As Vietnam continues to push past an economy that was badly struck by a global pandemic, the country’s future is looking bright and optimistic. Many businesses were badly affected by the mass lockdowns and social distancing protocols that were implemented by the government in response to the virus that ravaged most of 2020 and 2021. In fact, the country experienced a sharp decline in its GDP of around 6.17 percent in the 3rd quarter of 2021. This was the first time that the economy had experienced negative economic growth since 2000.

Things are finally starting to look up for the country as investors’ confidence has now returned and more businesses are opening up in the country again. One of the priorities of the Vietnamese government is to implement plans and protocols that are designed to reopen and revitalize its economy. In fact, the country’s Ministry of Planning and Investment (MPI) is targeting an annual average GDP growth rate of 7 percent from 2021 to 2025. This means that the country is going to aggressively pursue and entertain economic policies that are positioned to revitalize the nation’s position within the global market.

Why You Should Start a Business in Vietnam

Vietnam is one of the fastest-growing markets in the world for a variety of reasons. For one, it’s strategically located right in the heart of southeast Asia. It’s also relatively a lot cheaper to live in Vietnam and that makes it appealing for expats and foreign investors. Despite having a lower cost of living, Vietnam is still home to a highly qualified and skilled workforce. All of these and many other factors combined have contributed to the growing appeal of starting a business in the country.

While Vietnam has not had the reputation of being an economic giant in Asia, especially when compared to other countries like Singapore and Malaysia, it’s certainly holding its own. Vietnam is now a hub for labor-intensive goods because of the skilled workforce that we talked about earlier. In fact, a lot of foreign investments are pouring into Vietnam to the point that it’s even threatening China’s position as a labor force among Asian economies.

The Vietnamese government is also very supportive when it comes to its economic policies, particularly those that involve foreign investments. Lawmakers of the country have consistently exhibited efforts towards being more open-minded when it comes to modernizing and improving existing laws. One of the priorities of the Vietnamese government at this point is to make it easier for entrepreneurs and investors to conduct business within the country.

Lastly, Vietnam is investing heavily in its infrastructure development. Modern infrastructure is always going to be a driving force in any country’s economic growth. Vietnam’s government is pouring much of its funding towards the development of infrastructure in the country, both in the nation’s urban and rural areas. Urban rail systems are currently in the work so as to connect different cities and provinces across the nation. Regional and international airports are also being renovated and expanded to service a growing market.

Accounting Matters

Of course, starting a business carries with it a fair share of headaches and challenges. One of the most important facets of running a successful business is the adoption of an efficient and effective accounting system. For the most part, effective accounting systems are run by talented and experienced professionals who make use of innovative and modern accounting tools. A lot of the time, this translates to higher expenses and costs for smaller businesses and enterprises. That’s why many companies consider availing of outsourced accounting services instead. Here are a few other reasons why Vietnamese companies opt for outsourcing their accounting duties to third parties:

It's an Efficient Use of Time and Money

Time is money. Money is time. By outsourcing accounting services to a third-party, companies are able to free up both money and time for themselves. We’ve already established that it can be very costly to allocate resources for an in-house accounting team that requires a very special set of tools in order for them to operate effectively. At the same time, maintaining this team through recruitments and hirings can be very expensive and demanding when it comes to time.

That’s why it makes much more logical sense for many companies to just outsource their accounting duties to specialized professionals. It comes out cheaper not having to hire and onboard new employees to the company. And it’s a lot more efficient use of a company’s time because it takes away the grueling and time-consuming process of hiring and recruitment. By opting for a third-party service provider, a company is effectively tapping into a ready-made team that’s already primed to deliver.

Maximize the Expertise of Trained Professionals

There’s always a certain level of efficiency and mastery that is present in an entity that is more specialized in nature. Availing the services of a third-party provider means that companies are tapping the expertise of the people who dedicate their entire careers to providing a very specific service. This will naturally translate to these professionals providing better quality work and being more efficient at what they do. These are tried and tested professionals who have already been vetted by their own employers and who have the credentials to deliver the services that any company would require of them.

Reduce the Risk of Mistakes

Of course, by availing of the services of a dedicated expert, companies stand to make less mistakes. As any experienced businessman will tell you, accounting mistakes can be very costly to a company. There are so many companies that fail in the long-term because of poor accounting practices. By avoiding these mistakes to begin with, companies are free to focus on other aspects of the organization’s operations and conduct.

