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Vietnam’s Financial Institution Audit Checklist: A Guide for Foreign Investors
In Vietnam, financial institutions are required to adhere to strict audit and compliance requirements to ensure transparency and accountability in their financial reporting. The Accounting Law governs the principles for accounting, audits, and organizational structure, making it essential for foreign investors to understand the regulations.
Audit and Compliance Requirements for Foreign-Owned Enterprises (FOEs) in Vietnam
FOEs are obligated to provide an annual audit report and finalize corporate and personal income taxation within 90 days after the end of the fiscal year. The statutory audit requirements include:
- Statement of income
- Statement of financial position (profit and loss)
- Statement of changes in equity, if any
- Balance sheets
The audited reports must be submitted to three government agencies: Provincial Department of Planning and Investment, provincial-level tax departments, and provincial-level statistical offices.
Fiscal Year and Reporting Requirements for FOEs
The financial period in Vietnam usually coincides with the calendar year. However, FOEs can choose from four fiscal periods starting on January 1, April 1, July 1, or October 1. The financial reports must be submitted to the local tax authority, Ministry of Finance, and statistics office before the end of the fiscal year.
Annual Compliance for Representative Offices (ROs)
Representative offices are subject to simplified reporting requirements compared to FOEs. 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.
Accounting Standards in Vietnam
Local and international companies must adhere to the Vietnamese Accounting Standards (VAS), which provides guidelines for bookkeeping, financial reporting, and financial statement preparations. There are 26 VAS accounting standards based on International Financial Reporting Standards (IFRS).
Implementation of IFRS in Vietnam
The Ministry of Finance has issued a roadmap to implement IFRS by 2025. The implementation will be divided into three stages: preparation, pilot companies, and mandatory adoption.
Annual Reports for FOEs and ROs
Enterprises under foreign ownership must have their financial statements audited by an independent audit firm operating in Vietnam. The accounting records should be maintained in the Vietnamese language, although it can be combined with another commonly used foreign language such as English.
Penalties for Non-Compliance
Businesses that fail to adhere to compliance laws can now be held criminally responsible under the government’s New Penal Code. Tax authorities can impose penalties on discrepancies found in financial reports, including a 20 percent tax on under-declared amounts and a 0.03 percent daily interest rate for late payment of taxes.
For ROs, annual reports must include basic information, human resource report, and activities report.
Conclusion
In conclusion, foreign investors operating in Vietnam’s financial sector must comply with strict audit and reporting requirements to avoid penalties. Understanding the regulations is crucial to ensure transparency and accountability in financial reporting. ASEAN Briefing is a leading media publication that provides insights on doing business in Asia. Our team of experts assists foreign investors throughout Asia and maintains offices in several countries, including Vietnam. Please contact us at asean@dezshira.com or visit our website at www.dezshira.com for more information.