Financial Crime World

Compliance Best Practices Guide for Vietnam

To stay compliant with regulations, businesses operating in Vietnam must adhere to strict guidelines set forth by the Accounting Law. This law governs the principles of accounting, audits, and organizational structure.

Tax Year and Audit Requirements

  • The tax year in Vietnam coincides with the calendar year.
  • A Vietnamese-based auditing company is required to conduct an audit.
  • Financial reports must be submitted to the local tax authority, the Ministry of Finance, and the statistics office 90 days prior to the end of the fiscal year.

Compliance Requirements for Foreign-Owned Enterprises

  • FOEs are subject to different audit and compliance requirements compared to representative offices (ROs).
  • FOEs are required to provide an annual audit report and finalize corporate and personal income taxation.
  • Statutory audit requirements include:
    • Statement of income
    • Statement of financial position (profit and loss)
    • Statement of changes in equity, if any
    • Balance sheets
  • FOEs must submit the audited reports to three government agencies: the Provincial Department of Planning and Investment, the provincial-level tax department, and the provincial-level statistical office.

Compliance Requirements for Representative Offices

  • ROs are subject to simpler reporting requirements compared to FOEs.
  • ROs are forbidden from conducting profit-generating activities and are limited to market research, developing trade contacts, and gathering information on regulations and laws.

Accounting Standards

  • In addition to the Accounting Law, local and international companies must adhere to Vietnamese Accounting Standards (VAS) when documenting financial transactions.
  • VAS provides guidelines for bookkeeping, financial reporting, and financial statement preparations.
  • Industry-specific accounting guidelines are available for businesses engaging in insurance, securities, and funds management.

Annual Reports

  • Enterprises under foreign ownership must have their financial statements audited by an independent audit firm operating in Vietnam.
  • Statutory audits are performed in accordance with VAS.
  • Every organization is required to have a Chief Accountant.
  • The accounting records should be maintained in the Vietnamese language, although this can be combined with another commonly used foreign language.
  • The Vietnamese Dong must be used as the accounting currency, but entities that receive and pay in foreign currency can select that said foreign currency in their accounting records and financial statements.

Penalties for Non-Compliance

  • Businesses that fail to adhere to compliance laws can face criminal penalties.
  • If tax authorities find discrepancies in financial reports after an audit, a 20 percent tax will be imposed on the amount under-declared.
  • Additionally, there is a 0.03 percent daily interest rate for late payment of tax.
  • Tax authorities can also penalize companies for VAS non-compliance through the disallowance of input VAT credits and withdrawal of CIT incentives.