Circular No. 84/TC-CÐKT guiding the implementation of accounting work for foreign-invested enterprises

CIRCULAR

NUMBER 84-TC/CĐKT OF THE MINISTRY OF FINANCE GUIDING THE IMPLEMENTATION OF ACCOUNTING WORK FOR ENTERPRISES WITH FOREIGN INVESTMENT CAPITAL

Implementing the Law on Foreign Investment in Vietnam and Decree No. 18-CP dated April 16, 1993 of the Government detailing the implementation of the Law on Foreign Investment in Vietnam, the Ministry of Finance guides the implementation of accounting work in enterprises with foreign investment capital and foreign parties participating in business cooperation contracts operating under the forms prescribed in the Law on Foreign Investment as follows:

I. GENERAL PROVISIONS

1. All joint ventures, wholly foreign-owned enterprises, foreign parties in joint ventures, and export processing zones (hereinafter referred to as enterprises) operating within the territory of the Socialist Republic of Vietnam must implement accounting work according to the Accounting and Statistics Ordinance dated May 10, 1988 and in accordance with the provisions of this Circular.

2. The accounting work of enterprises must ensure truthfulness, legality, accuracy, timeliness, and continuity in reflecting:

- The existing amounts and changes in various types of assets, capital, and sources forming business capital.

- Costs, product costs, service costs, revenues, and income from business operations of the enterprise.

- Compliance with Vietnamese tax laws and other obligations as stipulated in the investment license.

3. Enterprises shall implement accounting work according to the current accounting system of the Socialist Republic of Vietnam or may choose another accounting system but must comply with international accounting standards and principles commonly accepted and approved in writing by the Ministry of Finance before implementation.

4. Enterprises must submit to the Ministry of Finance a registration dossier for the accounting system including:

4.1. A letter registering the accounting system (according to Appendix No. 1 model).

4.2. Copy of the investment permit.

4.3. If applying the Vietnamese accounting system, it must clearly specify the accounting system of the industry in which the enterprise operates (industry, construction, commerce, services, agriculture...).

4.4. If applying a foreign accounting system, the following documents must be attached:

- A list of accounting vouchers applied, accompanied by voucher samples.

- A list of accounting accounts applied, accompanied by explanations about the content, recording methods of the accounts, and the relationship between accounts: a general accounting chart regarding the use of the account system.

- A list of accounting books, accompanied by book samples, explanations about the recording methods and the relationship between different types of books.

- A list of accounting reports, accompanied by report samples, explanations about the recording methods of indicators in the reports.

4.5. Certificate of accounting expertise of the chief accountant.

5. Within 180 days from the date the enterprise receives the investment permit, the enterprise must submit the accounting system registration dossier to the Ministry of Finance. If for any reason, the enterprise cannot register the accounting system, it must send a letter to the Ministry of Finance explaining the reasons.

6. Within 30 days from the date of receiving the enterprise's accounting system registration dossier, the Ministry of Finance will issue a formal opinion in writing on that accounting system.

In case the enterprise's accounting system registration dossier is incomplete or unclear, the Ministry of Finance will request the enterprise to explain and provide additional necessary documents about the registered accounting system. The time for the enterprise to explain and provide additional documents does not count towards the response deadline of the Ministry of Finance mentioned above.

7. Enterprises operating in export processing zones in Vietnam shall submit the accounting system registration dossier to the management board of the export processing zone where the enterprise operates according to the contents specified in points 4 and 5 above.

8. Foreign parties participating in business cooperation contracts in Vietnam shall implement accounting work according to the currently applied accounting system and must register that accounting system with the Ministry of Finance as stipulated in point 3 above. During the contract period, contract termination, and future disputes, they must have sufficient accounting documents about their activities in Vietnam for Vietnamese competent authorities to inspect and resolve disputes according to the law.

9. During operation, enterprises may change the currently applied accounting system. In such cases, the enterprise must clearly state the reasons for the change and go through the registration process again and must obtain approval from the Ministry of Finance before switching. Changes to the accounting system can only be implemented at the beginning of the accounting year.

10. The accounting work of enterprises must be subject to inspection and supervision by Vietnamese financial agencies.

11. Recording on accounting vouchers, ledgers, and accounting reports of enterprises must be done using Arabic numerals and Vietnamese language and one commonly used foreign language approved by the Ministry of Finance and must be recorded in the Enterprise Charter.

