CIRCULAR

GUIDING THE IMPLEMENTATION OF ACCOUNTING AND AUDITING REGIMES BY VIETNAM-BASED ENTERPRISES AND ORGANIZATIONS WITH FOREIGN CAPITAL

Pursuant to the June 17, 2003 Accounting Law, the Government’s Decree No. 129/2004/ND-CP of May 31, 2004 detailing and guiding the implementation of a number of articles of the Accounting Law in business activities and Decree No. 185/2004/ND-CP of November 4, 2004 on sanctioning administrative violations in the accounting domain.

Pursuant to the June 17, 1996 Law on Foreign Investment in Vietnam, the June 27, 2000 Law Amending a Number of Articles of the Law on Foreign Investment in Vietnam, the Government’s Decree No. 24/2000/ND-CP of July 31, 2000 and Decree No. 27/2003/ND-CP of March 18, 2003 guiding the implementation of the Law on Foreign Investment in Vietnam;

Pursuant to the Government’s Decree No. 48/2000/ND-CP of September 12, 2000 detailing the implementation of the Petroleum Law;

Pursuant to the Government’s Decree No. 42/CP of July 8, 1995 issuing the Regulation on practice of legal consultancy by foreign lawyers’ organizations in Vietnam;

The Ministry of Finance hereby guides the implementation of accounting and auditing regimes by Vietnam-based enterprises and organizations with foreign capital as follows:

I. GENERAL PROVISIONS

1. Subject to this Circular are enterprises and organizations with foreign capital, including:

1.1. Foreign-invested enterprises and organizations; foreign parties to business cooperation under the Law on Foreign Investment in Vietnam;

1.2. Vietnam-based foreign lawyers’ organizations and branches operating under the Regulation on practice of legal consultancy by foreign lawyers’ organizations in Vietnam; commercial branches; organizations and individuals conducting oil and gas prospection and exploitation under the Petroleum

1.3. Enterprises and organizations with foreign capital, which are Vietnam-based resident offices of foreign companies and other foreign organizations and individuals doing business in Vietnam with investments in forms other than those prescribed in the Law on Foreign Investment in Vietnam.

2. All enterprises and organizations with foreign capital, established and operating in Vietnam, must abide by Vietnam’s Accounting Law and documents guiding the implementation thereof; the organization of accounting work must comply with accounting principles, contents and methods as well as methods of elaboration and presentation of financial statements as required by Vietnamese accounting standards and enterprise accounting regime.

3. In cases where international agreements which the Socialist Republic of Vietnam has signed or acceded to contain accounting provisions different from those of Vietnam’s Accounting Law, Vietnamese accounting standards and enterprise accounting regime, the provisions of such international agreements shall apply.

4. When applying the Vietnamese enterprise accounting regime, if enterprises or organizations with foreign capital need no amendments and/or supplements, they shall not have to register the applicable accounting regime with the Finance Ministry.

When applying the Vietnamese enterprise accounting regime, if enterprises or organizations with foreign capital wish to make amendments and/or supplements as prescribed in Section 1.1, Part II of this Circular, they must obtain the Finance Ministry’s written approval beforehand.

5. The annual financial statements of enterprises and organizations with foreign capital must be audited by audit enterprises operating lawfully in Vietnam before they are submitted to competent State agencies. The State encourages enterprises and organizations with foreign capital to have their financial statements audited for the tax purposes.

6. Enterprises and organizations with foreign capital must submit their audited annual financial statements to provincial/municipal Tax Departments, investment- or operation-licensing agencies, provincial/municipal Departments of Statistics, the Finance Ministry and the Vietnamese capital contributors (if any). Enterprises and organizations with foreign capital, that are based in export-processing zones, industrial parks or hi-tech parks, must submit their financial statements to the Management Boards of such export-processing zones, industrial parks or hi-tech parks if so requested.

7. Enterprises and organizations with foreign capital must submit to accounting inspection by finance agencies and specialized management agencies in accounting work according to the provisions of the Accounting Law and each accounting content shall be subject to no more than one inspection in a fiscal year.

