The selection and accurate registration of an accounting regime form the foundation for transparent financial management in Vietnam. As a manager of a foreign-invested enterprise (FDI) in Vietnam, you may be wondering which accounting regime is most appropriate for your business. How is the procedure for registering an accounting regime with the tax authority carried out, and what requirements must be met?
In the following article, KMC will provide you with a comprehensive guide, particularly a detailed roadmap for registering the applicable accounting regime for enterprises.
What Is the Enterprise Accounting Regime?
Pursuant to the Law on Accounting 2015 (Clause 2, Article 3), an accounting regime comprises regulations on accounting principles, accounting standards, and the organization of the accounting system. Enterprises are required to select an appropriate accounting regime based on their size, business sector, and management requirements.
The commonly applied accounting regimes in Vietnam currently include: Circular No. 200/2014/TT-BTC (applicable to large enterprises), Circular No. 133/2016/TT-BTC (applicable to small and medium-sized enterprises), and Circular No. 132/2018/TT-BTC (applicable to micro-enterprises). This framework enables tax authorities to monitor and control tax declarations, ensuring that enterprises comply with applicable legal regulations.
Why Is Registering the Accounting Regime So Important for FDI Enterprises?
The proper application of an accounting regime ensures transparency and accuracy in financial reporting, while also enabling enterprises to meet audit and inspection requirements from tax authorities.
For FDI enterprises in particular, the accounting system is not only used for compliance with Vietnamese tax authorities but must also satisfy reporting requirements of the overseas parent company. Therefore, accurate registration of the accounting regime with the tax authority from the outset will:
- Establish a clear legal framework: Define the applicable accounting standards, policies, and methodologies, thereby minimizing disputes during future tax audits and inspections.
- Optimize compliance costs: Selecting an appropriate regime based on actual business scale helps reduce personnel costs and the operational burden of the accounting function.
- Facilitate consolidated reporting: A transparent and properly structured accounting system serves as a reliable basis for data conversion and supports global consolidated financial reporting requirements.
- Mitigate legal and financial risks: Incorrect or non-registration may result in administrative penalties, difficulties in providing explanations to authorities, and wasted management time.
Consequences of Failing to Register or Incorrectly Registering the Accounting Regime
The registration of an accounting regime with the tax authority is a mandatory requirement in certain cases, particularly when an enterprise transitions from a simplified accounting regime (Circular 133 or 132) to a more complex regime (Circular 200). Failure to register the accounting regime with the tax authority in accordance with regulations is considered a violation of accounting laws and may be subject to administrative penalties under Decree No. 41/2018/ND-CP (as amended and supplemented). The fine may reach several tens of millions of VND.
More importantly, such non-compliance creates systemic risks:
- Accounting books and financial statements may lack a legal basis and are likely to be rejected during tax inspections or audits.
- It may cause difficulties in tax finalization, leading to disputes, tax penalties, and reputational damage to the enterprise.
- It creates inconsistencies in operational processes, which may hinder capital raising activities or future business transfers.
Conditions for Registering the Accounting Regime with Tax Authorities
To register an accounting regime with the tax authority, an enterprise must satisfy specific legal and technical requirements as follows:
- Completion of business registration: The enterprise must be granted an Enterprise Registration Certificate in accordance with Article 28 of the Law on Enterprises 2020.
- Determination of enterprise size: The enterprise must clearly determine its size (micro, small, medium, or large) based on criteria such as number of employees, revenue, and capital, as stipulated in Decree No. 80/2021/ND-CP.
- Selection of an appropriate accounting regime: The enterprise must select a suitable accounting regime according to its size. Micro and small enterprises may apply Circular No. 132/2018/TT-BTC or Circular No. 133/2016/TT-BTC; however, if they choose to apply Circular No. 200/2014/TT-BTC, they must notify the tax authority. Large enterprises apply the accounting regime under Circular No. 200/2014/TT-BTC.
- Electronic signature and bank account: The enterprise must obtain an electronic signature for electronic tax declaration and a bank account for tax payments, ensuring that the accounting regime registration is conducted through the eTax system.
- Compliance with statutory deadlines: The accounting regime notification must be submitted within 10 days from the date of issuance of the Enterprise Registration Certificate, in accordance with Article 32 of the Law on Tax Administration 2019.
Important Considerations for Selecting the Appropriate Accounting Regime for FDI Enterprises?
Many FDI enterprises have substantial charter capital but may operate at a small scale during the initial stage. Therefore, enterprises need to carefully consider both their financial capacity and actual business operations. If an enterprise meets the criteria for applying Circular No. 133/2016/TT-BTC but has a need for more detailed reporting (as required by the parent company), it may still voluntarily adopt Circular No. 200/2014/TT-BTC. However, this choice will result in a more complex accounting system and higher operational costs.
