Circular No. 60-TC/CĐKT guiding the implementation of accounting and auditing work for enterprises and organizations with foreign investment capital in Vietnam.

CIRCULAR

Guidelines for accounting and auditing work for enterprises with foreign investment capital in Vietnam,

organizations with foreign invested capital in Vietnam

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Pursuant to the Accounting and Statistics Ordinance promulgated by Decree No. 6LCT/HĐNN - 8 dated May 20, 1988 of the Council of State of the Socialist Republic of Vietnam;

Pursuant to the Accounting Organization Charter issued by Decree No. 25-HĐBT dated March 18, 1989 of the Council of Ministers (now the Government);

Pursuant to Article 37 of the Law on Foreign Investment in Vietnam adopted by the National Assembly on November 12, 1996 (hereinafter referred to as the Foreign Investment Law) and Articles 65, 66, 67, 68, 69, Chapter VIII of Decree No. 12/CP dated February 18, 1997 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam (hereinafter referred to as Decree No. 12/CP);

Pursuant to Article 23, Chapter III of Decree No. 42/CP dated July 8, 1995 of the Government regarding the "Regulation on Legal Consultancy Practice of Foreign Law Firms in Vietnam" (hereinafter referred to as the Legal Consultancy Regulation);

Pursuant to Section V - Labor for foreign organizations and individuals in Vietnam, foreigners working in Vietnam, labor abroad of the Labor Code of the Socialist Republic of Vietnam promulgated by Decree No. 35L/CTN dated July 5, 1994 (hereinafter referred to as the Labor Code).

The Ministry of Finance stipulates and guides the implementation of accounting and auditing work for enterprises with foreign invested capital and Branches of foreign law firms in Vietnam as follows:

I. SCOPE OF APPLICATION

1. In this Circular, the term Enterprise with foreign invested capital shall be understood to include the following entities:

1.1. Enterprises with foreign invested capital; Industrial Zone Enterprises; Export Processing Zone Enterprises; Parties involved in Joint Business Contract, Build-Operate-Transfer (BOT) Contract, Build-Transfer-Operate (BTO) Contract, Build-Transfer (BT) Contract implementing investment under three forms: Joint Business based on Joint Business Contract, Joint Venture Enterprise, 100% Foreign Invested Capital Enterprise.

Enterprises with foreign invested capital operate in all fields including insurance enterprises, banking enterprises and credit institutions.

1.2. Branches of foreign law firms in Vietnam operating according to the Regulation on Legal Consultancy Practice of Foreign Law Firms in Vietnam (hereinafter referred to as Branches of Foreign Law Firms).

II. GENERAL PROVISIONS

1. Enterprises with foreign invested capital must comply with the accounting and statistical system according to the Accounting and Statistics Ordinance, the Accounting Organization Charter, current legal regulations on accounting and auditing, Article 37 - Foreign Investment Law, Articles 65, 66, 67, 68, 69, Chapter VIII - Decree No. 12/CP, Article 23, Chapter III - Legal Consultancy Regulation, and the provisions set forth in this Circular.

2. Enterprises with foreign invested capital must be subject to supervision and inspection by financial authorities and relevant management agencies in the implementation of accounting work.

3. All enterprises with foreign invested capital must register their accounting system applicable to the enterprise and must obtain approval from the Ministry of Finance before implementation.

4. Enterprises with foreign invested capital must conduct accounting work according to the Vietnamese Enterprise Accounting System. In cases where enterprises with foreign invested capital have legitimate reasons to apply other common accounting systems, they must obtain written approval from the Ministry of Finance.

5. Enterprises with foreign invested capital must comply with the registered accounting system and the approved accounting system applied at the enterprise (including any additions or modifications to the approved accounting system).

6. When there is a need to supplement or modify the registered accounting system that has been approved, enterprises with foreign invested capital must clearly explain the reasons for the change and must obtain written approval from the Ministry of Finance before implementation.

7. In the case of joint venture enterprises hiring management organizations to manage business operations: In all cases, the joint venture enterprise is responsible under the law for the activities of the management organization in fulfilling contracts, as well as for the figures in financial reports. Management organizations must comply with the provisions of this Circular as with the entities specified in Point 1.1, Part I - Scope of Application.

