The accounting process for FDI enterprises is the foundation for foreign-invested enterprises to operate transparently, comply with the law and optimize costs in Vietnam. A standard process consists of 9 core steps, specifically:
- Summary of arising transactions
- Based on the information compiled to create original documents
- Compare and check the validity of original documents
- Based on information to record accounting books
- Arrange and classify accounting documents
- Make accounting entries and final transfers
- Closing and determining balance
- Prepare a balance sheet
- Prepare financial statements and tax settlement
Compliance with accounting procedures not only ensures transparency but also helps FDI enterprises proactively control risks and enhance their reputation in the Vietnamese market.
What is the accounting process for FDI enterprises?
The accounting process for FDI enterprises is a system of steps established to record, process, control and report all financial activities of foreign-invested enterprises in Vietnam. This process includes stages from collecting original documents, accounting for transactions, bookkeeping, final transfer to financial reporting and tax settlement.
The special feature of the accounting process of FDI enterprises is that it must simultaneously meet two requirements:
- Comply with Vietnamese laws and accounting standards (VAS) to ensure tax declaration and financial reporting obligations in Vietnam
- Synchronize with the parent group's international reporting system (IFRS) to serve global consolidation and governance.
A standard accounting process not only helps FDI enterprises to have financial transparency and reduce tax inspection risks, but also enhances the reputation and effectiveness of financial management in a multinational business environment.
Legal basis and standards applied to accounting processes of FDI enterprises
The accounting process of FDI enterprises must operate on a clear legal foundation, the key point is the Law on Accounting (No. 88/2015/QH13) together with the Decrees, Circulars guiding the implementation and related tax management documents (for example, Decree 132/2020/ND-CP on tax management for enterprises with related-party transactions). These documents stipulate the scope of accounting responsibilities, forms of documents, financial reporting regimes, record keeping and declaration obligations when related-party transactions arise; at the same time, they stipulate sanctions for violations. For FDI enterprises, it is necessary to pay attention to both domestic accounting regulations (VAS or Law on Accounting) and tax regulations. Especially the requirements for preparing related-party transaction dossiers according to Decree 132/2020/ND-CP.
The main difference between Vietnamese standards (VAS) and international standards (IFRS)
Although both aim to fairly and fairly reflect the financial situation of enterprises, Vietnamese accounting standards (VAS) and international accounting standards (IFRS) have many notable differences in approach, recording method and update level. Specifically:
- Approach: VAS in Vietnam tends to be rule-based (rules, detailed instructions for each situation), while IFRS is principles-based (principles, requiring more assessment based on the nature of the transaction). Therefore, for the same transaction, VAS may have more specific instructions while IFRS requires in-depth analysis to present a fair and reasonable financial picture.
- Scope and level of updates: IFRS is constantly updated with many new standards (e.g. on financial instruments, asset impairment, fair value measurement), while VAS has not been updated as widely and still retains many traditional regulations. This causes a gap or difference when FDI enterprises need to report according to IFRS standards, but must comply with VAS in Vietnam.
- Practical implications for FDI: Due to this difference, the accounting process of FDI enterprises often has to establish parallel accounting policies: one set for reporting according to VAS (to submit to management and tax agencies) and one set of adjustments for consolidated reporting according to IFRS (if required by the parent group). This creates additional requirements for control, data conversion and documents explaining the conversion.
From the actual operation, it can be seen that the gap between VAS and IFRS standards is not only limited to accounting techniques but also directly affects the reporting and determination of tax obligations of FDI enterprises. Therefore, fully complying with the accounting process of FDI enterprises according to the Vietnamese legal framework, while strictly controlling the differences in data conversion is the key to help enterprises prevent inspection risks, minimize tax adjustments and strengthen trust with management agencies.
The role of compliance in reducing audit risk and tax risk
Compliance with accounting procedures is not only a legal requirement but also brings many practical benefits to FDI enterprises. Below are the prominent roles of compliance in accounting practices:
- Transparent records: Full compliance with accounting procedures (complete documents, correct accounting, regular reconciliation, record keeping as required by law) helps businesses have clear evidence when tax or audit authorities request an investigation, especially with related transactions that are easily audited.
- Minimize the risk of discrepancies between VAS and IFRS: When an enterprise establishes a process with a mechanism for comparing VAS and IFRS back and forth (including reconciliation tables, adjustment journals), proactively explains discrepancies and avoids errors that lead to inconsistent reporting between reports submitted to the management agency and parent group reports. This reduces the risk of being questioned in an independent audit or internal inspection of the group.
For the accounting process of FDI enterprises, understanding the legal basis of Vietnam and the difference between VAS and IFRS is a prerequisite for designing an effective process. Strictly complying with these requirements, especially with the Transfer Pricing Documentation under Decree 132/2020/ND-CP, will help enterprises minimize inspection risks, limit tax imposition and create a transparent foundation for financial reporting.