Reduce the Likelihood of Fraud

Lastly, there is the potential legal blowback that comes with dishonest accounting practices. By outsourcing these services to a third party, companies are effectively able to hold themselves and the service provider accountable in cases of misconduct.

A Guide to Audit and Compliance for Foreign Investors in Vietnam

The tax year in Vietnam is in accordance with the calendar year and it’s imperative for a Vietnamese-based auditing company to conduct the audit, as prescribed by law. It’s also mandated that the financial reports be submitted to the Ministry of Finance and the statistics office 90 days before the end of the fiscal year. It’s also worth noting that the audit and compliance requirements are different for foreign-owned enterprises (FOE) and representative offices (RO).

FOE Requirements

FOEs are required to provide an annual audit report along with the finalization of corporate and personal income taxation. The audited report must be submitted if it has any requests from competent government agencies.

RO Requirements

Compared to FOEs, ROs have less demanding and complex auditing requirements. ROs are merely required to submit annual reports that include basic information such as office address, contact details, and primary bank contacts. They are also required to file annual human resource and activities reports.

Any failure to comply with the submission of these documents is punishable by law. Any discrepancies found in financial reports after an audit will be subject to a rate of percent tax fine on the amount that is under-declared. Aside from that, a daily interest rate will be imposed on any late payments of taxes.

Benefits of Outsourcing Auditing Services

The benefits of outsourcing accounting services also apply to auditing services. An argument can also be made that there is greater pressure on businesses to perform proper auditing under the eyes of the law.

While starting a business in Vietnam as a foreign national might seem like a daunting affair, it’s not an impossible feat. Numerous entrepreneurs have succeeded in this endeavor and there’s no reason that it should be impossible for you as well. However, it’s not going to be easy. And that’s why it would be a lot more efficient and helpful to avail of the services from a trusted organization like Premia TNC

Frequently asked questions

Are there Value Added Tax (VAT) Rates in Vietnam?

The standard VAT rate in Vietnam is 10%. However, this can vary depending on the nature of the product and service that is being provided by the company. There is a 5% VAT rate on specific food items and a complete tax exemption for certain goods and services.

What are the Corporate Income Tax (CIT) Rates in Vietnam?

The general CIT rate in Vietnam stands at 20%. However, this rate can also vary from industry to industry. The tax rate for businesses that operate within the oil, gas, and other precious natural resource industries can vary from anywhere between 32% to 50% CIT. A Special Sales Tax is also applicable to special goods and luxury services. However, for some special industries, the CIT rate would be reduced below 20%, some are even exempted from CIT for a few years after establishment.

When is the Deadline for the Filing of Financial Statements?

Financial reports should be submitted to the Ministry of Finance and the statistics office at least 90 days before the end of the fiscal year. Most commonly, the deadline is the last day of March, if the fiscal year applies from January 1 to December 31.

What Government Body is Responsible for Accounting-Related Regulations?

According to the Law on Accounting which was passed in 2003, the Ministry of Finance is largely responsible for overseeing and mandating regulations pertaining to accounting and bookkeeping matters. Under the Ministry of Finance is the Department of Accounting & Auditing Policy, which is responsible for the Vietnamese Accounting Standards Board (VASB). These are the three main government units that are responsible for accounting-related regulations in the country.

How Long Should Businesses Keep Records and Documents Following Annual Finalization?

It’s mandated that enterprises operating in Vietnam should retain important documents for periods of five or ten years with certain documentation being retained indefinitely. Documents that should be retained for a period of five years include all documents that are used in the management and operation of an organization. Documents that must be retained for a period of ten years include accounting and bookkeeping records. This can include financial statements, accounting books, and reports. Documents that need to be kept indefinitely include those that are of significance to the national security and defense of the country.

What is the Relevant Piece of Legislation Surrounding Accounting in Vietnam?

The Accounting Law of Vietnam was passed back in 2015 and was put into effect on January 1, 2017. The law functions as an updated version of the Low on Accounting that was passed back in 2003. It’s largely the same legal document with some minor updates to areas of internal controls, bookkeeping, and operation standards.

Is It Permissible for Enterprises to Use Different Exchange Rates for Accounting Items?

It is now legal for enterprises to use different exchange rates for different items. Assets and liabilities are converted into VND based on the specified exchange rate at the end of a particular period. The equity of a company’s owner is converted at the exchange rate on the data of the actual transaction.

Do you need more information?

You may refer to these Vietnam business expansion guides to find out more.

Vietnam Taxation System

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