Viet Nam - A Guide for Business and Investment - asean-korea centre

PART III. BUSINESS AND FOREIGN INVESTMENT ENVIRONMENTa consecutive 12 month period is considered as nonresidentin Vietnam. Non-residents are subject to a25% tax rate on Viet Nam-sourced income. However,this will need to be also considered in light of the provisionsof any DTAs that may apply.Vietnamese nationals working in Viet Nam are subjectto PIT rate up to 40%.There is 5% on the income from technological transferof more than VND15 million for each contract and10% on the income from lottery winnings of more thanVND15 million for each winning.From the strict reading of the PIT regulations all fringebenefits are taxable. However, there is an exceptionfor staff training fees, airfare for expatriate employeesto home country, school fee for expatriates’ childrenpaid directly to school in Vietnam.Expatriates or foreign individuals working in Vietnamare allowed to transfer their income abroad after incometax and other payroll withholdings have beenpaid.There are certain tax exempt categories, such as attractionallowance for working in remote areas/areaswith difficult conditions, hardship allowance for toxic,hard, dangerous jobs, etc.There is a general requirement to withhold 10% PITfrom payments to individuals who are not employees.Social security and health insuranceThe employer must contribute 15% of the salary andcertain allowances stated in the labour contracts forVietnamese employees for social security purposes.The employee has to contribute 5%.Additionally, health insurance contribution in respectof Vietnamese employees is also required at 1% forthe employee’s contribution and 2% for the employer’scontribution.Accounting Standards and tailored specifically for theVietnamese situation. The new Vietnamese AccountingSystem (VAS) comprises 4 components: (i) a chart ofaccounts with detailed accounting guidelines, (ii) financialreports system, (iii) accounting voucher system,and (iv) accounting books system. Application of VASis compulsory for all businesses operating in Viet Nam,with certain exceptions in specialised areas.In March 2002, the first four accounting standardswere introduced as a step towards the move to a moretransparent financial management system. The Ministryof Finance intends to implement all accountingstandards by the end of 2003.The measurement units used for statistical and accountingpurposes should be the units applicable inViet Nam. Accounts should be described in the Vietnameselanguage using Vietnamese Dong. However,other languages and foreign currencies may be usedwith the agreement of the parties and subject to theapproval of the Ministry of Finance.According to Vietnamese law, the Chief Accountant,not the Board of Directors of a business entity is responsiblefor the accuracy of the financial statementsof the entity. A statutory audit is only compulsory forforeign invested enterprises and commercial banks.Large state-owned enterprises are encouraged tohave their accounts audited.Quarterly financial statements should be submittedwithin 15 days of the end of the quarter, and annualfinancial statements should be audited and submittedwithin three months of the end of the year.There are 16 accounting firms operating in Viet Namincluding foreign invested, state-owned and privatedomestic companies. Viet Nam is in the process of developingauditing standards. As of 30 November 2004,Vietnam has issued 16 accounting standards and 27auditing standards which are modelled after the internationalstandards with some changes to suit the domesticsituation.9. Accounting and Auditing10. Banking and FinanceIn December 1994, a new accounting system for businessentities was introduced based on the InternationalVietnam’s credit institutions comprise State-ownedbanks, joint-stock banks, joint venture banks, 100% for-40 Viet Nam - A Guide for Business and Investment