Annual Compliance and Audit

Transcription

1 Issue 13 December 2012 VIETNAM BRIEFING The Practical Application of Vietnam Business From Dezan Shira & Associates Annual Compliance and Audit Introducing INCLUDING Annual Reporting for Foreign-owned Enterprises (FOEs) Annual Reporting for Representative Offices (ROs) Annual Tax Finalization and Annual Financial Statements for FOEs Q&A: What needs to be done for social insurance finalization at year-end? ASEAN Briefing Scan this QR code with your smartphone to visit:

2 Notes In Vietnam, the standard tax year is typically the calendar year, and therefore the deadline for foreign-owned entities to submit audited financial reports to the relevant authorities is March 31. These reports are generally submitted to licensing authorities (i.e. Department of Planning and Investment or the board of management of an industrial zone/export processing zone/ economic zone/hi-tech zone), as well as the Statistical Office of the city/province where the company is located. Hoang Thu Huyen Manager Dezan Shira & Associates Hanoi Office As the legally permissible business lines for ROs differ from foreign-owned entities (FOEs), namely that ROs are not allowed to directly conduct profit-generated business activities, therefore the annual reporting requirements are different for ROs as well. Prior to the final working day of January of the following year, ROs must submit a report their operations during the previous year to the Department of Industry and Trade in the province in which the RO is based. In this issue of Vietnam Briefing, we address a number of annual compliance topics relevant to foreign investors in Vietnam. Namely, annual reporting for foreign-owned enterprises and representative offices, as well as annual tax finalization (corporate income tax and personal income tax), and annual financial statements (structure, general accounting treatments, deductible expenditures, submission). For annual compliance, audit and related accounting questions, please contact Dezan Shira & Associates by ing vietnam@dezshira.com or visiting Warm regards, Asia Briefing editor@asiabriefingmedia.com Questions? Connect directly to professionals specializing in the topic at hand.? Vietnam Briefing News Read related news and commentaries on All materials and contents 2012 Asia Briefing Ltd. No reproduction, copying or translation of materials without prior permission of the publisher. Related Reading Find publications related to this topic at Regulatory Updates Keep current on regulatory changes with updates on International Perspective Learn about this topic in other Asian jurisdictions, including India and China. Podcasts Listen to an expert weigh in and provide an on-the-ground perspective. Introducing ASEAN Briefing is coming January of 2013 Asia Briefing Ltd. is proud to announce the launch of ASEAN Briefing, covering foreign direct investment news, commentary and advice relating to doing business both with and within the Association of Southeast Asian Nations (ASEAN): Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam Scan this QR code to visit the ASEAN Briefing website. 2 - VIETNAM BRIEFING 2012

3 Issue 12 December 2012 Contents Audit Report on Production and Business Activities p.4 Form 04-CS/SXKD Business lines Labor Taxes Annual Reporting for Foreign-owned Enterprises The Vietnamese government manages and controls all business operating activities of foreign-owned enterprises (FOE) through... p.6 PIT Finalization Dossier Submission Details Representative Office Wholly Foreignowned Enterprises Annual Reporting for Representative Offices As the legally permissible business lines for ROs differ from foreign-owned entities (FOEs), namely ROs are not allowed to directly conduct profit-generated business activities, the annual reporting requirements... Within 90 days of the end of the financial year, all foreign-owned enterprises in Vietnam must submit audited financial reports to tax authorities, licensing authorities, as well as the Statistical Office of the city/province where the company is located. p.7 Vietnamese Accounting Standards (VAS) Annual Tax Finalization and Annual Financial Statements for FOEs At the end of the year, In addition to completing corporate income tax (CIT) finalization, enterprises must complete... News at Vietnam-Briefing.com Nov 29 Vietnam s Compliance Requirements Nov 28 Vietnam Introduces New Visa Application Fees and Procedures Nov 27 Call for European Investors in the Oil and Gas Sector Nov 19 Vietnam s 2012 CPI Estimated at 8% Oct 31 Corporate Income Tax in Vietnam Scan this QR code with your smartphone to download the Asia Briefing mobile application VIETNAM BRIEFING - 3

