Familiarize Yourself with the New E-invoicing Rules in Vietnam

With new regulations in force, the best time for e-invoicing is now

On 1 November 2018, Decree No.119/2018/ND came into force. It brought new regulations that amended previous solutions and provides a better foundation for e-invoicing in Vietnam. For a little over half a year, entrepreneurs who struggled with reams of paperwork and intense accounting requirements have had a better environment in which to operate. Not only that, the changes in Vietnam are an example of how e-invoicing can change the way of doing business and make us open to challenges in the digitized economy. In building a well-functioning enterprise in Vietnam, traders will have to use modern methods of invoice transmission and archiving, significantly reducing costs related to running a business and making tax settlement more reliable. So how can organizations prepare for e-invoicing in Vietnam? And what are the requirements and challenges?

New rules, new capabilities?

Vietnam’s new e-invoicing regulations apply not only to public procurement suppliers, but to all B2B transactions. The mechanisms involved are necessarily complex, requiring solid preparation and good support. According to the Vietnamese government and the General Department of Taxation, over 90% of entrepreneurs in the country will use e-invoicing as the only way of transmitting invoices by the end of 2020. The new law allows a transitional period for implementation, until 31 October 2020.  Applying for an extension to this deadline is not a significant problem. In the event that an organization’s IT environment is not ready in time, there remains the option to send invoices with "Form 3" as an attachment. This will protect businesses against penalties that may otherwise be imposed as a result of invalid transactions.

Types of e-invoice and key requirements

Vietnam’s new law distinguishes two types of electronic invoices approved for use:

1. E-invoices issued with a verification code

2. E-invoices without a verification code

Why this distinction?

It’s all a matter of dividing companies by sector, tax risk and annual revenue.
For example, enterprises with high tax risk, individuals and households, agriculture and fishery businesses have to prepare invoices with a verification code. To this list can be added construction sectors with more than 10 employees and an annual revenue exceeding VND 3 billion in the preceding year. In the trade and services sector, the individuals and companies must use e-invoices with verification codes if annual revenue exceeds VND 10 billion.

Practically every other trade company, from credit providers to supermarkets, is under no obligation to use verification codes in transactions.

Decree No. 119/2018/ND also states that every entity bound by the new regulations must obtain prior approval from the General Tax Department. This can be done on GTD website.

The most important observations and advice regarding new requirements

The new rules in Vietnam are obligatory for every organization to which they apply. Scrapping the previous process entails changes in every aspect of invoice transmission and handling. Here are few of the most important points:

1. “Hard copy” document conversion

The new regulations limit the conversion of documents to paper format to accounting purposes. “Hard copies” will no longer be valid for conducting transactions, and invoices drawn up on paper but processed, transmitted or stored in e-devices are no longer treated as e-invoices. PDF documents received by a buyer are not e-invoices themselves. A structured format is required.

2. E-signatures

Every invoice requires an e-signature. Vietnam has a standard that is compliant with AES,
and foreign signatures are also valid.

3. Third-party providers

The originator of an invoice can delegate the preparation of document dispatch and storage to a third-party provider. This is a highly recommended solution that helps businesses comply with rules and standards.

4. E-archiving

E-invoices must be archived for 10 years.

5. Language

Invoices must be written in Vietnamese. Other languages may be included, but cannot replace the official language.

What could improve?

The new regulations have had a very positive impact, and doing business in Vietnam is now easier than ever. However, agreement on a unified e-invoice data format is an urgently required improvement.
The new law makes provision for this to be addressed in due course, in Article 8 of the Decree.
There remains the question of whether the Vietnamese government will attempt to enforce a national data format or remain open to common global standards. An official report by the Ministry of Finance shows that the number of companies using e-invoices has increased significantly in recent years. Not only that, there has been an exponential rise in the number of e-invoices issued – from 9 014 in 2011 to more than 277 million in 2016. It seems that the future of invoicing has already arrived in Vietnam.