All You Need to Know About Compliance with Financial Statements in Vietnam

Vietnam provides a conducive environment for international investors for doing business. However, the government requires all businesses to comply with financial requirements, including reports, and stay updated on any changes in the law, which do happen more than you might expect. 

A financial statement is the most crucial component of a financial report, and it may provide necessary information about the concerned company’s financial position to the internal and external stakeholders.

Read About Cekindo’s Corporate Tax & Compliance Services in Vietnam

In this article, we will present some important details one must be aware of when it comes to compliance-related to In this article, we will present some important details one must be aware of when it comes to compliance-related to financial statements.

Financial Statements in Vietnam

Financial statements, also known as financial reporting, are statistics produced by firms that represent their economic situations and operations, such as:

• balance sheet
• profit and loss statement
• cash flow statement
• statement of changes in financial status
• Schedules & other

However, they do not include information from other financial reports such as directors’ reports, management analyses, or financial fact sheets.

Different Types of Financial Statements

There are four fundamental forms within a firm’s financial statements, each of which conveys a different story about the company:

• Balance Sheet: Assets = Liabilities + Equity
• Profit and Loss Statement (or Income Statement): Net Income = Revenue – Expenses
• Cash Flow Statement: The in and out of cash from business activities such as operation, investment, and financing activities
• Notes and Changes of Financial Statement

These statements are frequently used to build up the entire financial reporting package, giving unique and important information that provides unparalleled insights into a business.

The Company’s Financial Year

If you manage a foreign entity in Vietnam, you can pick from four fiscal year periods:

• January 1 to December 31
• April 1 to March 31
• July 1 to June 30
• October 1 to September 30

*For the first financial year, if the company is established in the last 3 months of the year, it can be accumulated in the first months of the year.

Companies produce accounts for the previous year throughout these 12 months to reflect their operations and performance. The fiscal year of a new business in Vietnam is frequently set on the day of formation.

The accounting reference period is used to define financial years. This accounting reference comes to an end on a certain day known as the Accounting Reference Date (ARD). Companies in Vietnam have the option of making up their accounts to the accounting reference date or a date up to 7 days on either side of it.

Deadline of a Financial Statement Submission in Vietnam

The deadline for submitting 2021 financial statements in Vietnam is March 30, 2022. However, if, as previously stated, your company’s fiscal year is not a calendar year, this does not apply to you.

If you’re not sure how to set a deadline for your financial statement submission, enlist the help of a Vietnamese accounting firm.

It’s worth noting that not every company formed in Vietnam in a given year is required to file a financial report the following year. If your firm was formed in or after October, you may submit both the previous year’s financial statement and the next year’s financial report.

RELATED: Incorporating a Fintech Company in Vietnam, What You Need to Know

Local Company vs. Foreign-Owned Company in Vietnam

If you are a Vietnamese firm, submitting your financial statement to the Department of Taxation, the General Statistics Office of Vietnam, the Department of Planning and Investment, and other agencies such as your parent company would suffice.

However, if your company is a foreign-owned corporation in Vietnam, you must have your financial statements audited by an independent auditing firm in Vietnam. You’ll also have to submit an annual report to the departments listed above.

Other Requirements for Financial Statement Compliances

There are many additional compliance standards that businesses in Vietnam must consider at the start of each year.

The Tax of Business License in Vietnam

Companies are obliged to pay taxes for their company license once a year. There are three different types of business licensing taxes:

• Registered charter capital no more than 10 billion VND: The business license tax is 2 million VND (US$89)
• Registered charter capital > 10 billion VND: The business license tax is 3 million VND (US$133)
• Representative offices, branches, public service providers, and other business organizations and institutions: the business license tax is 1 million VND (US$45)

Tax Payments and Declarations in the 4th Quarter

Companies in Vietnam must declare includes:

• Value-added tax
• Personal income tax 
• Invoice-using report (if any)

and pay their taxes (if any) includes:

• Personal income tax 
• Value-added tax
• Corporate income tax (if company gains profit this quarter)

Annual Reports

Companies should be aware that, in addition to the financial statement, there are additional yearly reports that must be produced. The following are the yearly reports:

• Personal income tax settlement declaration
• Corporate income tax settlement declaration
• Statistic report

On April 2, these settlement statements and payments are due.

Overdue Financial Statements

If you do not submit your financial reporting to the tax authorities by the deadline, you will be subject to fines. Late filing fines vary from USD $220 to USD $2,200.

Penalties must be paid when you file your financial reporting, and if you are late again the following year, the penalty will be increased.

How can Cekindo help

Allow Cekindo’s outsourcing team to handle all yearly compliance needs, including preparing and auditing financial statements and tax finalization, to ensure that your firm meets all annual compliance standards and avoid expensive late fines.