8. The fiscal year of enterprises with foreign invested capital must align with the tax calculation year which can be the calendar year or a continuous twelve-month period registered by the enterprise.

9. Annual financial reports of enterprises with foreign invested capital must be audited by an independent auditing company legally operating in Vietnam.

10. Enterprises with foreign invested capital must publicly disclose annual financial reports and information about the situation and results of business operations to users of information as prescribed.

11. Requirements for accounting work

The accounting work of enterprises with foreign invested capital must ensure truthfulness, completeness, accuracy, timeliness, continuity, and systematicness regarding: The existing amount and changes in various types of assets, sources of capital, expenses, product costs, service costs, labor costs, sales revenue, income from business operations; the implementation of Tax Laws and other obligations towards the Vietnamese State according to the Investment License (for Directly Foreign Invested Enterprises) or the Operating License (for Branches of Foreign Law Firms).

12. When enterprises with foreign invested capital cease operations for any reason, they must provide written notice and prepare financial statements up to the date of cessation of operations to the Ministry of Finance.

III. SPECIFIC PROVISIONS

A. PROVISIONS ON IMPLEMENTATION OF THE ACCOUNTING SYSTEM

1. Enterprises with foreign invested capital applying the Vietnamese Accounting System or other common accounting systems must comply with the following provisions:

1.1. Enterprises with foreign invested capital must apply an accounting system suitable for their business industry and field of operation.

1.2. The accounting currency used in bookkeeping is the Vietnamese Dong. However, foreign-invested enterprises may use foreign currencies for bookkeeping and preparing financial reports, provided that they register this in their requested accounting system and obtain written approval from the Ministry of Finance before implementation.

Other currencies different from the officially approved currency must be recorded in their original form and converted to the officially approved currency according to the transaction exchange rate at the time of the economic activity, or the exchange rate published by the State Bank of Vietnam at the time of the economic activity's occurrence.

1.3. The units of measurement (physical goods and time) applied in bookkeeping are the official units of measurement of Vietnam. Other units of measurement, if any, must be converted to the official units of measurement of Vietnam. Foreign-invested enterprises may also use additional supplementary units of measurement for bookkeeping purposes.

1.4. Bookkeeping shall be conducted using Arabic numerals and Vietnamese language, or simultaneously with Vietnamese and another commonly used foreign language, which must be stipulated in the Articles of Association of foreign-invested enterprises and in the registered accounting system.

2. Fiscal Year

2.1. The fiscal year of foreign-invested enterprises must comply with the tax calculation year specified in Article 60 of Decree 12/CP. The fiscal year can be the calendar year or twelve consecutive months starting from the beginning of a quarter, and must be registered in the requested accounting system.

2.2. The first fiscal year is calculated from the date of issuance of the Investment License (or Branch Law Firm Permit) to the end of the approved fiscal year.

2.3. Accounting periods within the fiscal year include:

- Month: From the 1st day to the last day of the month.

- Quarter: From the 1st day of the first month of the quarter to the last day of the last month of the quarter.

3. Deadline for Submission and Public Disclosure of Financial Reports

- Quarterly Report: Within 15 days from the end of the quarter.

- Annual Report: Within three months from the end of the fiscal year of the foreign-invested enterprise.

4. Place of Submission of Financial Reports

Financial reports of foreign-invested enterprises must be submitted to the Ministry of Planning and Investment, the Ministry of Finance, the General Statistics Office, the local Tax Authority (where the enterprise's main office is located), and the joint venture capital contributors.

5. Audit of Financial Reports

The annual financial report of foreign-invested enterprises must be audited by an independent auditing company in Vietnam or another independent auditing company legally operating in Vietnam before submission and public disclosure. The audit report attached to the annual financial report must bear the signature of an auditor holding a certificate issued by the Ministry of Finance of Vietnam, or a national auditing qualification recognized by the Ministry of Finance of Vietnam and registered in the list of auditors with the Ministry of Finance; the signature of the company director and the seal of the auditing company. Underneath the auditor's signature, the full name and number of the auditor's certificate (qualification) must be clearly stated.

6. Organization of Accounting Work

6.1. Foreign-invested enterprises must implement accounting work including: Accounting voucher system, accounting account system, accounting ledger system, financial reporting system, and accounting document storage system.

6.2. To carry out accounting work, foreign-invested enterprises may establish their own accounting department or hire an independent accounting service organization legally operating in Vietnam.

