in 2020 and the following years”, Mr. Duc Anh emphasized.
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The trade war consequence will impact Vietnam GDP in 2020

NCIF forecasts that by 2020, the lowest GDP growth will reach 6.76%, shy of the 6.8% target set by the National Assembly. This growth is set by NCIF in the context of lower world economic growth in 2019.
Trade tension among the world's major economies continues to escalate, plus technical barriers to restrict imports are built by major markets. Even though this growth is set in the context of the agricultural sector suffered many negative effects due to climate change. Foreign investment and the private sector must take in consideration the decline of manufacturing and processing sector.
“The world economy just needs a slight increase compared to 2019. Vietnam continues to take advantage of opportunities from trade conflicts among the major powers to attract investment, as well as boosting export and 2020 GDP growth is forecast to reach 7.01%”, Mr. Duc Anh said.

International economic and political situation are expected to affect Vietnam

Reviewing the world economic - political situation, PhD. Tran Toan Thang, Manager of NCIF said that despite of the instability and conflict between the United States and Iran, the price of oil would not fluctuate sharply, if any increase in price, it is only temporarily increased, then it will be stabilized by the United States as the gas-consuming power country, previously dependent on imports, but it has currently been proactive, even participated in the export market of this strategic item thanks to shale oil extraction technology.
“Regarding the trade war, we should not just look at the tariff barriers or the non-tariff barriers. These are temporary signs that are easy to see, that affect the economies immediately. We must look deeper, the trade war affects production activities, global economic growth, as well as locally. Especially international-facing countries like Vietnam are bound to be affected. Therefore, in 2020 Vietnam economy as well as the world will absorb the consequences of the trade war", Thang warned.
Meanwhile, Ms. Nguyen Thi Van Anh, an economist of the International Monetary Fund, is concerned about the impact of climate change, sea level rise and environmental pollution on Vietnam's economy as well as the world in 2020 and the following years.