4 Annual Reporting for Foreign-owned Enterprises (FOEs) The Vietnamese government manages and controls all business operating activities of foreign-owned enterprises (FOE) through a report regime, with required monthly, quarterly, 6 month and annual reports. This article provides an overview of the annual reports that an enterprise must conduct and submit to relevant state authorities, including: Annual report types; and Required report forms and details. Annual Report Types Enterprises report on their business activities corresponding with their registered business lines. For example, enterprises that operate in construction should report on construction activities, ones which operate in wholesaling, retailing, repairing of automobiles, motorcycles and other motor vehicles shall make reports on trading activities, etc. Required report forms and details are listed in the accompanying table. All FOEs must submit a Repor t on Production and Business Activities and a Report on Charter Capital Contribution. This paperwork includes information on the enterprise s capital status, labor status, and result of business/production activities. These reports are generally submitted to licensing authorities (i.e. Department of Planning and Investment or the board of management of an industrial zone/export processing zone/economic zone/hi-tech zone), as well as the Statistical Office of the city/province where the company is located. Within 90 days of the end of the financial year, all FOEs in Vietnam must have an independent audit. The audit report needs to be sent to the licensing authorities (i.e. Department of Planning and Investment or the board of management of an industrial zone/export processing zone/economic zone/hi-tech zone), local tax agency, the Statistical Office and other agencies as Annual Financial Report Contents Statement of income Statement of financial position Statement of changes in equity (if any) Statement of cash flow Balance sheet Notes required by law. This report will also need to be resubmitted if a company at any point in the year wants to amend its investment certificate. Most annual reports are required to be submitted on March 31 of the following year. Some enterprises that operate under business lines relating to agricultural activities are required to submit an estimated half year and yearly report on June 12 and Dec 12 respectively. Additionally, those enterprises will need to make an official report for the whole year and send it to the relevant authorities on Jan 25 of the following year. General Contents of Two Mandatory Reports for All FOEs Report on Production and Business Activities Form 04-CS/SXKD Actual operating business lines Labor (number, turnover, etc.) Labor income and employer payments of social insurance, health insurance, unemployment insurance, and trade union fee Production and business activity results (revenue, profit, cost, etc.) Taxes and other amounts payable to the state Report on Charter Capital Contribution Form 04-CD/GVDL Initial registered charter capital Current registered charter capital Implemented charter capital in the reporting year Charter capital accumulated to the end of the year 4 - VIETNAM BRIEFING 2012

