Accounting For International Business in Vietnam

A robust accounting system is essential for every business, especially foreign-invested companies (FDI) in Vietnam. Without a professional accounting system, it is easy for FDI companies to make mistakes in the following stages: preparing and submitting financial statements, making declarations, and paying tax or other accounting tax procedures. So should FDI companies build an internal accounting system or outsource accounting for international business? Let’s follow the article below with LTS LAW!

What is internal accounting, and what does an internal accountant do?

• Internal accounting can be known as management accounting. This department handles all issues related to tax, accounting, and finance of the company, based on the documents of each period that the internal accountant will evaluate to determine the company’s actual profit and loss.
• In addition to those related to records, accounting books, invoices, tax declarations, and internal revenue and expenditure accounting, the internal accountant is responsible for making statistics, analyzing data on the company’s business situation, and giving advice to the Board of Directors.
• Internal accounting may include revenue and expenditure accountants, warehouse accountants, banking accountants, payroll accountants, sales accountants, debt accountants, general accountants, chief accountants, and internal controllers… Depending on the size of each company, it will be divided into many different departments, or there may be only one internal accountant in charge of all tasks.

It is these errors that will cause considerable damage to the business operations of the company. Not only is it costly and resource-consuming, but it can also cause the business to be suspended or stripped of its business license. Therefore, FDI companies in Vietnam need to choose a reputable, professional service unit and be incredibly knowledgeable about multinational accounting.

Should FDI companies use external accounting services or use internal accounting?

Many FDI companies in Vietnam are still wondering “Should they set up an internal accounting system or outsourced accounting services for foreign companies?”. To find out the answer, let’s carefully consider the following criteria with LTS LAW:

Costs for internal accounting and costs for outsourcing accounting services

Internal accountants of FDI companies are often paid a reasonably high salary, an average of about 15-20 million VND per month. This salary does not include other allowances such as bonuses, social insurance, and other benefits. Building a complete and professional accounting department also takes a lot of time and costs, including personnel training costs, equipment investment costs – accounting software to support professional operations, accounting, office rental costs, electricity and water, and management costs… The costs will increase accordingly if a company has many internal accounting departments.

In contrast, outsourced accounting for international business only cost about 35% to 50% of the above costs. The company will significantly reduce the above costs. Thereby focusing resources on the business activities of the company.

About accounting personnel

FDI enterprises that want to build a professional internal accounting department will need much time to train personnel and build working processes. The human resource system may also experience many changes: employees leave work or take maternity leave, which consumes much time in handing over and training new personnel.

With outsourced accounting services for foreign companies, the agency always arranges personnel in charge of accounting work efficiently and timely, ensuring the proper work schedule.

About Responsibility

With errors in the process of performing accounting operations by internal staff, the company will have to bear all risks. In contrast, accounting for international business service will work directly with competent state agencies on accounting operations. Therefore, when any errors occur, the service provider will also be responsible for and compensate for damage according to the signed contract.

Professionalism

If FDI companies recruit new and inexperienced accountants, it will take a long time to train staff. On the contrary, if hiring a professional accountant with extensive experience, the salary paid will be very high.

In the case of using complete accounting services for foreign companies, clients only need to pay a reasonable cost. However, the quality and progress of the work are still guaranteed because a team of professional accountants with extensive experience in the field performs all operations. In the face of arising problems, service providers also quickly provide appropriate and timely handling.

Conclusion: Internal accounting is suitable for FDI companies or large-scale corporations with a professional accounting apparatus, strictly complying with processes and standards. However, besides internal accounting, the company can also outsource accounting services to ensure compliance and accuracy in tax declaration and minimize tax and accounting risks.

Outsourcing accounting for international business services are very suitable for small and medium-sized FDI companies that have not yet built a professional accounting apparatus to save initial investment costs and limit tax and accounting risks. At this time, outsourcing accounting services for foreign companies will be the optimal measure to keep business costs and improve work efficiency.

What services do outsourcing accounting services for international companies provide?

