According to Vietnamese Law on Accounting, Audit and Compliance is the examination and confirmation of the compliance of your company. To make sure your company stays compliant in the market, this aspect must be focused. Therefore, in this article, we will share a condensed guideline about Audit and Compliance for Foreign Investors doing business in Vietnam.
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Overview of Audit and Compliance in Vietnam
According to Article 15 of Decree No. 17/2012 / ND-CP dated March 13, 2012, the Law on Independent Audit, the following subjects are required annual financial report auditing:
- Foreign-invested enterprises;
- Credit institutions established and operated under the Law on Credit Institutions, including foreign bank branches in Vietnam;
- Financial institutions, insurance enterprises;
- Public companies, issuers and trading organizations;
- Other enterprises and organizations are required to be audited according to relevant law provisions.
The Vietnamese Law on Accounting set the principles for accounting, audits, and enterprise structure, for businesses to comply in Vietnam. The tax in Vietnam is determined according to the solar calendar year, and a Vietnamese – based auditing company must be in charge of the audit.
The financial statements are sent to the Vietnam Ministry of Finance and the Statistics Office 90 days before the end of the Fiscal Year.
For the fiscal period, you can choose either the solar calendar fiscal year starting from Jan 01, or the 12-month fiscal period beginning on the first day of any quarter.
*Note: The audit and compliance requirements are different between foreign-invested companies (FIC) and representative offices (ROs).
Audit and Compliance criteria
According to the Enterprise Law, all foreign-owned companies are required to have annual financial statements audited by an independent audit firm. The legal audits in Vietnam were performed in accordance with the Vietnamese Standards on Auditing.
Audited financial statements and tax finalization records must be made within 90 days of the end of the Fiscal year.
After fulfilling these obligations and notifying the local tax authority at least 07 working days in advance, you are entitled to remit profits abroad. There will be no tax on repatriation profits.
Once performing the audit, you must maintain accounting records based on the Vietnamese Accounting Standards (VAS), in short – the requirements for accounting include:
– Use Vietnamese language (besides a foreign language, if any)
– Use VND as the currency
– Comply with Vietnamese chart of account (COA)
– Include reports according to VAS regulations, monthly printed, and signed by the General Director with the company seal.
In case you want to use a foreign currency other than VND for your financial records, you need to submit to the local tax authority. This currency unit must be the one used for banking transactions, services and quotations. This currency can also be used to account for revenues, pay staff’s salaries and raw materials.
You can choose to manage two accounting records; one based on VAS and the other compiled exclusively for its abroad headquarters. In fact, many foreign investors maintain the accounting system under VAS and only convert to IFRS, for the purpose of corporate consolidation, quarterly or even annually – this could be supported by the audit firm after completing the statutory audit.
Compliance For foreign-invested companies (FOCs)
For FDI enterprises, according to the Law on Independent Audit passed by the Vietnamese Government in 201, you must provide an audit report, the corporate finalization and personal income taxation annually. The audit and compliance requirements cludes:
- Income Statements;
- Financial position Statements (profit and loss);
- Changes in equity Statements, if any;
- Balance sheets.
Then, you need to submit the audited reports to three government agencies no later than 90 days after the end of the fiscal year. The three government agencies includes:
- Provincial Department of Planning and Investment (DPI) or the Provincial Level Export Processing and Industrial Zone Department in the case of your business based in industrial zones (IZs) or export processing zones (EPZs);
- Provincial-level tax departments;
- Provincial-level statistical offices.
Audit and Compliance for representative offices (ROs)
Setting up a Representative office (ROs) is one of the simplest and fastest ways to establish a legal entity in Vietnam. Their report requirements are also more simple compared to FOCs.
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Because ROs are forbidden from directly conducting profit-generating activities and are limited to market research, developing trade contacts, and gathering information on regulations and laws, their compliance requirements are also more simple than FOCs.
Procedure requirements check – list (2021 update)
- Tax and accounting procedures
- PIT finalization
- PIT finalization for individuals with multiple sources of income or have direct income from abroad
Tasks to note:
- Complete cash book and petty card with appropriate invoices and vouchers for tax inspection
- Re-audit the tax return – payment and tax receipts
- Cross-check the balance – tax status with the tax agency
- Annual activity Report
- Prepare and submit the Report on the operation of the office during the year to the Department of Industry and Trade
- Procedures for wage labor
- Signing a labor contract, an employment contract appendix for the new salary and income for the year for each employee in the country.
- Provide appointment letter, confirmation letter of annual income for foreign workers.
- Registering and adjusting the salary scale system, labor regulations, labor agreements … to update regulations and welfare policies.
- Complete information about the employee management book with content that needs updating such as days off, overtime hours, discipline, salary increases, …
Tasks to note:
- Performing income verification procedures, issuing PIT withholding vouchers for seasonal employees, employees earning direct income from abroad.
- Determine a list of personnel subject to PIT self-finalization with the tax office.
Non-compliance penalties (2021 update)
According to the Government’s latest Penal Code, enterprises that do not comply with compliance law can be considered as criminal and must take responsibility before the law.
If the tax authorities find false in the financial report, after the audit, 20% tax will be applied to the under-declared amount.
In addition, the enterprise is also fined 0.03% of the daily interest rate for late tax payment.
To sum up, Audit and Compliance is no longer complicated and confusing once you understand it. If you want to start laying the groundwork for your business in Vietnam, please always remember that you can always find a loyal and reliable partner. Us Viettonkin are always ready to accompany you at any time ! Please contact us on the website for more information !