5 Annual Reporting for Foreign-owned Enterprises (FOEs) Form Form Code Reporting Term Report on Production and Business Activities Report on Industrial Production Activities Report on Construction Activities Required Report Forms and Details Date of Receiving Report Report Recipient Application Domain/FOE Statistical DPI or BOM of Registered Business Line Office in city/ IZ, EPZ, EZ, Hitech province Zone 04-CS/SXKD year March 31 of following year x x All FOEs 04-CS/SXCN year March 31 of following year x FOE with industrial production activities 04-CS/HĐXD year March 31 of following year x FOE with construction activities Report on Trading Activities 04-CS/HĐTM year March 31 of following year x FOE with wholesales, retail activities; repair of automobiles, motorcycles and other motor vehicles Report on Other Service Business Activities 04-CS/HĐDV year March 31 of following year x FOE other service business activities Report on Transportation and Warehouse Activities Report on Accommodation Service Activities Report on Food and Beverage Service Activities Report on Travel and Tourism Activities Report on Information Technology Service Activities Report on Charter Capital Contribution Report on Size, Productivity, Output Of Agricultural Plants Report on Quantity and Livestock Product Report on Forest Planting, Tending 04-CS/VTKB year March 31 of following year x FOE with transportation and warehouse activities 04-CS/HĐLT year March 31 of following year x FOE with accommodation service activities 04-CS/DVAU year March 31 of following year x FOE with food and beverage service activities 04-CS/DLLH year March 31 of following year x FOE with travel and tourism activities and supporting activities for tourism 04-CS/CNTT year March 31 of following year x FOE with information technology service activities 04-CS/GVĐL year March 31 of following year x x All FOEs 04-CS/SLNN 04-CS/SPCN 04-CS/KTLS - 6 month estimation - year - 6 month - year 6 month estimation - year Report on Aquaculture 04-CS/NTTS - 6 month - year Report on Fisheries Exploitation Report on Performance Of Waste Collection and Treatment Report on Export Of Goods Activities Report on Import Of Goods Activities Report on Receiving Income Activities Generated From Services From Abroad Report on Spending/Paying Activities Generated From Services For Abroad Report on Works and Work Items Carried Out In The Year 04-CS/KTTS - 6 month - year - 6 month estimation; June 12 - year: December 12 - official yearly report: January 25 of following year Apr 12 Oct 12-6 month estimation; June 12 - year: December 12 - official yearly report: January 25 of following year - 6 month estimation; June 12 - year: December 12 - official yearly report: January 25 of following year - 6 month estimation; June 12 - year: December 12 - official yearly report: January 25 of following year x x x x x FOE with farming activities FOE with livestock activities FOE with forestry activities FOE with aquaculture activities FOE with fisheries exploitation activities 04-CS/TGRT year March 31 of following year x FOE registered with waste collection and treatment activities 04-CS/XKHH year March 31 of following year x FOE registered with activities of export of goods 04-CS/NKHH year March 31 of following year x FOE registered with activities of import of goods 04-CS/XKDV year March 31 of following year x FOE with activities of receiving income generated from services from abroad 04-CS/NKDV year March 31 of following year x FOE with activities of spending/ paying generated from services for abroad 04-CS/SPXD year March 31 of following year x FOE with construction activities All forms are attached in Circular No. 04/2011/TT-BKHĐT issued by the Ministry of Planning and Investment 2012 VIETNAM BRIEFING - 5

6 Annual Reporting for Representative Offices (ROs) One of the simplest and most common ways for foreign businesses to develop a presence in the potential market is to open representative offices (ROs). As the legally permissible business lines for ROs differ from foreign-owned entities (FOEs), namely that ROs are not allowed to directly conduct profit-generated business activities, therefore the annual reporting requirements are different for ROs as well. Prior to the final working day of January of the following year, ROs must submit a report of their operations during the previous year to the Department of Industry and Trade in the province in which the RO is based. This report, which must follow a form issued by the Ministry of Industry and Trade, is generally comprised of the information described here, namely: basic information, human resources situation, and annual operation activities. In addition, ROs should handle personal income tax finalization and annual social insurance obligations. Basic Information Basic information about the RO to be stated in the report includes: Full name In the case that foreign businesses have only one RO in Vietnam, the name of the RO can include the word:... in Vietnam. In the case that foreign businesses have more than one RO in Vietnam, the name of each RO must include the word showing the city or province where ROs are located, i.e. RO in Hanoi should have the name:... in Hanoi, Vietnam. Address This must be the address shown in the license of the Representative Office. In case the RO changes the address, authorities may pass by without prior notice to check whether or not the RO actually operates at that address. Telephone and fax number (if any) Bank account details of a bank registered and operating in Vietnam. Human Resources Situation The annual RO report should state the policies which an RO applies for employees such as salary, bonus, insurance and other operations. During operation, the human resources situation of an RO can change for different reasons, such as the Chief Representative of the RO returning to their country, the resignation of employees, or the recruitment of new employees. If there are any changes relating to the number of employees in an RO, the RO must report these changes to competent authorities for their update within 10 working days. The report should declare the number of Vietnamese staff and the number of foreign staff with information of their full name, gender, nationalities, identity card/passport number, date and place of issuing, position, etc. Annual Operation Activities An RO has to report its operation status for the preceding year as applicable in the accompanying table. Other activities such as advertising, fair, exhibition, display or other social activities (if any) should also be stated in the report. RO Annual Operation Activities Operation Vietnamese partner Goods Agreement Implementation Value (US$) Estimate for next year Market (country) Note 1. Export contract promotion 2. Import contract promotion 3. Bilateral processing agreement promotion 4. Bilateral service providing promotion (SAMPLE TABLE) 5. Corporation project promotion 6. Market research 6 - VIETNAM BRIEFING 2012