12. Accounting records, in terms of value, use the Vietnamese dong as the unit of currency or may use a foreign currency proposed by the enterprise and approved by the Ministry of Finance. Where accounting vouchers are recorded in a different currency, they must be converted to the chosen currency based on the buying rate published by the State Bank of Vietnam at the time the transaction occurred.

For physical items, officially recognized measurement units in Vietnam must be used. Where accounting vouchers have been recorded in different measurement units, they must be converted to officially recognized units for accounting purposes.

13. The accounting year of enterprises runs from January 1 to December 31.

The accounting periods within the accounting year are:

- Month, from the first day to the last day of the month.

- Quarter, from the first day of the first quarter month to the last day of the last quarter month.

Applying a different accounting year must be approved by the Ministry of Finance.

The first accounting year of an enterprise is calculated from the date the enterprise receives the investment permit to the end of that accounting year.

14. The enterprise must have an independent accounting system and staff sufficient accountants according to the standard positions prescribed for accountants. Accountants are guaranteed independence in their professional duties. The head of the accounting system is the Chief Accountant, who is selected and appointed by the Management Board. The Chief Accountant is responsible for directing all accounting work, statistics, and economic activity analysis, while also having the duty to inspect and control economic and financial matters within the enterprise.

The Chief Accountant and accountants of the enterprise must be individuals trained in the field of finance and accounting and hold valid certificates or diplomas in this specialty.

15. Accounting data and documents serve as legal grounds for evaluating the results of production and business activities, fulfilling obligations towards the State of Vietnam and investors and joint venture partners of the enterprise.

II. SPECIFIC PROVISIONS

1. The accounting work of the enterprise includes the following contents: preparation, circulation, and processing of original vouchers; recording in accounting books (general and detailed accounting books); preparing accounting reports; implementing internal controls and archiving accounting documents.

2. Accounting vouchers:

Accounting vouchers consist of original vouchers and bookkeeping vouchers. Original vouchers are legal grounds reflecting completed economic and financial transactions. Bookkeeping vouchers are the basis for recording in accounting books.

All economic activities occurring at the enterprise must establish original vouchers (original vouchers). Original vouchers are prepared once for each transaction and must ensure authenticity, legality, legitimacy, and reasonable reflection of the economic and financial activities occurring at the enterprise, and must comply with the prescribed forms issued by the State.

- If foreign voucher systems are applied, they must follow the registered models approved by the Ministry of Finance. For sales invoices, enterprises must use pre-printed models issued by the Ministry of Finance. In cases where enterprises print their own sales invoice models, they must register with the Vietnamese tax authority and obtain approval from the tax authority before implementation.

- Accounting vouchers must be originals, not copies.

3. The enterprise can only use accounting accounts and accounting books according to the contents that have been registered and approved.

Each enterprise can only have one official set of accounting books, ensuring the legal validity and consistency of the system.

Accounting books include: journal, general ledger, and detailed ledgers. Enterprises base on the accounting account system, accounting regulations, and management requirements to open all necessary accounting books.

Recording in accounting books must be based on legitimate accounting vouchers of the enterprise: it must ensure the timeliness of accounting figures during the accounting period and fiscal year; ensure the continuity of accounting books; ensure the principle of closing accounting books.

The content reflected in the books must comply with the financial and tax regulations applicable to enterprises with foreign investment capital.

4. The enterprise must prepare accounting reports according to the registered and approved reporting system. Accounting reports must ensure the truthfulness and accuracy of the figures in the report indicators.

The enterprise's accounting reports include:

4.1. Balance Sheet (Summary of Assets): reflects the value and structure of various types of capital and sources of capital of the enterprise at the end of the accounting period and fiscal year.

4.2. Profit and Loss Statement: reflects reasonable revenue, expenses, and profit from business operations of the enterprise, as well as other special gains and losses within an accounting period and fiscal year.

4.3. Report of the Board of Directors (or General Director) of the enterprise: clearly states the current situation and results of the enterprise's operations, the distribution and use of business profits; recommendations regarding the enterprise's business operations.

In case one of the joint venture parties requests conversion accounting reports (from Vietnamese accounting standards to foreign accounting standards and vice versa), the enterprise has the responsibility to prepare and submit the converted reports to the requesting party.