Procedure for Registering the Accounting Regime with the Tax Authority
After determining the appropriate accounting regime, the enterprise must register it with the directly managing tax authority. This procedure should be completed immediately after the issuance of the Enterprise Registration Certificate.
The procedure for registering the accounting regime with the tax authority includes the following steps:
Step 1: Preparation of application dossier
The required documents include:
- Notification of application of the accounting regime (as per the prescribed form): Clearly stating the enterprise name, tax identification number, and the selected accounting regime (Circular 200 or Circular 133).
- Certified copy of the Enterprise Registration Certificate.
- Letter of authorization (if the submitter is not the legal representative).
Step 2: Submission of dossier
The enterprise may:
- Submit directly or via postal service to the Tax Sub-Department where the enterprise is headquartered.
- Submit online via the National Public Service Portal or the electronic tax portal (eTax).
For reference, official guidance on online public services is available on the National Public Service Portal.
Step 3: Monitoring and receipt of results
After the tax authority receives the dossier, within 03 working days from the date of receiving a complete and valid application, the tax authority will record the registration in its system. Enterprises may check the application status via the tax authority’s electronic information portal.
Key considerations for Japanese FDI enterprises when registering the applicable accounting regime.
As a Japanese FDI enterprise developing an investment strategy in the Vietnamese market, from the very first step of registering the accounting regime, you need to be aware of the following key considerations:
- Language of documentation: All documents submitted to Vietnamese state authorities must be in Vietnamese. Original documents in Japanese or English must be translated and notarized.
- Chief Accountant requirements: Under the Vietnamese Law on Accounting, FDI enterprises of a certain scale are required to appoint a Chief Accountant who meets the prescribed qualifications and standards. This requirement should be planned from the outset.
- Transition of accounting regimes: When an enterprise expands and exceeds the thresholds under Circular 133 for two consecutive years, it is mandatory to switch to Circular 200 and re-register the accounting regime with the tax authority.
- Parallel accounting standards: Many Japanese enterprises need to maintain accounting systems under Japanese GAAP (JGAAP) or IFRS for internal purposes, while still complying with Vietnamese Accounting Standards (VAS) for tax reporting. This requires an effective dual-reporting accounting framework.
Frequently Asked Questions on Registering the Accounting Regime with Tax Authorities for FDI Enterprises
Frequently Asked Questions on Registering the Accounting Regime with Tax Authorities for FDI Enterprises
Is it necessary to register the accounting regime annually?
No. The accounting regime registration procedure is only required once upon establishment of the enterprise or when there is a change in the accounting regime. The enterprise must consistently apply the registered accounting regime throughout the financial year.
Can the accounting regime be changed after registration?
Yes. When there is a change in eligibility criteria (such as charter capital or revenue) requiring a different regime, or when the enterprise voluntarily decides to change, it must prepare and submit a notification of the new accounting regime to the tax authority before the beginning of the applicable financial year.
A Japanese-owned enterprise with VND 50 billion charter capital and expected first-year revenue below VND 30 billion: which regime should be applied?
Based on charter capital (VND 50 billion > VND 20 billion), the enterprise falls under the scope of Circular 200/2014/TT-BTC. Revenue is only used as a classification criterion for small and medium enterprise support policies and is not applicable for determining the accounting regime in this case.
Is this registration related to the financial year selection?
Yes. In the registration notification, the enterprise must specify its financial year (typically the calendar year from 01/01 to 31/12 or another 12-month fiscal year). The financial year should be determined in accordance with business characteristics and the parent company’s reporting requirements.
Does a representative office of a Japanese company need to register an accounting regime?
A representative office is not a legal entity and does not conduct profit-generating business activities in Vietnam; therefore, it is not subject to the enterprise accounting regime registration requirements. However, it is still required to perform accounting-related obligations in accordance with applicable regulations for representative offices.
The above provides KMC’s comprehensive guidance on the procedure for registering an accounting regime with the tax authority.
As a foreign investor planning to establish an FDI enterprise in Vietnam, if you are still unsure about selecting appropriate tax and accounting policies and require in-depth consultation from experts, please contact KMC.
As a leading professional firm providing tax, accounting, and legal solutions for enterprises, our team of experienced lawyers and tax/accounting experts will accompany you in selecting and applying the appropriate accounting regime in full compliance with regulations. We also offer comprehensive outsourced tax and accounting services tailored to enterprise needs, helping FDI companies ensure legal compliance, minimize risks, and achieve sustainable and stable development.
For expert consultation from KMC, please contact our hotline: 081 489 4789.