7 Annual Reporting for Representative Offices (ROs) At the bottom of the report, the RO should provide an evaluation on its operation activities during the year as well as recommendations for the next year. This report has to be made following Form BC 1 attached to Ministry of Industry and Trade Circular 11/2006/TT-BTM dated September 28, PIT Finalization An RO is responsible for declaring and paying personal income tax (PIT) on behalf of its employees throughout the year and conducting PIT tax finalization procedures on their behalf at the end of the year. PIT finalization procedures for ROs are similar to the procedures of an FOE, with two major differences. The first is that ROs must submit this documentation within 90 days of the end of the calendar year, while WFOEs must do so within 90 days of the end of the fiscal year (which may be different from the calendar year). Furthermore, ROs must submit a tax finalization dossier in the licensing agency, i.e. the Department of Trade and Industry of the province in which the RO is based, rather than the Department of Tax for that province. Social Insurance As with WFOEs, the only related activity that ROs must conduct at the end of the year is the distribution of health insurance cards to employees. PIT Finalization Dossier Submission Details Item Representative Office Wholly Foreign-owned Enterprises Deadline for submission of PIT finalization Competent body No later than 90 days from the ending date of a calendar year. Department of Trade and Industry in the city/ province where the RO is located. No later than 90 days from the ending date of fiscal year. For a WFOE, the fiscal year can be different from the calendar year. Department of Tax in the province/city where the company is located. Annual Tax Finalization and Annual Financial Statements for FOEs Annual Tax Finalization At the end of the year, in addition to completing corporate income tax (CIT) finalization, enterprises must complete personal income tax (PIT) on behalf of their employees. Following the finalization process at the end of the fiscal year, or when terminating the investment project in Vietnam, foreign investors are allowed to remit profits abroad. Corporate Income Tax Although corporate income tax (CIT) is declared and paid quarterly, enterprises must still conduct CIT finalization at the end of the year. The standard tax year is the duration of one calendar year. If a different year is applied, the enterprise must inform the local tax agency. If no tax liability arises during this period, or the enterprise is eligible for incentives and/ or tax deductions, the enterprise must still complete tax filings with the competent tax authorities in accordance with the prescribed time limit (unless tax-generated activities are terminated or the enterprise has ceased business operations and no tax responsibilities have arisen). Taxable income includes any income from production, trading activities, services and other income, whether or not that income has been generated within Vietnam. The enterprises with production/trading activities and/or services that generate a taxable income qualify as taxpayers. Taxpayers must calculate the payable tax, unless in special cases where the tax agency has fixed or determined the tax amount in accordance to the laws on tax management. Taxpayers are required to prepare an annual CIT return which must include a section for making adjustments between accounting profits and taxable profits. The total amount of CIT should be finalized after the addition or deduction of any elements that cannot be declared in the quarterly declaration, such as takeover of unexpected expenses or profits, and reporting losses of previous years. If the taxpayer has depending branches 2012 VIETNAM BRIEFING - 7

