The current regulatory and compliance context in Vietnam emphasizes the importance of annual accounting audits and compliance processes. These activities help prevent penalties and ensure business continuity. Key changes include:
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VAS Compliance: Companies must ensure their accounting systems comply with Vietnamese Accounting Standards (VAS). Recent notifications suggest that Vietnamese authorities are aligning these standards closer to International Financial Reporting Standards (IFRS). However, it is crucial for businesses to consult local tax officials or engage expert consultants to adhere to the guidelines outlined in Circular No. 200/2014/TT-BTC.
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Penalties for Non-Compliance: Failure to meet the requirements and deadlines in accounting audits can lead to fines and jeopardize certain operations. Businesses that pay taxes beyond the final deadline must pay additional fines equivalent to 0.05% of the owed tax for each day late. Those who misreport taxes must pay the full amount of under-reported or over-reimbursed taxes, plus an additional 20% penalty for the tax not declared.
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Significant Updates and Concepts:
- Approach towards IFRS: The introduction of Circular No. 200/2014/TT-BTC in December 2014 marked a significant shift in accounting practices, aiming to bring VAS closer to IFRS principles.
- Foreign Currency Rate Effects: Under the new standard, companies can use different exchange rates for different balance sheet items instead of using the average interbank rate at the end of the accounting period. This affects mainly foreign investment companies, banks, and insurance firms, which often have different exchange rates for various transactions.
- Revenue and Other Receipts: According to Circular n. 200, income should be recorded based on the nature of the operation rather than its form, only when the company's obligations are fully fulfilled. This means companies cannot record prepayments from customers as revenue. For free products provided separately from sales, the cost of such goods is recorded as selling expenses. When products are offered as promotions with conditions for other purchases, companies must record both the sales of the products sold and those promoted. This change affects primarily consumer goods production businesses, impacting their gross profit margins and selling expenses.
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E-filing Progress: To simplify the process of paying taxes, the Ministry of Finance issued Circular No. 110/2015/TT-BTC on electronic transactions with tax authorities, effective September 10, 2015. All types of enterprises are required to use this system, aligning with the Tax Administration Law.
