What are regulations on accounting policies applying to foreign contractors in Vietnam?

Who is a foreign contractor?

Pursuant to Clause 29, Article 4 of the Law on Bidding 2023, a foreign contractor is defined as an organization established under foreign law or an individual of foreign nationality participating in bidding.

What are regulations on accounting policies applying to foreign contractors in Vietnam?

The accounting policies applicable to foreign contractors is guided in Article 10 of Circular 200/2014/TT-BTC as follows:

[1] Foreign contractors with a permanent establishment or residency in Vietnam, where such establishment or residency is not an independent legal entity, apply the accounting policies in Vietnam as follows:

- Contractors with specific characteristics apply the accounting policies issued separately for contractors by the Ministry of Finance;

- Contractors for whom no specific accounting policies is issued by the Ministry of Finance may opt to fully apply the Vietnamese corporate accounting policies or adjust certain contents of the Vietnamese corporate accounting policies to suit their operational characteristics and management requirements.

- If contractors choose to fully apply the Vietnamese corporate accounting policies, they must consistently do so for the entire accounting period.

- Contractors must notify the tax authority of the applied accounting policies no later than 90 days from the official commencement of their operations in Vietnam. When changing the accounting policies format, contractors must notify the tax authority no later than 15 working days from the date of change.

[2] Foreign contractors must account in detail for each contract award (each contractor license), and each transaction as a basis for contract settlement and tax settlement.

[3] In cases where foreign contractors fully apply the Vietnamese corporate accounting policies but require amendments or supplements, they must register in accordance with Article 9 of Circular 200/2014/TT-BTC and may only implement such amendments or supplements upon receiving written approval from the Ministry of Finance.

Within 15 working days from the receipt of the complete application, the Ministry of Finance is responsible for responding in writing to the foreign contractor regarding the registration of amendments or supplements to the accounting policies.

Referencing Article 9 of Circular 200/2014/TT-BTC concerning the registration of amendments to the accounting policies:

- Regarding the accounting chart of accounts system

+ Enterprises base on the accounting chart of accounts of the corporate accounting policies issued with this Circular to apply and detail the accounting accounts system suitable to the production, business characteristics, and management requirements of each sector and unit, but must match the content, structure, and accounting method of the corresponding synthetic accounts.

+ If an enterprise needs to add Level 1, Level 2 accounts or modify Level 1, Level 2 accounts in terms of name, symbol, content, and peculiar economic transaction accounting methods, it must receive written approval from the Ministry of Finance before implementation.

+ Enterprises can open additional Level 2 and Level 3 accounts for accounts without specified Level 2, Level 3 accounts in the corporate Accounting Chart of Accounts list provided in Appendix 1 of this Circular to serve the enterprise's management requirements without requesting Ministry of Finance approval.

- Regarding vouchers and accounting books

+ All accounting vouchers are of guided types (non-mandatory); enterprises can choose to apply according to the form issued in Appendix 3 of this Circular or self-design to fit operational characteristics and management requirements but must ensure the provision of information as prescribed by the Law on Accounting and the amending, supplementing, replacing documents.

+ All forms of accounting books (including various Ledgers, Journals) are non-mandatory types. Enterprises can apply the book forms as per the guidance in Appendix 4 of this Circular or add, modify book forms, accounting cards suitable to operational characteristics and management requirements but must ensure complete, clear, easily checkable, controllable information presentation.

What are regulations on accounting policies applying to foreign contractors in Vietnam? (Image from the Internet)

What are regulations on selection of monetary unit in accounting applying to foreign contractors in Vietnam?

Based on the provisions in Article 4 of Circular 200/2014/TT-BTC regarding the selection of currency unit in accounting as follows:

- Enterprises with primary income and expenditure transactions in foreign currency, based on the Law on Accounting, consider, decide on the accounting currency unit, and take responsibility for their decision before the law. When choosing the accounting currency unit, enterprises must notify the directly managing tax authority.

- The accounting currency unit is the currency unit:

+ Primarily used in sales transactions and service provisions of the unit, having a significant impact on the sale price of goods and service provisions, and often being the currency unit for listing and payment; and

+ Primarily used in goods, service purchases having a significant impact on labor costs, raw materials, and other production and business expenses, typically being the currency unit used to pay for these costs.

- The following factors are also considered and provide evidence for the unit's accounting currency:

+ The currency unit used for raising financial resources (like issuing stocks, bonds);

+ The currency unit frequently obtained from business activities and accumulated.

- The accounting currency unit reflects the transactions, events, conditions related to the unit's activities. Once determined, the accounting currency unit must not be changed unless there is a significant change in these transactions, events, and conditions.