8 Annual Tax Finalization and Annual Financial Statements for FOEs in different provinces, it should submit only one CIT finalization dossier. However, manufacturing enterprises must allocate the payable tax amount to the tax agencies in provinces where the branches are located depending on the expenditure portion of each branch of the enterprise. A CIT return should include the following: CIT finalization statement (form 03/TNDN) issued with Ministry of Finance circular 28/2011/TT-BTC on February 28, 2011; The annual financial statements and other related documents; and One or more annexes enclosed with the declaration (depending on the actual arising of the enterprises). The deadline for submission of CIT finalization paperwork is 90 days before the end of the fiscal year. The deadline for filling tax finalization for cases of operation termination, contract termination, and corporate ownership transformation is 45 days since the first day that such changes were made. Enterprise Types Receiving a 30 Percent CIT Reduction in 2012 Medium and small enterprises (excluding those that are involved in lottery, real estate, securities, finance, banking, or insurance; businesses that are producing goods or providing services subject to special consumption tax; first-class enterprises, or special-class enterprises belonging to economic corporation and general companies); and T h e e n t e r p r i s e s w h i c h u s e intensive-labor operating in the field of manufacture, processing of agricultural products, forestry products, aquacultural products, textile and garments, leather and footwear, electronic components; building socio-economic infrastructural constructions. In case of unavoidable accidents such as fire, natural disasters, and any other unforeseen event that prevents the taxpayer from filling on time, the head of the tax agency can extend the deadline up to 60 days. Outstanding CIT should be paid at the same time as the annual CIT finalization statement is submitted to the relevant tax department. If an enterprise registers a digital signature for its legal representative, the annual CIT statement can be submitted online. Due to the difficulty of global economic crisis, the Vietnam government issued a resolution that enables enterprises to enjoy a CIT reduction for the year 2012, shown in the accompanying table. P e r s o n a l I n c o m e T a x Finalization Documents PIT Finalization Statement* The list of taxable income and tax deducted from salaries and wages of the resident individual who is engaged in an employment contract* The list of taxable income and tax deducted from salaries and wages of the resident individual who does not have an employment contract, or has an employment contract with a period of less than 3 months, and non-resident individuals* Annex about PIT reductions or exemptions (if any) Personal Income Tax FOEs, as employers, are responsible for the declaration and finalization of personal income tax (PIT) for their employees which is deducted from their salaries and wages throughout the year. The deadline for submission of the PIT finalization dossier is no later than 90 days from the end of the calendar year. The dossier must be sent to the tax officer that directly manages the enterprises; in this case it is usually the department of tax in the province/city unless a tax agency authorizes another state body to collect tax. In special cases where enterprises are consolidated or merged, they must do the PIT finalization for the deducted tax in advance of the change and provide a voucher to employees for their PIT finalization at the end of the year. * Form No 05/KK-TNCN, 05A/KK-TNCN, and 05B/ KK-TNCN issued with Ministry of Finance Circular 28/2011/TT-BTC, February 28, 2011 In the year 2012, the government issued another policy to support laborers by exempting PIT for the people who receive low salaries or wages for the last six months of Specifically, PIT exemptions are granted from July 1 to December 31, 2012 for individuals earning taxable incomes from salaries, wages and business that belong to the Level 1 of the partially progressive tariff regulated in PIT Laws (lower than VND5 million/month). Profit Remittance Profit remittance can be done following tax finalization, or when terminating the investment project in Vietnam, in cash or in kind, if the FOE has not accumulated losses. Offshore remittance of profits in cash must comply with the laws on foreign exchange management; offshore remittance of profits in kind and conversion of their value must comply with the law on import and export of goods and other relevant laws. The relevant tax officer must be notified of the plan of profit remittance at least 7 working days before the scheduled transferring. Annual Financial Statements All foreign-owned enterprises (FOEs) in Vietnam are required to prepare annual financial statements for annual audit. These statements, which must be in accordance with the Vietnamese Accounting Standards (VAS), should include balance sheets, income statements, and cash flow statements. 8 - VIETNAM BRIEFING 2012

