Vietnam Audit | Compliance Guide for Foreign Companies, Investors and Representative Offices
Auditing in Vietnam is an inevitable matter for foreign companies and investors. Foreign-affiliated companies in Vietnam and investors operating in Vietnam must be audited in accordance with Vietnamese law. This is called legal audit. This time, we will introduce it as a compliance guide for foreign-affiliated companies and investors expanding into Vietnam.
Vietnam Audit | Obligations of foreign-affiliated companies, investors and representative offices
Foreign companies and representative offices are required to audit the annual report. Furthermore, foreign investors need to be aware that there are different legislative requirements than audits of foreign-affiliated companies and representative offices.
By 2025, the government aims to replace accounting standards in Vietnam and adopt international financial reporting standards. Vietnamese accounting law extends to accounting, auditing and organizational theory (corporate law) for companies to maintain compliance in Vietnam.
Vietnam's tax year is determined according to the calendar year and must be conducted by an audit company based in Vietnam. The financial report must then be submitted 90 days before the end of the financial year to the local tax authorities, the Ministry of Finance, and the statistical office.
Vietnam Audit | Points to be noted by foreign-affiliated companies and investors
Foreign-affiliated companies and investors, along with experts who are familiar with Vietnamese accounting and law, need to confirm that the declaration to the Vietnamese government complies with the law and Vietnamese rules.
Vietnam accounting period
- January 1st to December 31st
- April 1-March 31
- July 1-June 30
- October 1-September 30
- *Selectable from the above
Vietnamese accounting standards
In addition to accounting laws, local and international companies are required to comply with the Vietnam Accounting Standards (VAS) established by the Ministry of Finance when documenting financial transactions. VAS provides guidelines for bookkeeping, financial reporting, and financial statement preparation. Companies involved in insurance, securities and cash management have industry-specific accounting guidelines.
The Government aims to replace VAS by 2025 and adopt International Financial Reporting Standards (IFRS). IFRS will be applied to all financial reporting, quality control and auditing standards relevant to all profit oriented companies.
Duty to report taxes to foreign companies and investors
You are required to file corporate and personal income taxes along with your annual audit report.
Request for legal audit of foreign-affiliated companies
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Profit and loss statement
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Financial position statement
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Statement of changes in capital, etc.
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Balance sheet
Within 90 days of the end of the financial year, the audited report must be submitted to government agencies, such as the Investment Planning Department, local tax offices, and statistics departments.
Representative office compliance
A representative office is the easiest and fastest way to set up a corporation in Vietnam.Report requirements are also simplified compared to foreign companies.
Representative offices are prohibited from directly engaging in profit-generating activities and are limited to market research, development of trade relationships, and collection of regulatory and legal information.
Annual report to representative office
Representative offices are required to report the following information:
- Basic information: office address, telephone number, main bank contact, etc.
- HR Report: Document and submit salary, bonus, insurance, and other benefits policies
- Activity Report: Report of activity records such as market research activities, advertising activities, and participation in trade fairs in the previous year
*In the basic information, it is necessary to pay attention to whether the address of the representative office matches the registered address.
*The personnel report must also include the personal information and job titles of all employees.
Penalties for non-compliance of foreign companies, investors and representative offices
Under the new government criminal law issued in 2018, companies that fail to comply with compliance law will now be criminally liable. If tax authorities consider a financial report to be a fake or false report, they will be subject to a 20% double tax in addition to the underreported amount. In addition, a penalty of 0.03% per day will be levied as a penalty for late tax payments. The compliance of foreign-affiliated companies is often regarded as strict. To avoid this situation, we recommend that you consult a specialist who is familiar with Vietnamese accounting and law.
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