Question:
The client is a foreign-invested trading company with a total investment capital of less than 3 billion VND and 2 employees. The question is whether the company is required to hire a Chief Accountant. If required, what are the procedures, requirements, and conditions for hiring one?
Answer:
- Obligation to Appoint a Chief Accountant
Based on Clause 1, Article 3 of Decree No. 174/2016/ND-CP as follows:
"1. Accounting units in the business sector include enterprises established and operating under Vietnamese law; branches of foreign enterprises operating in Vietnam; cooperatives, inter-cooperative unions; project management boards, and other legal entities established by enterprises."
Pursuant to Clause 1 and Point b, Clause 2, Article 20 of Decree No. 174/2016/ND-CP:
“Clause 1: Accounting units must appoint a Chief Accountant, except for the units specified in Clause 2 of this Article. If an accounting unit cannot immediately appoint a Chief Accountant, it must assign a person in charge of accounting or hire Chief Accountant services in accordance with regulations.
Clause 2 - Person in charge of accounting:
...
- b) Micro-enterprises, as defined by the law on support for small and medium-sized enterprises, may assign a person in charge of accounting and are not required to appoint a Chief Accountant.”
Thus, the your Company falls under the category of an accounting unit as regulated by Decree No. 147/2016/ND-CP, and therefore, it is required to appoint a Chief Accountant, except in cases where the company is classified as a micro-enterprise. In such cases, the micro-enterprise is not required to appoint a Chief Accountant, but it must appoint a person in charge of accounting.
- Determination of the Company as a Micro-Enterprise
According to Clause 1, Article 5 of Decree No. 80/2021/ND-CP:
"A micro-enterprise in the commerce and service sector is one that employs an average of no more than 10 people participating in social insurance per year, and has a total annual revenue of no more than 10 billion VND or total capital of no more than 3 billion VND."
Thus, the classification of a micro-enterprise in the commerce and service sector is based on the following criteria:
- The average number of employees participating in social insurance per year does not exceed 10 people; AND
- The total annual revenue does not exceed 10 billion VND; OR the total annual capital does not exceed 3 billion VND.
Accordingly, the determination of the business sector and the criteria for the number of employees, total revenue, and total capital are regulated in Decree No. 80/2021/ND-CP as follows:
“Article 6. Determining the business sector of small and medium-sized enterprises (SMEs)
The business sector of SMEs is determined based on the main business lines registered by the enterprise with the business registration authority.
Article 7. Determining the average number of employees participating in social insurance in a year of SMEs
- The number of employees participating in social insurance includes all employees that the enterprise manages, employs, and pays wages or salaries to, who are subject to social insurance according to the social insurance law.
- The average number of employees participating in social insurance in a year is calculated by dividing the total number of employees participating in social insurance in all months of the preceding year by 12 months.
The number of employees participating in social insurance for a month is determined at the end of the month, based on the social insurance contribution documents submitted by the enterprise to the social insurance agency.
- In case the enterprise operates for less than one year, the average number of employees participating in social insurance in a year is calculated by dividing the total number of employees participating in social insurance during the operating months by the number of months the enterprise has been in operation.
Article 8. Determining the total capital of SMEs
- The total capital for the year is determined in the balance sheet presented in the financial statements of the preceding year, which the enterprise submits to the tax authority. The total capital is calculated at the end of the year.
- In case the enterprise operates for less than one year, the total capital is determined based on the balance sheet at the end of the quarter immediately preceding the date the enterprise registers to receive support.
Article 9. Determining the total revenue of SMEs
- The total revenue for the year refers to the total revenue from the sale of goods and the provision of services by the enterprise and is determined based on the financial statements of the preceding year, which the enterprise submits to the tax authority.
- In case the enterprise operates for less than one year or operates for more than one year but has no revenue, the enterprise shall use the total capital criteria defined in Article 8 of this Decree to determine whether it qualifies as a small or medium-sized enterprise”.
Thus, based on the information provided by the client, the company operates in the commerce sector with total investment capital of less than 3 billion VND and 2 employees participating in social insurance. Therefore, the company is classified as a micro-enterprise according to the legal regulations.
- Conclusion
The client's company is classified as a micro-enterprise under the law. Therefore, the company is not required to appoint a Chief Accountant, but it must appoint a person responsible for accounting to ensure compliance with accounting regulations.
However, the client should be aware that the criteria for determining whether the company qualifies as a micro-enterprise, especially regarding total capital and total revenue, must be evaluated based on the financial statements. Additionally, the company will no longer be classified as a micro-enterprise if one or both of the following events occur:
(i) The number of employees participating in social insurance exceeds 10 people; and/or
(ii) The total annual revenue exceeds 10 billion VND and the total capital exceeds 3 billion VND.
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