Accounting services for foreign companies will meet and implement all accounting operations in accordance with current provisions of law, including:

• Synthesize invoices and vouchers and set up a system of accounting books in accordance with Vietnamese accounting standards.
• Prepare financial statements and CIT finalization reports, and check and balance business accounting data.
• Tax declaration, quarterly/annual tax reporting.
• Translate vouchers, invoices, and accounting books into foreign languages.
• Consult on accounting, tax, compliance with current legal regulations, and suitable for specific activities of foreign companies.

Benefits of using outsourced accounting services for foreign-invested companies

Save time and maximize costs

Using accounting services is optimal for FDI companies in Vietnam, especially small and medium-sized companies, whose financial potential still needs to grow. If you build your own highly specialized accounting apparatus, it will cost an enormous amount of money. Instead, outsourced accounting services only cost about 35% to 50% of the cost that companies need to spend on internal accounting.

Fast and accurate workflow

The accounting service agencies have a team of professionals with expertise, high professionalism, and experience in the field. Therefore, FDI companies can rest assured of assigning the handling of tax reports, financial statements, or related operations to the service agency. The job will be completed quickly and accurately.

Comply with legal regulations, minimize risks

The professionalism of outsourced accounting services is also reflected in the service agency always quickly and continuously updating new regulations, tax laws, circulars, and decrees. Thereby helping companies handle all legal issues accurately, minimizing mistakes or unnecessary risks.

Common risks when using accounting services for FDI companies

Besides the many benefits mentioned above, if an FDI company chooses a disreputable and unprofessional accounting service agency, it is easy to have trouble with the company’s tax and accounting matters.

The following are common risks when using outsourced accounting services for foreign-invested companies:

• The outsourced accounting agency does not continuously and fully update new regulations, circulars, and decrees leading to errors in the process of performing accounting operations. Such as errors: in tax declarations, tax reports, financial statements that are not in accordance with accounting standards, and mistakes in voucher information, …
• The financial statements are not submitted on time and have not complied with the accounting regime.
• Failing to fully and accurately determine payable taxes leads to a high risk of tax arrears.
• Errors in translating Vietnamese accounting vouchers into foreign languages.
• Errors related to documents, purchase and sale invoices…

These matters will cause significant damage to the company’s business activities. Therefore, FDI companies in Vietnam need to find and choose a reputable and professional accounting service agency.

Notes when using outsourced accounting services for foreign companies

Foreign enterprises operating in the Vietnamese market need to ensure compliance with the accounting laws of Vietnam, properly and fully comply with relevant legal procedures. The optimal solution for FDI companies at this time is using professional outsourcing accounting services. However, foreign companies will need to consider a few factors as follows:

• The foreign company must agree on the exact scope of work the service agency will provide for its company.
• The service contract should clearly state which party is obligated to file tax returns and reports and is responsible for preserving and managing the company’s digital signature.
• Foreign companies should require service units to report quickly on the following items: withholding VAT, payable VAT, financial statements, CIT, total revenue, and expenses,… per month or quarter.
• Tax reports, financial statements, and accounting books should be translated into English.

Prestigious and professional accounting for international business services

The accounting department plays a crucial role in all companies, especially FDI companies in Vietnam. In the face of language and legal barriers, accounting for international business services will act as a bridge to help businesses operate smoothly, comply with the law, and avoid penalties.

LTS LAW is currently associated with many units providing professional and quality accounting and auditing services with affordable and reasonable service fees. The accounting and auditing units we introduce to customers are all reliable partners of LTS LAW. If you reach the tax and accounting services of LTS LAW’s partners, we will still coordinate with the accounting units we introduce and assist in answering customer requests in legal matters. Related to accounting and tax according to the provisions of Vietnamese law.

Please reach out to us immediately for more detailed advice!

LTS LAW FIRM

Address: Room 602, 6^th Floor, 520 Cach Mang Thang 8, Ward 11, District 3, Ho Chi Minh City, Vietnam.

Email: contact@lts.com.vn

Hotline: (+84) 902 798 066