Vietnam Year-End Closing and Audit Preparation for Foreign-Invested Enterprises

For companies operating in Vietnam, year-end closing establishes taxable income, distributable profit, and compliance standing for the following reporting cycle.

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Understanding Vietnam Accounting Standards (VAS) for Foreign Companies

Corporate income tax finalization and audited financial statements must be completed within 90 days from the fiscal year-end, typically December 31, unless an alternative year is registered. Administrative penalties for late filing range from VND 8 million (US$327) to VND 25 million (US$1,020), while late payment interest accrues at 0.03 percent per day on outstanding tax. The statutory calendar creates a defined exposure window with quantifiable financial consequences.

Statutory audit requirements and market pricing

An annual audit by a Ministry of Finance-licensed firm is generally mandatory regardless of revenue size. Fieldwork for small to mid-sized subsidiaries typically requires four to eight weeks, depending on transaction volume, internal control quality, and related-party exposure. Peak season between January and March reduces scheduling flexibility, and late engagement increases the probability of material adjustments surfacing close to filing deadlines.

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For support with year-end closing or statutory audit preparation in Vietnam, contact Dezan Shira & Associates

Audit fees are market-driven rather than regulated and vary according to scale, sector complexity, and documentation quality. For many small and medium-sized foreign-invested enterprises, annual statutory audit fees commonly range from US$800 to US$5,000, with higher costs where operations involve multiple branches, significant inventory, or extensive related-party transactions. Compressed timelines and weak controls generally increase fees due to expanded review procedures.

Accounting framework divergence and group reporting pressure

Statutory accounts must be prepared under Vietnam Accounting Standards rather than IFRS or US GAAP commonly used at the parent-company level. Differences in revenue timing, lease treatment, and provisioning thresholds may produce profit figures that diverge from consolidated accounts. Reconciliation work at year-end may affect internal performance benchmarks, debt covenant testing, or transfer pricing margin alignment within the group structure.

Corporate income tax exposure and duration risk

Vietnam applies a 20 percent corporate income tax rate on taxable income, and statutory accounts determine the final tax base. Tax losses may generally be carried forward for up to five consecutive years, but incorrect revenue or expense recognition can reduce future offset capacity. In cases of serious violation, authorities may reassess tax for up to 10 years.

For example, if a manufacturing subsidiary reports VND 50 billion (US$2.04 million) in accounting profit but VND 10 billion (US$408,000) in intercompany service fees is disallowed as non-deductible, taxable income increases by that amount. At 20 percent, this results in VND 2 billion (US$81,600) in additional tax, directly reducing retained earnings. Concurrent exchange losses would further compress distributable profit.

Early voluntary adjustment before filing generally reduces penalty exposure compared to reassessment during inspection.

Thin capitalization and earnings sensitivity

Interest expense is deductible only up to 30 percent of EBITDA under thin capitalization rules. Where intercompany financing forms a significant portion of capital structure, earnings volatility may cause partial disallowance. Excess interest may be carried forward, but immediate deductibility limitations increase effective financing cost.

Transfer pricing alignment and penalty exposure

Enterprises engaging in related-party transactions must submit transfer pricing declaration forms together with corporate income tax finalization. Contemporaneous documentation, including Local File and, where applicable, Master File, must be prepared before filing deadlines. Financial data in these files must reconcile with audited statutory accounts. Insufficient documentation may lead to administrative penalties, and profit adjustments trigger additional tax, together with late payment interest at 0.03 percent per day.

Inconsistencies also affect future inspection classification.

Foreign currency revaluation and earnings volatility

Foreign currency balances and intercompany loans must be revalued at the exchange rate announced by the State Bank of Vietnam on the balance sheet date. Unrealized exchange gains or losses are reflected in accounting profit and may influence taxable income treatment. For entities with USD- or EUR-denominated loans, year-end rate movements can materially alter reported earnings independent of operating performance.

Inventory control and audit escalation

Manufacturing and trading companies must conduct physical inventory counts before finalizing accounts. Material discrepancies between the book and physical stock may prompt expanded audit sampling. Inventory valuation directly affects cost recognition and reported profit, increasing exposure where internal controls are weak.

Fixed asset depreciation compliance

Capital expenditures must be depreciated within the statutory useful life ranges prescribed by regulation. Accelerated depreciation outside permitted limits is generally disallowed unless specifically authorized. Reclassification between capital and operating expenses alters depreciation expense and reported earnings, affecting both current tax and future depreciation schedules.

Payroll reconciliation and statutory contribution risk

Year-end reconciliation requires alignment between payroll records and social insurance contributions. Employer contributions are generally approximately 21.5 percent of the salary base, while employee contributions are around 10.5 percent, subject to statutory ceilings. Under-declaration may result in retroactive assessments and penalties, increasing labor costs beyond projections.

Dividend distribution and liquidity planning

Dividends may only be distributed after completion of tax finalization and confirmation that retained earnings remain positive after offsetting prior-year losses.

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To assess your Vietnam tax exposure and audit readiness, reach out to Dezan Shira & Associates for guidance

Dividends paid to corporate shareholders are generally not subject to withholding tax under domestic rules, while dividends paid to individual shareholders are typically subject to a 5 percent withholding tax unless reduced by treaty. Audit adjustments, expense reclassification, and exchange movements therefore influence shareholder remittance timing.

Value-added tax exposure

Vietnam’s standard VAT rate is 10 percent, though a temporary 8 percent rate applies to many goods and services through December 31, 2026, subject to exclusions. Year-end reconciliation requires confirmation that compliant invoices support input VAT credits. Denial of credit increases indirect tax cost and may attract additional inspection.

Risk-based tax classification

Vietnam applies a risk-based inspection framework, influencing review frequency and scope. Repeated late filings, material adjustments, or inconsistencies between financial statements and tax declarations may elevate classification and increase the likelihood of detailed inspection in subsequent periods.

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