Steps in the accounting process of FDI enterprises
To ensure transparency and compliance with the law, the accounting process of FDI enterprises needs to be carried out according to the specific steps below.
Board: Steps in the accounting process of FDI enterprises.
| Steps to take | Target |
| Summary of arising transactions | Collect all information, documents and data related to financial and accounting activities arising during the period. |
| Create original documents | Based on the compiled data, prepare accounting documents (invoices, receipts, payment vouchers, minutes, contracts, etc.) to ensure validity and legality. |
| Compare and check the validity of original documents | Ensure documents are accurate, complete, and in compliance with regulations before being recorded in the accounting system. |
| Bookkeeping | Based on valid documents, record in general accounting books and detailed books, accurately reflecting each transaction. |
| Arrange and classify accounting documents | Group documents by transaction type (revenue, expenses, assets, debts, etc.) for easy reference, comparison and storage. |
| Make accounting entries and final transfers | Record adjusting entries, allocations, depreciation, provisions; transfer revenue and expenses to determine business results. |
| Closing and determining balance | At the end of the accounting period, close all accounts to determine the ending balance and serve as a basis for reporting. |
| Prepare a balance sheet | Synthesize data from accounting accounts to compare and check accuracy before preparing financial statements. |
| Prepare financial statements and tax settlement | Complete financial reports (balance sheet, income statement, cash flow statement, etc.) and tax settlement documents as prescribed. |
The table above shows all the steps in the accounting process of FDI enterprises, from summarizing transactions, preparing documents, recording books, to preparing financial statements and tax settlement. Each stage has a key role, closely linked to ensure accuracy, transparency and compliance with Vietnamese laws.
However, during the implementation process, it is difficult to avoid common errors that cause inconsistent financial reports or potential tax risks.
Common mistakes in the accounting process of FDI enterprises
When FDI enterprises violate the accounting process of FDI enterprises such as creating incorrect documents, accounting for incorrect exchange rates or recording invalid expenses, it not only affects the accuracy of financial reports but can also be subject to severe administrative sanctions. Below are common errors in the accounting process of FDI enterprises, as well as specific penalties according to current regulations, helping enterprises clearly understand the risks and proactively prevent them.
Board: Common mistakes in the accounting process of FDI enterprises.
| Violating group | Behavior description | Legal basis | Penalty level |
| Incomplete accounting documents, incorrect content | Not creating, creating missing required information (signature, date, number...), or creating an incorrect form according to regulations. | Article 12, Decree 41/2018/ND-CP (on administrative sanctions for violations in the field of accounting and independent auditing). | Fine of 5 - 10 million VND; forced to re-establish or supplement documents according to regulations. |
| Wrong exchange rate or incorrect accounting principles | Incorrectly applying the recorded exchange rate when foreign currency transactions occur; not adjusting the exchange rate difference at the end of the period. | Clause 2, Article 12, Decree 41/2018/ND-CP | Fine of 10 - 20 million VND; request to adjust accounting books and financial reports. |
| Invalid expense recording | Accounting for expenses that do not serve production and business, do not have valid documents, or do not meet tax deduction conditions. | Article 16, Decree 125/2020/ND-CP; Clause 2, Article 16, Law on Tax Administration 2019. | Collect corporate income tax corresponding to the excluded expenses.
Fine 20% for additional tax (if declared incorrectly). Late payment fee 0.03%/day. |
| Failure to store and provide documents upon request | Failure to fully store or fail to present documents when requested by tax authorities. | Article 8, Decree 125/2020/ND-CP. | Fine of 5 - 15 million VND; in serious cases, tax may be imposed. |
The above errors not only distort accounting data but also directly affect the tax obligations of the enterprise. With the characteristics of multinational operations, FDI enterprises need to pay special attention to checking documents, exchange rates and valid costs. Because even a small error can lead to tax assessment, administrative fines and the risk of extended inspection.
Optimal solution for accounting process of FDI enterprises
In the period of strong digital transformation, perfecting the accounting process of FDI enterprises does not only stop at legal compliance, but also aims at automation, transparency and optimization of operating costs.
- Applying digital transformation in accounting: Helping businesses digitize documents, store data securely and reduce manual errors
- Automate accounting, reporting and risk control processes: Reduce processing time, increase accuracy and support timely financial decision making.
- Professional accounting and financial consulting services: An effective solution for FDI enterprises to ensure compliance and cost control.
With a team of experts with over 30 years of experience in the fields of accounting, auditing and tax, MAN – Master Accountant Network Committed to providing the most optimal and suitable solutions for each FDI enterprise.
Conclude
A properly established accounting process for FDI enterprises not only helps ensure transparency and compliance with Vietnamese law, but is also an important foundation for sustainable business development, limiting tax and audit risks. In the context of increasingly strict tax policies and accounting standards, proactively reviewing and optimizing each step in the process is a must for all FDI enterprises operating in Vietnam.
Contact us now Contact MAN – Master Accountant Network for support and advice on suitable solutions.
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