The challenge in managing accounting for your Vietnam subsidiary from abroad
Corporate groups setting up their Vietnam operations often (incorrectly) assume that they can centralise all their accounting and finance function for their Vietnamese entity into the headquarters finance function. Whilst there are some opportunities, caution must be taken to understand the local requirements regarding accounting and documentation in Vietnam.
A common structure for expanding entrepreneurial groups is that online software such as Xero or Quickbooks is used by the group in their operations. They have one central headquarters function reviewing/controlling the financial accounts through online software, and which processes all banking transactions. Unfortunately, this structure has significant compliance problems in the Vietnamese context and needs to be altered to remain compliant.
Significant barriers to centralising accounting, tax and banking outside of Vietnam for a Vietnamese entity that need to be taken into account include:
- Accounting software must be Vietnam Accountant Standards (VAS) compliant, and follow the approved VAS Chart of Accounts structure.
- All entries within the accounting software must be entered in Vietnamese language (can be dual language – but must include Vietnamese).
- All bank account transactions should have description fields in Vietnamese Language (or dual language).
- There are considerable requirements for vouchers, journals, ledgers etc to be printed in specified formats, signed by the Bookkeeper, Chief Accountant and General Director (and stamped by the company). The Chief Accountant needs to hold a Vietnamese Chief Accountant certificate.
- Supporting documents must be verified as compliant with Vietnamese tax and accounting obligations before they are processed.
- The accounting currency is Vietnamese Dong (VND). However, foreign-invested enterprises are allowed to select a foreign currency as their accounting currency. Even if a foreign currency is used for accounting purposes, financial statements must be converted to VND for statutory reporting. This ensures compliance with local regulations.
The result of the above is that Vietnamese companies effectively need to have their accounting and banking undertaken locally in Vietnam, using VAS approved software, to be compliant. Groups have to make decisions whether to:
- Run/maintain two sets of accounting records (i.e., simultaneous VAS software and international accounting software), or extract entries from the VAS software at month end and import/update at headquarters each month. This dual-record system helps ensure that they meet the regulatory requirements in Vietnam while also aligning with the accounting practices of their home country.
- Establish their own accounting and tax (and HR) teams, or outsource to providers, and
- Have all banking localised, or keep the authorisation tokens at headquarters so that the Vietnam team uploads payment order for approval from headquarters.
It is better to understand and plan for the above well before your new Vietnamese entity is operational and established, rather than the awkward discovery after establishment that your centralised finance function will not meet Vietnamese requirements.
Understanding the regulations related to accounting and bookkeeping in Vietnam is essential for optimising costs and ensuring compliance with tax laws. Proper adherence to VAS not only ensures regulatory compliance but also aids in efficient financial management for the local subsidiary.
If you need any assistance with these or any other matters in Accounting and Tax compliance in Vietnam, to ensure you are compliant and protected in the market, our experts are ready to support.
