Vietnam's Current Compliance Environment: A Guide to Navigating Annual Audit and Compliance
Introduction
Vietnam's business environment, particularly for foreign investors, involves navigating complex compliance tasks, especially during the first quarter when license renewals and new legislative issues are compounded by the need to prepare annual reports. All foreign entities in Vietnam are bound by statutory audit procedures outlined in law and clarified by numerous decisions and circulars. This article serves as a guide to help businesses ensure compliance with up-to-date procedures and accounting standards efficiently.
Key Changes and Convergence with IFRS
- Circular No. 200/2014/TT-BTC was promulgated in December, bringing significant clarification to Enterprise Accounting, aligning national GAAP (VAS) more closely with International Financial Reporting Standards (IFRS).
- Conversion of Financial Statements: Under the new circular, enterprises can use different exchange rates for different items, unlike previous guidelines which required a single rate for all items. This affects foreign-invested companies, banks, and insurance companies, where varied exchange rate conversions might apply.
- Revenue Recognition: Revenue must now be recorded according to the nature of the transaction rather than its legal form, and only when the enterprise’s obligations are fully met. This impacts the recording of pre-payment revenue and the distinction between free products and promotional goods.
Emergence of E-Filing
- Circular No. 110/2015/TT-BTC introduced electronic transactions in tax administration, simplifying the tax payment process. All types of enterprises are required to conduct electronic tax procedures with local tax agencies, encompassing registration, filing, payment, and refunds.
Penalties for Non-Compliance
- Failure to comply with reporting requirements and deadlines can result in substantial penalties, impacting the profitability of operations. Late tax payments incur a fine of 0.05% of the tax due for each day the payment is late, and incorrect declarations lead to fines equal to 20% of the under-declared or excess refunded tax amounts, plus a late payment fine.
Navigating Compliance Challenges
Given the complexity and frequent changes in regulations, it is crucial for foreign enterprises to stay informed and engage with local tax officials or professional advisors to ensure compliance with the latest guidance and standards.
Conclusion
Navigating Vietnam's compliance environment requires vigilance and proactive management, especially concerning annual audits and reporting. Enterprises should leverage the alignment with IFRS for better standardization and embrace technological advancements like e-filing to streamline tax processes. Consulting with local experts ensures adherence to the evolving legal landscape, mitigating risks and facilitating smoother operations.
