What Are The Key Requirements For Preparing The Annual Financial Statement In Vietnam?

Navigating Vietnam’s annual financial statement reporting landscape starts with grasping essential statements. For executives seeking a clear, concise overview, this post delivers. Discover the core components of balance sheets, income statements, cash flows, and more – the must-know metrics to propel your Vietnamese business forward.

Breakdown of the Key Sections in a Company’s Annual Financials

The Vietnamese law on accounting outlines specific financial statements that must be included. These mandatory reports are the balance sheet, profit and loss statement, cash flow statement, and notes detailing the financials.

For local companies in Vietnam, they need submit the financial statements to the Tax Department, Statistics Office, Planning and Investment Department, and parent company suffices. However, foreign-owned firms undergo an extra step.

For The FDI companies in Vietnam, the financial statements must be audited by an independent auditing firm in Vietnam before submitting. Additionally, foreign companies submit annual reports to a financial institution along with the standard departments.

Vietnam Year-End Financial Statement Due Dates

Businesses operating in Vietnam must submit annual financial statements within 90 days of their fiscal year-end. Newer companies may qualify for exceptions. Firms established in October or later can combine statements for their first partial year with the next full year.

Missing the 90-day deadline carries penalties. Rather than risk noncompliance, retaining local accounting expertise is prudent. Vietnamese CPAs understand all nuances of the financial reporting rules. They can ensure statements are filed correctly and on time. Even experienced foreign enterprises benefit from this specialized knowledge. A small investment yields significant dividends through avoided penalties and peace of mind.

Selecting the Optimal Fiscal Year for Your Business

Businesses in Vietnam can choose from four different fiscal year options when managing foreign entities: January 1st to December 31st, April 1st to March 31st, July 1st to June 30th, or October 1st to September 30th.

For a company’s first fiscal year, if established in the last three months, its fiscal year can extend into the first months of the following year. Throughout the 12-month fiscal period, companies produce financial statements reflecting their operations and performance for the previous year.

Often, a new business in Vietnam will set its fiscal year beginning on its formation date. The accounting reference period defines the financial year and ends on the Accounting Reference Date (ARD). Vietnamese companies can prepare their accounts through the ARD or up to 7 days before or after.

Retention of Documentation

Following the end of each fiscal year, businesses must retain various documents that may be produced during accounting and bookkeeping activities. The length of time records must be kept depends on the document type. General business operation and management files without direct accounting records must be kept for 5 years.

Accounting records, books, financial statements, and third-party audit reports have a 10-year retention period. A small subset of documents relevant to Vietnam’s economy, national security, or defense must be kept indefinitely.

Adhering to proper document retention policies ensures companies maintain adequate records for legal compliance, tax filings, and operational continuity. Establishing organization-wide procedures for categorizing and storing documents enables efficient retrieval and responsible destruction when retention periods expire.

Requirements for Local and Foreign-Owned Companies in Vietnam

Vietnamese companies can submit internal financial statements to government agencies. However, foreign companies operating in Vietnam must have audited statements. An independent Vietnamese auditing firm should complete these audited reports.

Complying with Annual Financial Statement Regulations

Vietnamese businesses must review numerous regulatory requirements at the start of each year for ongoing compliance.

Business License Tax in Vietnam

Businesses in Vietnam pay an annual tax for their company license. There are three tiers based on the registered charter capital. If it’s under VND10,000,000,000, the tax is VND2,000,000. Over VND10,000,000,000, the tax rises to VND3,000,000. For representative offices, branches, public services, and other institutions, it’s a flat VND1,000,000, regardless of capital. The taxes provide revenue but add administrative costs, so policymakers balance incentives and equity.

Tax Payments and Declarations for Q4

In Vietnam, companies are required to make declarations encompassing various taxes. These declarations contain the assessment of value-added tax and personal income tax. Additionally, companies must provide reports regarding their usage of invoices, if applicable.

On the other hand, regarding tax payments, businesses in Vietnam must settle their dues, primarily personal income tax and value-added tax.

Furthermore, suppose a company records a profit in a given quarter. In that case, it must also ensure payment of corporate income tax, ensuring all tax liabilities are met in compliance with Vietnamese tax regulations.

Annual Reports

Businesses must recognize the necessity for producing various annual documents beyond the ordinary financial report. Such essential documents include the individual income tax return, the corporate income tax return, and the statistical report.

These critical filings and any requisite payments have an established deadline: they must be submitted by the last day of third month of following financial year ended. 

Penalties for Late Annual Financial Statements in Vietnam

Firms that fail to adhere to the submission deadline for their reports will incur a penalty. In Vietnam, the penalty for delayed financial disclosures begins at approximately 5,000,000 VND (about $205) and can escalate to 20,000,000 VND (around $82,000).

The landscape of emerging markets like Vietnam is characterized by many complex regulations, necessitating a significant investment of time to grasp all the local legal requirements fully. Moreover, the legal framework in Vietnam is subject to frequent updates, rendering some sources of information obsolete.

To avoid the repercussions of non-compliance, consider engaging with experts specializing in regulatory adherence. By doing so, you can streamline your operations and concentrate on enhancing your enterprise.

How can we help?

Navigating the intricacies of annual financial filings in Vietnam doesn’t have to be a headache. With Premia TNC, you’re in capable hands. Our team of financial experts takes the reins on your yearly compliance requirements with precision. Not only do we meticulously prepare and audit your financial statements, but we also manage tax finalization processes. This comprehensive approach ensures that your firm aligns perfectly with Vietnam’s stringent annual compliance standards.

Bid farewell to the stress of potential penalties for late submissions. Premia TNC’s proactive services are the buffer you need against expensive fines. Trust in our expertise to keep your company’s financial responsibilities timely, accurate, and worry-free. It’s more than just compliance; it’s peace of mind, knowing that every detail is covered for your annual financial statement filings.