5. Recipients of accounting reports:

- For wholly foreign-owned enterprises and foreign parties participating in business cooperation contracts, accounting reports must be sent to the State Committee on Cooperation and Investment and the local tax authority where the enterprise's main office is located.

- For joint ventures, accounting reports must be sent to the State Committee on Cooperation and Investment, the local tax authority where the enterprise's main office is located, and the joint venture capital contributors.

- For enterprises operating in export processing zones, accounting reports must be sent to the Export Processing Zone Management Board, the export processing zone tax authority, and the joint venture capital contributors.

6. Deadline for submitting accounting reports:

- Quarterly reports within 30 days after the end of the quarter being reported.

- Annual reports within three months after the end of the fiscal year being reported.

7. The annual accounting report of the enterprise must be confirmed by an independent auditing company before being submitted to the authorities mentioned in point 5 of Part II.

The enterprise may designate independent auditing companies legally operating in Vietnam to audit the enterprise's accounting reports.

In case the enterprise wishes to designate an independent auditing company from abroad that has not yet been permitted to operate in Vietnam, it must comply with the following conditions:

- For wholly foreign-owned enterprises and foreign parties participating in business cooperation contracts, the designated auditing company must be notified to the Ministry of Finance for review and approval, and must bear the responsibility for paying on behalf of the foreign auditing company the taxes due to the State of Vietnam according to the laws governing such activities in Vietnam.

- For joint ventures: the designated auditing company must cooperate with a Vietnamese auditing company to jointly conduct the audit. The audit result will only have legal validity when both sides agree. In case the Vietnamese auditing company refuses, the designated foreign auditing company will conduct the audit for the enterprise after notification and approval from the Ministry of Finance.

8. The auditing company must be responsible under the law for the independence, objectivity, and truthfulness of the audit results.

The audit report shall be attached to the enterprise's accounting report. The audit report must comment and evaluate the following contents:

- The truthfulness and reasonableness of the accounting figures on the enterprise's accounting report.

- The situation of performing accounting work at the enterprise; compliance with accounting rules and regulations. - Recommendations.

9. The enterprise must conduct an asset inventory at the end of the accounting period to determine the actual amount and current status of assets of the enterprise.

10. Accounting documents include: vouchers, ledgers, accounting reports, and other related documents. These documents must be securely preserved during their use. Accounting documents must be stored by accounting periods and by type. Original accounting documents must be kept at the enterprise for a minimum of ten years.

If an enterprise with foreign investment does not comply with or violates the above provisions, it must be handled according to the provisions of the Accounting and Statistics Ordinance dated May 10, 1988.

III. IMPLEMENTATION PROVISIONS

This Circular replaces Circular No. 46-TC-CĐTC dated October 21, 1989 of the Ministry of Finance and takes effect from the date of signature. Enterprises must strictly and fully comply with the provisions of this Circular. Local tax authorities and management boards of export processing zones are responsible for guiding, directing, and inspecting enterprises under their jurisdiction in accordance with the provisions of this Circular.

APPENDIX 01

MODEL OF REGISTRATION LETTER FOR ACCOUNTING SYSTEM

Respectfully submitted to: Ministry of Finance

(Department of Accounting Regulations and Auditing)

- Based on the Law on Foreign Investment in Vietnam;

- Based on Decree No. 18-CP dated April 16, 1993 of the Government of Vietnam regarding the implementation of the Law on Foreign Investment in Vietnam;

- Based on the regulations of the Ministry of Finance on the implementation of accounting systems for enterprises with foreign investment as stipulated in Circular No. ... dated ... 1993;

Name of Company ... Industry ...

According to Investment License No. ... dated ... Month ... Year 199...

We hereby apply to use the accounting system as follows:

1. Accounting system applied: (Vietnamese or foreign) of the industry ... (industry, construction, agriculture, services ...).

- Initial voucher system ...

- Account system ...

- Ledger system ...

- Reporting system ...

2. Language used in accounting: Vietnamese and ...

3. Currency unit used in accounting ...

4. Measurement units used in accounting: according to the officially applied system in Vietnam.

5. Accounting period applied: From ... to ...

We request the Ministry of Finance to consider and approve.

Credit organization branch in province/city and basic credit cooperative…

(Signature and seal)

Place of Receipt
- As above
- To be filed at the unit.