9 Annual Tax Finalization and Annual Financial Statements for FOEs Annual financial statements are required to be audited by an independent auditing firm registered in Vietnam under Vietnamese law, and the audited reports shall be completed and submitted to the relevant authorities within 90 days after the end of the fiscal year. Here, we will take a look at what to pay attention to in preparation and submission of audited reports in Vietnam, including: Structure of statutory audited financial reports General accounting treatments on significant independent audit areas General treatments on significant tax audit areas Audited financial statements submission Structure of Statutory Audited Financial Reports In general, statutory audited reports for FIEs in Vietnam should include 3 parts: Summary of the main business activities of the FIE, including the investment license number, registered capital, name and history of BOM, and the history of amending investment license. The most important of these is the CPA and FIE s legal representative s comment on limitation for responsibilities on accuracy of the financial report and continuous operation or other business activities Financial Reports including balance sheets, income statements and cash flow A detailed breakdown of financial reports as well as comments on any other relevant information. General Accounting Treatments on Significant Independent Audit Areas Trade debtors/trade creditors Enterprises should provide reasonable debt provisions according to the ending balance of their accounts receivable and must comply with the instructions from MOF. Balance confirmations are used as an important factor, especially on foreign currency other than Vietnam Dong. Fixed assets All fixed assets of an FIE should be recorded. There are specific regulations that must be followed regarding what will be capitalized. Any items currently under construction should be transferred into fixed assets once they are put into use. Intangible assets can be amortized on a straight-line basis, declining balance basis or productivity basis over the beneficiary or investment period within the registered given useful life range (as listed below). Intangible assets should be recognized and recorded at an objective value, i.e. for purchased assets at the purchase price, for self-built assets at cost except for research expenses. Annex under Circular No. 203/2009/TT- BTC allows FIEs to decide the length of useful life within stipulated ranges. Pre-operating Expenses Expenses and exchange losses for FIEs during the start-up period can be charged to the profit and loss account in one lump sum during the first month, or amortized within 36 months after commencing operations. Pre-operating expenses refer to all relevant expenses incurred before the establishment of the business. This could include costs for research, exploration, market surveys, investment projects, established businesses, project appraisal, established meetings, etc. along with the valid legal documents (VAT invoice, sub-contract, etc.). These expenses will be considered non-deductible if not accompanied by valid legal documents. These kinds of payments must all fall under written authorization to organizations and individuals who make the payment for certain expenses, purchase of goods, supplies, related to the establishment of business, and the payment must be done via bank transfer for all bills worth twenty million VND or more. Reserve Funds Appropriations to all funds should be made in accordance with the articles of association and a board resolution. Provision for reserve funds must be computerized and strictly follow guidance from the Ministry of Finance. Special Attention to Inventories For both trading and manufacturing companies, inventories must form a significant proportion of total assets, and auditors will therefore pay close attention to the existence and valuation of such stocks. The inventories valuation should be clearly identified from the purchase invoices or cost calculation sheet, but auditors will also take care to confirm the existence of the inventory and how stocktake is carried out. In conducting stocktake, the following steps should be followed: a. Observe whether the stocks are neatly kept, whether bins are properly labeled, and whether large items are properly piled and marked. b. Check that counting is systematic and that precautions are taken to ensure everything is counted accurately. c. Pay attention to high-value items. d. Investigate whether discrepancies arise between the physical count and stock records. e. Note any items that appear to be damaged, obsolete or slow moving, in order to ascertain whether adequate provisions for loss have been made. Some FIEs may have missed the stocktake at the end of the year. If so, roll-back procedures can also be carried out to check the stock movements in the intervening period and ensure the year-end balance. FIFO stock valuation is recommended in Vietnam. General Accounting Treatments on Significant Tax Audit Areas Tax year The current CIT regulations provide that the 2012 VIETNAM BRIEFING - 9