6.2.1. In the case where foreign-invested enterprises establish an independent accounting department:

a. Must allocate sufficient accounting staff according to the standard positions prescribed for accounting staff. Accounting staff must be guaranteed independence in their professional duties to perform accounting work. Accounting staff shall not concurrently undertake the responsibility of asset protection and accounting functions during the performance of accounting work.

b. The head of the accounting department is the Chief Accountant or Head of Accounting Department. The Chief Accountant (or Head of Accounting Department) assists the General Director, or the Director of the foreign-invested enterprise in organizing and directing all accounting, statistical, and economic information work at the enterprise.

- The Chief Accountant of foreign-invested enterprises is selected and appointed in writing by the Board of Directors (for joint ventures), the General Director, or the representative permanently residing in Vietnam authorized by the enterprise (for wholly foreign-owned enterprises). When there is a change in the Chief Accountant, the foreign-invested enterprise must formally notify the Ministry of Finance in writing within twenty days.

- The Chief Accountant must have a professional degree (graduation certificate) in accounting or finance at least at the college level; have attended a chief accountant training course (for Vietnamese); possess necessary knowledge about economics, technology, and finance; have organizational, leadership, guidance, inspection, analysis capabilities regarding financial, accounting, statistical, economic information, and economic accounting work. The person appointed as Chief Accountant must have at least three years of practical experience in accounting work (if graduated from university), five years (if graduated from college).

- The Chief Accountant must be subject to professional financial and accounting supervision by the Vietnamese financial authorities.

c. Vietnamese accounting staff (including the Chief Accountant) hired by foreign-invested enterprises through labor contracts must be those who have been trained in finance and accounting and introduced by a recruitment service organization established under Vietnamese law (as stipulated in Article 132 of the Labor Code).

Accounting staff (including the Chief Accountant) in foreign-invested enterprises must enter into labor contracts with the enterprise and comply with Articles 131, 132, and 133 of Part V of the Labor Code; they must demonstrate their professional competence as required by Points 6.2.1.b and 6.2.1.c before state management agencies with relevant functions.

d. A foreign-invested enterprise must have a plan to train accounting staff to meet the requirements for accounting work of the unit according to the Vietnamese accounting system, including other commonly used accounting systems approved by the Ministry of Finance.

6.2.2. In the case of hiring an independent and legally operating accounting service organization in Vietnam to perform accounting work based on an economic contract signed between both parties, the provided accounting services must comply with the accounting regulations as if the enterprise were performing its own accounting work in accordance with the enterprise accounting system and the provisions of this Circular.

7. Accounting Work

7.1. Initial Recording: All economic activities arising from the business operations of a foreign-invested enterprise must be recorded in accounting vouchers according to the registered model.

Accounting vouchers generated from outside Vietnam must be registered in advance and their main contents must be translated into Vietnamese. Accounting vouchers must be original copies, photocopies, or faxes which do not have legal validity.

7.2. A foreign-invested enterprise can only apply one officially recognized accounting system according to the registered accounting regime. The basis for recording in accounting books is the accounting vouchers. Accounting books must be clearly, continuously, systematically recorded and cannot be erased or altered.

7.3. A foreign-invested enterprise must register with the local Tax Authority (where tax registration is made) the use of two accounting books: General Ledger and Journal, or Register of Accounting Vouchers (page numbers and cross-stitch seals).

General Ledger and Journal, or Register of Accounting Vouchers of the enterprise without confirmation from the local Tax Authority will not be accepted legally.

7.4. If a foreign-invested enterprise records accounting entries on pre-printed accounting books, it must affix a cross-stitch seal and have sufficient signatures of the bookkeeper and the person responsible for the legal liability of the enterprise on all books used during the fiscal year.

7.5. In the case where accounting books are recorded using computers:

- The enterprise must manually record the closing figures of the fiscal year for each general ledger account on the General Ledger that has been registered at the local Tax Authority.

- At the end of the accounting period (after completing the bookkeeping and preparing financial statements), the foreign-invested enterprise must print the accounting books, bind them into volumes, affix a cross-stitch seal, and have sufficient signatures of the preparer and the person responsible for the legal liability of the enterprise on all accounting books used during the fiscal year. At the end of the month, after fully reflecting all transactions, the accountant must copy all pages of the accounting books onto floppy disks (at least two copies) and seal them according to the sealing regulations for files.

