Vietnam's accounting audit, response to tax audits, points that companies should be aware of
2021 is approaching the end of the year, and foreign-affiliated companies are approaching audit seeds.
Many foreign-affiliated companies, including Japan, set a fiscal year with the end of December as the end of the fiscal year.
Foreign-affiliated companies to which accounting audits are compulsorily applied will proceed with accounting audits and tax filing within 90 days from that date.
In 2021, Vietnam was also greatly affected by the plague.
In 2020, Vietnam was said to be an honor student in the world with a cumulative total of hundreds of infected people, but by the middle of 2021, thousands of people will be infected every year, mainly in Ho Chi Minh, the largest city in southern Vietnam. It has spread.
First, bars, taverns, massages, and other industries where people could come into contact with each other closed their stores, and even then many factories were forced to shut down.
That's why we'll outline how auditing should be viewed by companies in such a year.
Vietnam's accounting audit, response to tax audits, precautions
Vietnam's tax authorities reduce tax revenue
Sales are expected to decline this year in many industries and companies. That means a big reduction in tax revenues for the Vietnamese tax authorities as well, and the tax authorities may scrutinize the company.
In addition, various incentives, tax cuts and tax exemptions have been implemented this year due to the influence of the pandemic. As a result, it leads to a decrease in tax revenues of tax authorities. Companies need to pay more attention to compliance.
Areas of risk pointed out in tax audits
Some common areas that tax authorities are likely to point out are:
- Eligibility if corporate tax incentives are applied
- Handling of loss carryforwards
- Interest with related parties
- Inconsistency in inventory list and physical inventory quantity
- Bad debt processing and evaluation
- Employee salary
- Personal Income Tax (PIT) Residents' domestic and foreign income in Vietnam
- Appropriate housing allowance
- Appropriate withholding tax on foreign contractor tax (FCT) technology and service use
- Permanent establishment (PE)
- Transfer pricing documentation
Penalties
- Additional tax (underreported) 20%
- Heavy additional tax (tax evasion, fraud) 100% -300%
- Late interest 0.05% per day
Accounting audit, response to tax audit, summary
The response of the tax authorities is expected to be stricter than before.
Accounting audits are extremely important for foreign-affiliated companies in order to fully respond to tax audits.
It is also important for companies to communicate with accounting firms who have a firm grasp of their management methods and characteristics.
At AACS, we would like to inform you of points to be aware of from the aspect of accounting audit.
If you have any questions, please contact us.
Related: Vietnam Audit | Compliance Guide for Foreign Companies / Investors
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