8. Enterprises and organizations with foreign capital must organize accounting apparatuses, arrange or hire accountants and chief accountants. In cases where they cannot arrange or hire chief accountants, they must appoint persons to take charge of the accountancy. Such appointment shall be effected for no more than one fiscal year, after that the arrangement or hiring of chief accountants is required. The chief accountants or persons in charge of accountancy must meet all criteria and conditions prescribed in the Accounting Law and the decree guiding the implementation thereof.

9. The monetary unit used in accounting is Vietnam dong (symbolized in Vietnam as “d” or “VND”). In cases where economic or financial transactions arise in foreign currencies, both the original currencies and Vietnam dong must be recorded according to the actual exchange rates (determined on the basis of the exchange rates posted up at foreign currency-trading enterprises or organizations under Vietnamese law provisions) or the exchange rates announced by Vietnam State Bank (the inter-bank average transaction exchange rates), except otherwise prescribed by law.

In cases where an arising transaction involves a foreign currency for which the direct rate of exchange with Vietnam dong is not available, such foreign currency shall be converted into Vietnam dong via another foreign currency for which the rate of exchange with Vietnam dong is available.

Enterprises and organizations with foreign capital, which have revenues and expenditures mostly in foreign currencies, may select one foreign currency as their accounting monetary unit but must obtain the Finance Ministry’s written approval beforehand. Such enterprises and organizations shall make accounting records and financial statements in the foreign currency approved by the Finance Ministry as their accounting monetary unit, which, however, must be converted into Vietnam dong according to the prescribed exchange rate for financial statements submitted to competent State management agencies.

10. The script used in accounting is Vietnamese. In cases where a foreign language should be used in accounting vouchers, books and financial statements in Vietnam, such foreign language must be used together with the Vietnamese language.

11. The numerals used in accounting are Arabic numerals: 0, 1, 2, 3, 4, 5, 6, 7, 8 and 9; following the thousand, million, billion, thousand billion, trillion or billion billion, a dot point (.) is required; for decimals, a commas (,) is required after the numeral representing units.

12. Accounting periods of enterprises and organizations with foreign capital are prescribed as follows:

12.1. An accounting year consists of 12 months, counting from the beginning of January 1 to the end of December 31 of the calendar year.

Enterprises and organizations with organizational or operational particularities may select an accounting year consisting of full 12 months according the calendar year, which lasts from the beginning of the first day of the first month of a quarter to the end of the last day of the last month of the preceding quarter of the subsequent year, and must notify such to provincial/municipal Tax Departments.

After the effective date of this Circular, all cases of registering the accounting year at variance with the above provisions must adjust their accounting year in accordance with this Point’s provisions.

12.2. For newly-founded enterprises or organizations, the first accounting year shall be counted from the date of issuance of the investment license to the end of the last day of the accounting year as prescribed at Point 12.1 above.

12.3. For cases of division, separation, merger, transformation, dissolution, operation termination or bankruptcy, the last accounting year shall be counted from the beginning of the first day of the accounting year to the end of the day preceding the effective date of the decision on division, separation, consolidation, merger, ownership transformation, dissolution, operation termination or bankruptcy of the accounting unit.

12.4. In cases where the first accounting year or the last accounting year is shorter than 90 days, it may be incorporated in the subsequent accounting year or the preceding accounting year for calculation into one accounting year. The first accounting year or the last accounting year shall be 15 months at most.

13. Enterprises and organizations with foreign capital may select accounting software suitable to the Vietnamese accounting regime and need not register it with the Finance Ministry but must fully satisfy the criteria and conditions prescribed by the latter.

14. Enterprises and organizations with foreign capital must archive accounting documents according to the provisions of the Accounting Law and the Government’s decree guiding the implementation thereof.

15. Enterprises and organizations with foreign capital must submit to accounting inspection by competent State agencies. In case of committing acts of administrative violation in the accounting domain, they shall be sanctioned according to the provisions of the Government’s Decree No. 185/2004/ND-CP of November 4, 2004 on sanctioning administrative violations in the accounting domain.

II. A NUMBER OF SPECIFIC PROVISIONS

1. Cases of amending and/or supplementing the accounting regime, which must be approved by the Finance Ministry:

1.1., supplementing the applicable accounting regime:

- Amending the contents and structure of compulsory accounting forms;

- Adding or amending the names, symbols and/or contents of grade-I or grade-II accounts or methods of accounting particular arising economic transactions;

- Amending the contents, order and recording method of accounting books;

- Amending norms of financial statements or altering their structure or elaboration method.