8. Financial Statements

- The financial statements of a foreign-invested enterprise must be prepared fully and submitted within the prescribed time limit to the relevant entities as stipulated in Point 4, Section A, Part III.

- The financial statements of a foreign-invested enterprise must be prepared based on the data recorded in the accounting books from valid and lawful accounting vouchers.

- Financial statements must ensure completeness, truthfulness, accuracy, comparability, clarity, and must include full signatures of the person responsible for the legal liability of the enterprise (General Director or Director and Chief Accountant).

9. Asset Inventory

- During the fiscal year, a foreign-invested enterprise must conduct an asset inventory at least once and must compulsorily conduct a comprehensive inventory of all assets of the enterprise at the end of the fiscal year.

- The results of the asset inventory are reflected in the inventory report and the consolidated report on the results of the inventory.

- The consolidated report on the results of the inventory must be attached to the financial statements.

- A foreign-invested enterprise is responsible for ensuring the consistency between the actual value of assets (inventory data) and the data recorded in the accounting books, accounting reports, and financial statements.

10. Strictly Prohibited for Foreign-Invested Enterprises:

- To forge accounting vouchers, record books, and prepare false accounting reports;

- To destroy accounting vouchers, books, and reports before the retention period expires as stipulated by current regulations;

- To misrepresent figures, submit false reports, or compel others to misrepresent figures; to use invalid types of vouchers and forms that do not conform to the registered and approved accounting system;

- To keep any form of assets, materials, sales revenue, other income outside the accounting books.

B. REGISTRATION AND PROCEDURES FOR REGISTERING THE ACCOUNTING SYSTEM

1. A foreign-invested enterprise must register with the Ministry of Finance regarding the Accounting System to be applied in the enterprise and must obtain written approval from the Ministry of Finance before implementation.

1.1. Before registering the accounting system, a foreign-invested enterprise must select and clearly define the Accounting System applicable to the industry and business sector according to the national economic classification.

1.2. A foreign-invested enterprise must complete the registration of the Accounting System within the prescribed time limit from the date of issuance of the Investment License or Business License. From the effective date of the Investment License or Business License, all economic activities arising from the foreign-invested enterprise must be recorded in the accounting books.

1.3. When wishing to make changes to the content of the registered Accounting System that has been approved, a foreign-invested enterprise must request in writing from the Ministry of Finance and can only implement these amendments upon written approval from the Ministry of Finance.

2. Time Limit for Registration and Approval of the Accounting System

2.1. Time Limit for Application and Extension of Registration

2.1.2. In case for some reason, a foreign-invested enterprise has not been able to register the Accounting System according to the prescribed deadline, it must submit a letter requesting an extension of the registration of the Accounting System to the Ministry of Finance, stating the reasons and must be approved in writing by the Ministry of Finance.

A foreign-invested enterprise must promptly complete the procedures to register the Accounting System according to the extended deadline.

2.2. Time limit for processing the registration dossier

2.2.1. Within twenty days from the date of receipt of a valid Registration Dossier of the Accounting System of a foreign-invested enterprise, the Ministry of Finance will issue a formal opinion in writing regarding the registration of the accounting system of the enterprise.

2.2.2. In cases where the documents in the Registration Dossier of the Accounting System of a foreign-invested enterprise are incomplete or unclear as stipulated, the Ministry of Finance will request the foreign-invested enterprise to explain and supplement the documents. The waiting time for the foreign-invested enterprise to explain and supplement the documents does not count towards the response time as specified in Point 2.2.1, Section B.

3. Registration Dossier

3.1. When registering the Accounting System with the Ministry of Finance, a foreign-invested enterprise shall submit a registration dossier including: 3.1.1. A letter registering the accounting system (according to Model Appendix No. 01). 3.1.2. Investment License (Certified copy, or certified by the Ministry of Planning and Investment).

3.1.3. Appointment and nomination of the Chief Accountant by the Board of Directors or General Director; labor contract signed between the Chief Accountant and the General Director, Business Director.

3.1.4. Professional certificates, qualifications (graduation certificates) in the field of accounting - finance; Certificate of having completed the Chief Accountant training program of the Chief Accountant (certified copy).

