Bookkeeping for Tax Compliance Purposes in Vietnam
In the event of an audit, accurate tax records can be crucial in ensuring the process is as smooth and quick as possible. In this article, Vietnam Briefing breaks down the requirements for accounting records in Vietnam.
Establishing and operating a business in Vietnam can come with a number of tax benefits and incentives. For example, it is common for firms to receive tax holidays and tax breaks for up to 10 years depending on the investment project and where it is located.
Furthermore, adding Vietnam to a firm’s supply chain can increase a firm’s transfer pricing opportunities and broaden its tax options. This can be very financially rewarding and beneficial to foreign firms.
Transfer pricing enables the setting of prices for goods and services exchanged among subsidiaries, affiliates, or closely linked companies within a larger enterprise. This practice can result in tax advantages for corporations, but it may face challenges from tax authorities. (See also: Transfer Pricing in Vietnam – An Overview).
That said, operating in an unfamiliar tax jurisdiction like Vietnam can be challenging for foreign firms. Of note, Vietnam operates on its own accounting system known as the Vietnam Accounting Standards (VAS) as opposed to International Accounting Standards. This can be difficult for non-Vietnamese accountants to get used to and can cause problems if not implemented correctly.
In this light, accurate record-keeping that meets Vietnam’s tax record-keeping guidelines can be paramount to ensuring doing business in Vietnam is as easy as possible.
With this in mind, the Vietnam Briefing breaks down what firms need to keep track of and how, per Vietnam’s Law on Accounting.
What information to include in accounting records in Vietnam
The content requirements of accounting records are outlined in Chapter II, Section 1, Article 16 of the Law on Accounting and include:
- The name and number of the accounting record;
- The date the record was made;
- The name and address of the firm creating the accounting record;
- The name and address of the firm receiving the accounting record;
- Transaction details including the quantity, unit price, and the transaction’s financial value in both numbers and words;
- The signature and full name of the person creating the record and that of the person approving the accounting record; and
- Any other relevant information.
In the digital age, it has become common practice to keep accounting records electronically. In Vietnam, electronic records are acceptable as long as they meet the above requirements outlined in Article 16. They must, however, also be encrypted and unable to be changed during their digital transmission or by a storage device like magnetic tape or bank cards.
Furthermore, firms must ensure electronic records are stored securely and that the integrity of the data is protected to the extent that on inspection it cannot be illegally accessed or duplicated.
As long as these requirements are met, electronic records will be treated the same way as paper documents.
Creating and storing accounting records
An accounting record needs to be generated for each transaction conducted in Vietnam. Firms should ensure that only one record is made per transaction though there may be multiple copies.
Accounting records need to be clear, complete, and accurate and should be created in a timely manner. They should be created using a set form; however, if a standardized form is not available, a firm may create its own form as long as it meets the criteria outlined in the aforementioned Article 16.
There are several technical requirements that firms should also adhere to. These include:
- Accounting records should not contain abbreviations or corrections;
- The text of an accounting record should be written in pen;
- Numerals and letters must be written continuously without interruption; and
- Blank spaces need to be crossed out.
Note that accounting records that have been changed will not be valid for payment or for record-keeping purposes.
Electronic accounting records need to be printed and stored. If a firm chooses to store their electronic records digitally rather than printing them out, the device on which they are stored must be kept secure for the duration of the retention period.
Signing accounting records
There are a number of stipulations in the law as to how accounting records should be signed. These include:
- They must be signed with permanent ink;
- They cannot be signed with red ink; and
- A rubber signature stamp is not acceptable.
When an accounting record is paid, it should be signed by the person approving the payment and the chief accountant or an authorized person before payment is made. Every copy of an accounting record should be signed when it is paid.
Electronic records need to have electronic signatures and will be treated per signatures on physical documents.
Managing and using accounting records
There are a handful of requirements that firms need to ensure they meet with respect to managing and using accounting records. These include:
- Accounting records need to be sorted by the content of the transaction and by time.
- In the event records are confiscated, the authorities will photocopy the records and give said copies to a firm’s accounting unit.
- The authority will also make a record that specifies the reasons for confiscating the records and the quantity of each type of record confiscated.
- If accounting records are sealed, the person of authority responsible for sealing the records must document the reason for sealing and specify the quantity of records sealed.
Invoices created by vendors and service providers are considered a type of accounting record. Issuing invoices, however, follows a modified version of the requirements listed above. These are governed by the Law on Tax Administration and more specifically Decree 123/2020/ND-CP.
Ensuring accounting records are compliant with relevant tax and accounting legislation in Vietnam is crucial. With accurate, clear, and well-kept records, firms will find dealing with tax authorities in Vietnam fast and easier.
That said, satisfying Vietnam’s record-keeping compliance requirements can be complicated for tax professionals unfamiliar with Vietnam’s tax landscape. In this respect, firms looking for support meeting Vietnam’s accounting records requirements should contact the tax experts at Dezan Shira and Associates.
Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, Russia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at firstname.lastname@example.org or visit us at www.dezshira.com
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