1.2. Using accounting monetary unit other than Vietnam dong;

1.3. Currently applying the Vietnamese accounting regime but wishing to make amendments and/or supplements as prescribed at Point 1.1 of this Section.

1.4. Enterprises and organizations, which have obtained approval for implementation of accounting regimes other than the Vietnamese enterprise accounting regime but now shift to apply the Vietnamese accounting regime with amendments and/or supplements prescribed at Point 1.1 of this Section.

2. Documents of request for amendment and/or supplementation of accounting regimes

In case of requesting amendment and/or supplementation of the applicable accounting regime, an enterprise or organization with foreign capital must prepare three (3) dossier sets, each consisting of:

- A written request for amendment and/or supplementation of the accounting regime; the Finance Ministry’s written approval of the previously applied accounting regime (if any).

- The copy of the investment license or operation permit.

- The written explanations about amendments and/or supplements to the applicable accounting regime. The concerned enterprise or organization must enclose such specific documents requesting the amendment and/or supplementation as accounting vouchers, documents on the system of accounting accounts and accounting books, accounting methods and financial statement system, attached with the forms and explanations about amendments and/or supplements.

The documents amending and/or supplementing the applicable accounting regime that satisfy the set requirements shall be affixed with certification stamps of the Finance Ministry before circulation:

- One set: To be kept at the Finance Ministry (Accounting and Auditing Department);

- One set: To be kept at the concerned provincial/municipal Tax Department;

- One set: To be kept at the concerned enterprise or organization.

3. Time limit for reply

- Within 20 days after fully receiving official dispatches and documents on amendment and/or supplementation of accounting regimes of enterprises or organizations with foreign capital, the Finance Ministry shall give official written replies.

- In cases where documents of the enterprises or organizations are incomplete or unclear according to the provisions of Section 2, Part II of this Circular, the Finance Ministry shall request them to explain and supplement the documents. The time for enterprises or organizations to make explanation or documentary supplementation shall not be accounted into the above-mentioned reply time limit.

III. ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its publication in the Official Gazette and replaces the Finance Ministry’s Circular No. 60-TC/CDKT of September 1, 1997 guiding the performance of accounting and auditing work by Vietnam-based enterprises and organizations with foreign capital and Circular No. 155/1998/TT-BTC of December 8, 1998 amending and supplementing Circular No. 60-TC/CDKT.

All regulations that are contrary to this Circular’s provisions are hereby annulled.

Any difficulty or problem arising in the course of implementation should be reported to the Finance Ministry for study and settlement.

APPENDIX 01

To: The Ministry of Finance

(The Department for Accounting and Audit Regimes)

- Pursuant to the Finance Ministry's Circular No. 122/2004/TT-BTC of December 22, 2004, guiding the implementation of accounting and audit regimes in foreign-invested enterprises and organizations operating in Vietnam.

Name of company

Domain of operation

Under investment license (operation permit)

Hereby agrees to apply the accounting regime with the following contents:

1. The accounting regime to be applied: The accounting system applicable to Vietnamese enterprises

For the domain of operation: ……….. (

2. Proposed amendments:

2.1. Contents of the accounting regime:

- Initial documents: (Enclosed with amended documents)

- Accounts: (Enclosed with amended documents)

- Accounting books: (One of the following four forms of accounting shall be selected: general diary, book-entry document, diary-document, diary-ledger, enclosed with amended documents).

- Financial statements: Accounting balance sheet, report on business results, report on cash flow, financial statement explanation (enclosed with amended documents).

2.2. Currency used in accounting: ……..

2.3. Annual accounting period (in case of any change)

- First annual accounting period: From … to …

- Subsequent annual accounting period: From … to… every year.

3. Other provisions on accounting: the Accounting Law and its guiding documents, and current regulations.

(Notes:

- For the contents of Point 2, the unit shall only write down the proposed amendments.

- The enterprise or organization shall enclose copies of its investment license or operation permit and the Finance Ministry's Official Letter approving the former accounting regime (if any)).

The Finance Ministry's consideration and approval will be appreciated.