- Foreign language professional qualification certificates must be certified by a notarized agency.

3.1.5. Documentation explaining the applied accounting system (in cases of supplementation, reduction, modification of the Vietnamese enterprise's Accounting System or application of another common accounting system).

- In cases where there is a request to supplement, modify, or specify the Vietnamese enterprise's Accounting System applied at foreign-invested enterprises to suit the characteristics of production and business activities, detailed documents of the content of the supplementary, modified proposal (accounting voucher system, accounting account system, accounting ledger system, accounting calculation method, financial reporting system) must be submitted. These documents must include: Classified list of each item of the proposed supplementary, modified accounting system; accompanied by sample forms and explanations.

- In cases of applying another common accounting system: When registering another common accounting system, a foreign-invested enterprise must clearly explain the reason for choosing another common accounting system; simultaneously submitting a set of documents on the entire accounting system that the foreign-invested enterprise proposes to apply, including the documents specified in Point 3, Section D - Case of applying another common accounting system.

3.2. The dossier sent to the Ministry of Finance includes four sets (bound volumes):

One set: Kept at the Ministry of Finance

One set: Submitted to the local Tax Authority

Two sets: Kept at the enterprise.

Registered dossiers of the Accounting System will be stamped as registered before circulation.

C. CASE OF APPLYING THE VIETNAMESE ENTERPRISE ACCOUNTING SYSTEM

1. A foreign-invested enterprise applying the Vietnamese Enterprise Accounting System must comply with and implement all current regulations on accounting vouchers, accounting account systems, accounting ledger systems, financial reporting systems, and accounting document storage as prescribed.

2. In cases where it is necessary to supplement, reduce, or modify the content and methods of accounting to suit the characteristics of production and business activities, the enterprise must submit to the Ministry of Finance for review and approval. Any such supplements, reductions, or modifications must ensure compliance with and respect for the general principles of the Vietnamese Enterprise Accounting System. A foreign-invested enterprise may only implement a supplemented, reduced, or modified Vietnamese Enterprise Accounting System after obtaining written approval from the Ministry of Finance.

- Documents submitted to the Ministry of Finance for supplementing, reducing, or modifying the Vietnamese Accounting System to be applied are regulated under Point 3.1.5 - Section B - Part III.

3. A foreign-invested enterprise registering the application of the Vietnamese Accounting System will be facilitated and guided during the registration process and implementation.

D. CASE OF APPLYING ANOTHER COMMON ACCOUNTING SYSTEM

1. The Ministry of Finance will only consider and approve the application of another common accounting system (other than the Vietnamese Enterprise Accounting System) in the following cases:

- A foreign-invested enterprise with 100% foreign capital proves that it cannot and is not convenient for managing the enterprise if it follows the Vietnamese Enterprise Accounting System, thus being compelled to choose another common accounting system.

- A foreign-invested enterprise operating in special sectors where Vietnam has no specific accounting regulations and guidelines.

2. A foreign-invested enterprise proposing to apply another common accounting system must adhere to the following principles:

2.1. Only allowed to apply another common accounting system on four aspects: Forms of the accounting voucher system; list, content, and accounting methods of the accounting account system; forms and recording methods of the accounting ledger system; forms, indicators, and preparation methods of financial reports.

2.2. Must comply with and implement the general principles of the Vietnamese Enterprise Accounting System concerning the accounting voucher system and the accounting ledger system.

3. Documentation of the proposed accounting system to be applied (submitted within the Registration Dossier of the Accounting System as stipulated in Point 3.1.5 - Section B - Part III) must include the following contents:

- Accounting policies, principles, and standards applied at the foreign-invested enterprise.

- The list of accounting vouchers to be applied, classified according to six criteria: wage labor, inventory, sales, currency, fixed assets, and production and business operations; accompanied by samples of vouchers to be officially applied.

For self-printed sales invoices, in addition to submitting them in the Registration File for Accounting System, enterprises must submit them to the General Department of Taxation for registration and approval.

- The list of accounting accounts system (code, name, nature) classified according to the principles of account classification, accompanied by documentation explaining the content and methods of accounting entries of the accounts; the relationship between accounts and the general accounting chart regarding the use of the account system (reflecting main economic transactions concerning assets, sources of business capital, and reports on business results).

