Developing financial regulations for businesses in Vietnam

Financial regulations play an important role for each business because they can see the company’s governance principles in terms of capital, financial regime, accounting, auditing, salary, company assets and other financial issues of the company. However, how to develop financial regulations in enterprises reasonably. Viet An Tax Agent will share information on how to develop a financial regulation for your business to refer to.

Concept of financial regulation in Vietnam

Regarding the concept of financial regulations, although the law currently does not have specific provisions on this concept, financial regulations are understood as a set of internal regulations related to accounting and financial activities of enterprises. This is an important management tool to ensure consistency in financial management, accounting and organization of business operations effectively.

Some contents of the financial regulation should be noted as follows:

• Regarding assets and capital: Corporate assets include current assets and fixed assets. The capital of an enterprise can come from many sources such as charter capital, loans, mobilized capital, legal capital and other legal capital.
• Regarding the principles of governance in enterprises:
• First, in order for production and business activities to achieve optimal efficiency, the executive board of the enterprise needs to develop a clear, systematic and highly feasible overall operation plan. This plan must not only orient the development strategy but also concretize daily activities, organizational structure, operational processes as well as resource use plans. At the same time, the executive board needs to establish an effective coordination mechanism between departments, strengthen the control of revenues and expenditures, and promulgate reasonable policies for employees. This not only ensures financial transparency but also creates motivation and retains quality personnel, contributing to developing a stable working environment and sustainable development.
• Second, the department in charge of production and sales plays a key role in controlling costs and creating value for businesses. This group needs to carefully and reasonably calculate all expenses for business activities, from the cost of raw materials, labor, machinery to other indirect costs. The goal is to ensure that every expense is contributing to real revenue and profit. Moreover, this department needs to be directly responsible before the law for its financial and production activities, ensuring objectivity, honesty and compliance with legal regulations within the scope of its assigned functions and powers.
• Thirdly, in enterprises, expenses usually include financial costs, regular production and business operation costs, and expenses incurred irregularly as prescribed by law. Therefore, business leaders need to have a strict cost management policy, ensuring that all expenses are used for the right purpose, reasonably and effectively. In particular, for expenses incurred outside the plan, it is necessary to have a clear mechanism for consideration and approval to ensure that it does not negatively affect the overall financial situation, and at the same time contribute to improving the performance and competitiveness of enterprises in the market.

How to develop an internal financial regulation in Vietnam

Depending on the type of business and the specific mode of operation, each enterprise will choose to develop internal financial regulations in accordance with its characteristics. In this process, the accounting department plays an important role in supporting the design of regulations to ensure reasonableness, legal compliance and optimize benefits for both businesses and employees.

Notes when developing internal financial regulations:

• Statutory Expense Classification Enumerate permissible tax-deductible expenses including meal allowances, travel costs, and employee welfare benefits to ensure full deduction compliance.
• Documentation and Substantiation Requirements Maintain proportional correspondence between actual expenditures and supporting vouchers. Financial records must demonstrate exact amount matching for audit transparency.
• Authorization Matrix for Exceptional Expenditures Establish clear approval hierarchy for non-routine expenses to facilitate regulatory compliance explanations to tax authorities.
• Regulatory Update Protocol Implement systematic revision procedures to align internal policies with evolving tax legislation. Retain historical regulation versions for comparative audit purposes.

How to develop a corporate financial regulation in Vietnam

Developing financial regulations for a corporation is an important task to ensure that financial activities are transparent, effective and in line with the overall development strategy. Each corporation is different, based on the characteristics and mode of operation, there are different ways of developing financial regulations.

When developing a financial regulation for a construction corporation, this regulation should reflect the characteristics of the industry and organize financial activities in a reasonable way to ensure effective control of costs, resources, and investment. The financial regulation of a construction corporation will usually include the following basic parts:

• One is the capital of the parent company, including all capital directly mobilized by the parent company, other capital as prescribed and the state capital allocated at the parent company. The parent company is responsible for monitoring, managing and fully accounting each capital source in accordance with the current law.
• Second, the charter capital of the parent company is approved by the Prime Minister and can be adjusted based on the opinions of the Ministry of Planning and Investment, the Ministry of Finance and the proposal of the Committee for Management of State Capital at Enterprises.
• Thirdly, in terms of capital mobilization, the parent company is allowed to borrow capital from domestic and foreign credit institutions, individuals, economic organizations as well as from other lawful sources in accordance with the law. The mobilization of capital must be carried out on the basis of a specific plan, ensuring the ability to repay debts. The person approving the capital mobilization plan shall be responsible for inspecting and supervising the implementation process and ensuring that the capital source is used for the right purpose and effectively.
• Fourth, it is necessary to have clear and transparent regulations on the financial revenue and expenditure regime. Revenue of the parent company includes revenue from production, business, and financial activities, along with other incomes directly generated by dependent units or the parent company itself.
• The fifth is the profit of the parent company arising from production and business activities, the profit is divided from the investment capital contribution or from dependent units and other lawful revenue sources. Financial regulations should specify the principles of profit distribution, as well as the use of funds such as development investment funds, reward and welfare funds to serve the sustainable development goals of enterprises.

How to develop a branch financial regulation

The development of financial regulations for the company and its branches depends on the type of enterprise, the model of production and business activities, as well as the management objectives of the parent company for subsidiaries or branches. Although each business can be flexible in how to develop regulations, there are still some important principles and notes that need to be adhered to:

• First, the financial regulations of the branch need to be consistent with the general financial management principles issued by the parent company. However, the branch can still adjust some contents to suit the actual situation, as long as it is not contrary to current legal regulations.
• Second, it is necessary to establish a financial reporting mechanism and operate according to specific cycles such as by day, month, quarter and year. This makes it easy for the parent company to monitor, control and evaluate the performance of each branch.
• Third, Revenue and profit sharing mechanism between the branch and the parent company need to be transparently regulated. At the same time, the policy of paying salaries and bonuses to employees at branches also needs to be built clearly and consistently.
• Fourthly, when developing financial regulations, it is necessary to base on the type of accounting of the branch (independent or dependent accounting) registered with the tax authority to ensure compliance with the accounting process and related legal obligations

If you have any difficulties or questions related to financial regulation development services for businesses, please contact Viet An Tax Agent for the most specific advice.