Investing in Accounting and Auditing Services in Vietnam: A Guide for Foreign Investors

I. Legal and Regulatory Framework:

The foundation for foreign investment in Vietnamese accounting and auditing services rests on a combination of international agreements and domestic legislation:

- International Agreements: These treaties establish the overarching principles for trade in services, including market access and national treatment. Key agreements impacting this sector include the WTO Trade Agreement, AFAS, VJEPA, VKFTA, EVFTA, and CPTPP. Investors should familiarize themselves with the specific provisions of each agreement relevant to their desired service offering

- National Laws: Two pivotal laws govern the accounting and auditing landscape:

• Law on Accounting 2015: This law sets the general framework for accounting practices in Vietnam, including requirements for accounting professionals and entities.
• Law on Independent Audit 2011: This law specifically addresses the independent audit profession, defining audit standards, auditor qualifications, and restrictions to ensure auditor independence.

• Government Decrees: Several decrees provide detailed guidance on implementing the aforementioned laws and agreements:

  • Decree 129/2004/ND-CP: Details and guides the implementation of several articles of the Accounting Law related to business activities.
  • Decree 17/2012/ND-CP: Details and guides the implementation of several articles of the Independent Audit Law.
  • Decree 84/2016/ND-CP: Stipulates standards and conditions for practicing auditors and audit firms eligible to audit entities of public interest.
  • Decree 174/2016/ND-CP: Details a number of articles on accounting law.
  • Decree 151/2018/ND-CP: Amends and supplements several Decrees stipulating investment and business conditions under the state management of the Ministry of Finance.

II. Foreign Investment in Accounting Services (CPC 862): Permitted Business Forms

Foreign investors can engage in the Vietnamese accounting services market through the following avenues:

• Capital Contribution: This involves purchasing shares or contributing capital to an existing accounting services business already established and operating in Vietnam. This approach allows for a faster market entry and leverages the existing infrastructure and client base of the local firm. Due diligence on the target firm is crucial.

• Branch Establishment: Foreign accounting firms can establish a branch in Vietnam. This requires meeting specific licensing requirements and complying with Vietnamese regulations. This option offers greater control over operations but necessitates navigating the establishment process.

• Cross-Border Services: Providing accounting services remotely from outside Vietnam is possible, subject to compliance with Vietnamese government regulations. This mode of operation is suitable for specific types of services and may involve data transfer and privacy considerations.

III. Requirements for a Foreign Accounting Service Business Branch:

Establishing a branch of a foreign accounting service business in Vietnam requires fulfilling specific criteria to obtain a Certificate of Eligibility:

• Valid Home Country License: The parent foreign accounting service business must hold a valid license to provide accounting services in its country of origin. This demonstrates the firm's credibility and adherence to professional standards.

• Qualified Professionals: The branch must employ at least two practicing accountants, one of whom must be the branch's director or general director. These professionals should possess the necessary qualifications and certifications recognized in Vietnam.

• Leadership Restrictions: To avoid conflicts of interest, the director or general director of the branch cannot simultaneously hold managerial or executive positions in other businesses within Vietnam.

• Parent Company Guarantee: The foreign accounting service business must provide a legally binding document guaranteeing responsibility for all obligations and commitments undertaken by its branch in Vietnam. This provides assurance to Vietnamese authorities and clients.

IV. Foreign Investment in Audit Services:

The Independent Audit Law 2011 (Article 36) outlines the permissible forms for foreign audit firms operating in Vietnam:

• Capital Contribution: Similar to accounting services, foreign investors can contribute capital to existing Vietnamese audit firms.

• Branch Establishment: Establishing a branch of a foreign audit firm is also a viable option.

• Cross-Border Services: Providing audit services remotely is permissible under specific conditions and regulations.

V. Restrictions on Audit Activities: Maintaining Independence

Maintaining auditor independence is paramount. Article 30 of the Independent Audit Law 2011 outlines restrictions on audit activities for both domestic and foreign audit firms operating in Vietnam:

General Restrictions for All Audit Firms:

• Prohibition of Conflicting Services: Auditors are prohibited from providing bookkeeping, financial statement preparation, or internal audit services to the entity they are auditing. This prevents auditors from auditing their own work.
• Independence-Impairing Services: Providing any other services that could compromise the independence of the auditors, as defined by accounting and auditing professional ethics standards, is also restricted.
• Financial and Personal Relationships: Close financial or personal relationships between members, managers, or executives of the audit firm and the audited entity are prohibited. This includes ownership, family ties, and other significant relationships.
• Influence on the Audit Firm: If managers, executives, supervisory board members, or chief accountants of the audited entity have significant influence on the audit firm, the firm cannot conduct the audit.
• Common Ownership: Audits are prohibited when the audit firm and the audited entity share common ownership or founding entities.
• Reciprocal Audits: The audited entity cannot have provided or be providing financial statement audits for the audit firm.
• Other Restrictions: Other restrictions may apply as stipulated by law.

Specific Restrictions for Branches of Foreign Audit Firms:

The restrictions outlined above also apply to branches of foreign audit firms operating in Vietnam, with a focus on the relationship between the branch and the audited entity.

VI. Further Considerations:

• Licensing and Permits: Obtaining the necessary licenses and permits from relevant Vietnamese authorities is crucial before commencing operations.
• Professional Standards: Adhering to Vietnamese accounting and auditing standards, as well as international standards where applicable, is essential.
• Taxation: Understanding the tax implications for foreign investors and businesses operating in Vietnam is vital.
• Foreign Exchange Control: Regulations related to foreign exchange control and repatriation of profits should be carefully considered.

 

The information contained in this article is general and intended only to provide information on legal regulations. DB Legal will not be responsible for any use or application of this information for any business purpose. For in-depth advice on specific cases, please contact us.

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