- The list of accounting books system to be applied (classified according to the system of summary accounting books and detailed accounting books), accompanied by samples of official books to be applied; a diagram illustrating the process of recording from original vouchers to summary accounting books, detailed accounting books, and financial statement preparation; explanation of the recording method and the relationship between the summary accounting book system and the detailed accounting book system.

The form of accounting books to be applied can only be chosen from four common forms currently used in Vietnam (Journal Ledger, Bookkeeping Voucher, Common Journal, Journal-Voucher).

- The list of financial reporting system, accompanied by samples and explanations of the calculation and preparation methods for indicators in financial statements.

The financial reporting system includes: Balance Sheet, Income Statement, Cash Flow Statement, and Notes to Financial Statements.

E. AUDITING WORK AT ENTERPRISES WITH FOREIGN INVESTED CAPITAL

1. For enterprises with foreign invested capital:

1.1. All enterprises with foreign invested capital must conduct audits on both compliance with accounting work and financial statements.

1.2. The annual financial statements of enterprises with foreign invested capital must be audited by an independent auditing company in Vietnam or another independent auditing company legally permitted to operate in Vietnam, as stipulated by auditing laws, before submission to relevant authorities and public disclosure.

1.3. The audit report must be attached to the annual financial statements of enterprises with foreign invested capital when submitted to relevant authorities and publicly disclosed.

1.4. The audit report includes the following main contents:

1.4.1. Confirmation of the objectivity, truthfulness, and reasonableness of financial statements and accounting figures.

1.4.2. Comments and evaluations on the implementation of accounting work; adherence to the accounting system registered and approved by the Ministry of Finance; compliance with laws, regulations, and accounting rules.

1.4.3. Recommendations.

1.5. The audit report must bear the signature and clearly state the full name and auditor certificate number of the auditor, the signature of the company director, and the seal of the independent auditing company.

2. For independent auditing companies when conducting annual financial statement audits for enterprises with foreign invested capital:

2.1. Independent auditing companies may only conduct audits based on accounting documents of enterprises with foreign invested capital that have been implemented according to the registered accounting system approved by the Ministry of Finance for application at the enterprise.

2.2. An independent auditing company that has provided accounting services to establish financial statements for enterprises with foreign invested capital cannot conduct audits on the same financial statements.

2.3. An independent auditing company conducting financial statement audits for enterprises with foreign invested capital must have independent legal status and ensure objectivity and impartiality during the audit at the audited enterprise with foreign invested capital.

2.4. Independent auditing companies must bear legal responsibility for the independence, objectivity, and truthfulness of the audit results.

IV. PROVISIONS ON CHANGES TO APPLIED ACCOUNTING SYSTEMS

1. Enterprises with foreign invested capital that had registered the Vietnamese Accounting System before January 1, 1996, must implement the transition to comply with the current Enterprise Accounting System issued by Decision 1141 TC/QĐ/CĐKT dated November 1, 1995, of the Ministry of Finance.

2. Enterprises with foreign invested capital that had registered and were accepted for other commonly used accounting systems, not falling under Section D - Part III after a one-year period (from the date this Circular takes effect), must switch to applying the Vietnamese Enterprise Accounting System and must re-register the applied accounting system at the enterprise in accordance with this Circular with the Ministry of Finance.

3. Enterprises with foreign invested capital that have been granted Investment Licenses or Operating Licenses up to now but have not yet registered their accounting systems with the Ministry of Finance should promptly complete necessary procedures and register the applied accounting system in accordance with the provisions of this Circular.

V. IMPLEMENTATION AND EFFECTIVE ENFORCEMENT

This Circular replaces Circular 84 TC/CĐKT dated October 23, 1993, of the Ministry of Finance and takes effect from the date of signing.

Entities subject to Article 1.1, 1.2 - Part I - Scope of Application of this Circular must strictly comply with all provisions of this Circular. Any violations of the provisions of this Circular will be handled according to the Accounting and Statistics Ordinance dated May 10, 1988, and the Administrative Penalty Regulations of the Socialist Republic of Vietnam.

State agencies with relevant functions are responsible for guiding, directing, and inspecting enterprises under their management in accordance with this Circular.

During the implementation of this Circular, if there are difficulties or obstacles, they are requested to report to the Ministry of Finance for prompt resolution.