10 Annual Tax Finalization and Annual Financial Statements for FOEs basis period for the tax year can be either the calendar or fiscal year. The maximum length for a single tax year is 15 months; any period of time that is more than 15 months should be separated into a second tax year. For example, if the first year s operation begins on Aug 1, and the company uses a calendar year for reporting, then they should have two separate tax years: the first being from Aug 1 to Dec 31, and the second from Jan 1 to Dec 31 of the following year. Loss carry forward When a tax finalization report for the fiscal year is done, the company should determine the losses and transfer all to the following year. Losses must be carried forward in a consecutive manner and should not exceed 5 years. Losses in a different quarter of the fiscal year can be offset to the following quarter of the same fiscal year. Revenue The revenue to calculate taxable income is the total proceeds from the sale of goods, processing amount, and services supply amount, including price subsidies, surcharges or anything else that enterprises are entitled to enjoy regardless of the collection or non-collection of money. FIEs need to pay attention to the time for revenue determination in order to calculate taxable income. For example, the time of invoicing service supply occurs before the time of services completion. The time for determining the taxable revenue shall be calculated according to the time of invoicing service supply. When calculating the taxable income regarding goods and services sold under the installment and deferment method, goods and services used for exchange, donations, offerings and internal consumption (excluding goods and services used to continue the process of production and business of the enterprise), all exceptions will be instructed clearly in the Circular 123/2012/TT-BTC by MOF which has been modified to meet the open information for investment trends and global business. Deductible and nondeductible expenditures upon determination of taxable income FIEs and local enterprises alike shall be deducted of all expenditures if they satisfy the conditions pertaining to production and business activities, and/or have the adequate legal invoices or documents under regulations of the law. Some kinds of expenditures that fully meet the above conditions are still considered to be nondeductible expenditures upon determination of taxable income if they fall into some specified cases, shown in the accompanying table. Audited Financial Statements Submission Within 90 days after the end of the fiscal year, FIEs need to prepare and submit audited reports to three different government departments: 1. Provincial Department of Planning and Investment (DPI) or Provincial-level Export Processing and Industrial Zone Department in case FIEs are based in IZ or EPZ 2. Provincial-level Tax Department 3. Provincial-level Statistical Office Those authorities will confirm their receipt by placing an incoming stamp directly on one copy of submitted reports. Regardless of the number of FIE branches in one city or province, the FIEs only have to submit once at their base. FIEs which fail to comply with the deadline to submit audited financial statements may be fined. These kinds of fines are clearly outlined in Decision No. 39/2011/NĐ-CP and amended with details described in Circular No. 169/2011/TT-BTC, where the fine for late submission could be from VND6,500,000 to VND10,000,000. Non-deductible Expenditures: Specific Cases Some kinds of expenditures that otherwise fully meet deductible conditions are still considered to be nondeductible upon determination of taxable income if they fall into some specified cases, including: Expenditures related to the value of loss caused by natural disaster, epidemic, fire and other unforeseen c i r c u m s t a n c e s w i t h o u t a n y compensation; Expenses for raw materials, supplies, fuel, energy and goods in excess of reasonable consumption; Payment of salaries, wages and other amounts payable to employees that the enterprises have accounted in business expenses, but have not made payments, or do not have payment vouchers as prescribed by law; Premium of life insurance for employees not specified within the conditions for entitlement and rate of entitlement in one of the following dossiers: labor contract, collective labor agreement, regulation on finance of company, corporation, group; Reward regulations regulated by the chairman of the board of directors, general director and director under the financial regulation of the company and corporation and further more in the related instruction Circular. These kinds of expenditures are clearly instructed by the related Circular 123/2012/TT-BTC issued by MOF VIETNAM BRIEFING 2012

11 Further Resources Q & A What needs to be done for social insurance finalization at year-end? As social insurance, health insurance, and unemployment insurance are calculated and paid monthly, the only related activity that must be conducted at the end of the year is the distribution of health insurance cards to employees. Bearers of compulsory health insurance cards are entitled to the health insurance regime for medical examination, as well as inpatient and outpatient treatment at authorized medical establishments. Compulsory health insurance cards are normally valid for one year and should be renewed at the end of each calendar year. Before the end of the year, the social insurance officer will send a letter to each company instructing how to make a list of employees eligible for issuing a new health insurance card. Card holders can chose one of the authorized medical establishments as the initial medical checking clinic, and it shall be indicated in the card. Foreign employees working in Vietnam under labor contracts with indefinite terms, or a definite term of over three months, are subject to the mandatory health insurance scheme in the same manner as Vietnamese staff. The monthly health insurance premium is equal to 4.5 percent of employees monthly salaries or wages, of which 3 percent shall be paid by employers and 1.5 percent by employees. For Vietnamese staff and foreign staff with a labor contract term over three months, compulsory health insurance cards are normally valid for one year and should be renewed at the end of each calendar year.? Rates for Employee and Employee by Insurance Type Items Social insurance Heath insurance Unemployment insurance Employee 7% 1.5% 1% Employer 17% 3% 1% Questions on doing business in Vietnam? vietnam@dezshira.com. Selected questions will be answered here or at Related Reading Doing Business in Vietnam (173 page guide, released March 2012) US$50 An accessible compilation of the practical information you need for doing business in the region. 1. Introduction to Vietnam 2. Conducting Business in Vietnam 3. Vietnam s Regions Asia Briefing Ltd. is proud to announce the launch of its latest regional publishing title, ASEAN Briefing, covering foreign direct investment news, commentary and advice relating to doing business both with and within the economic organization known as the Association of Southeast Asian Nations (ASEAN). Read more at: VIETNAM BRIEFING - 11

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