THE IMPACT
OF CHANGES IN CORPORATE INCOME TAX POLICY IN 2025 ON THE AUDIT RISK OF
FINANCIAL STATEMENTS
CPA, M.A. Nguyen Tan Quang
Lecturer, Van Hien University
Summary
Viet Nam’s
corporate income tax (CIT) policy in 2025 introduces several fundamental
changes concerning tax rates, taxable entities, incentives, and the
determination of taxable income. These changes have a direct impact on
financial obligations and pose new challenges for the audit of 2025 financial
statements. Consequently, companies and auditing organizations need to prepare
in advance, accurately assess the potential impacts, and establish appropriate
audit procedures to minimize the risk of material misstatements.
INTRODUCTION
The
year 2025 marks a significant turning point in Vietnam’s tax policy, with a
series of new regulations on corporate income tax (CIT) being enacted. These
changes not only reshape the financial strategies of enterprises but also
substantially increase the complexity of auditing financial statements.
The
implementation of the Global Minimum Tax (GMT) in accordance with the OECD’s
recommendations, together with the revision of the 2025 Corporate Income Tax
Law, has created a new legal environment that compels auditors to reassess
their entire process of tax risk identification and management.
Literature
Review
OVERVIEW
OF CORPORATE
INCOME TAX IN 2025
Corporate
income tax
Law on
Corporate income tax (CIT) was approved by the National Assembly in mid-2025
and came into effect in the fourth quarter of the same year. A key highlight of
the new law is the expansion of its regulatory scope, the introduction of
taxation mechanisms for enterprises operating on digital platforms, and the
redefinition of deductible expenses in determining taxable income.
These
adjustments are intended to respond to the transformation of the digital
economy. However, the fundamental changes in the method of determining taxable
income have created considerable challenges for enterprises, particularly in
updating their accounting systems and managing temporary differences between
accounting profit and taxable income.
Global
minimum tax and its implementation in Viet Nam
The
Global minimum tax (GMT) is a policy initiated by the Organisation for Economic
Co-operation and Development (OECD) to prevent profit shifting to low-tax
jurisdictions. Under this policy, multinational corporations with consolidated
revenues of €750 million or more are required to maintain an effective tax rate
of at least 15%.
Viet
Nam officially implemented this mechanism at the beginning of 2025 through
Decree No. 236/2025/NĐ-CP, which provides detailed regulations on the Qualified
domestic minimum top-up tax (QDMTT) and Rule on income inclusion (IIR). This
mechanism directly affects foreign-invested enterprises (FDIs) that currently
enjoy low preferential tax rates, requiring many of them to pay additional
top-up taxes to meet the global minimum threshold.
Impact
on accounting
and auditing
standards
The
introduction of the Global Minimum Tax necessitates adjustments to several
provisions in international accounting standards (IFRS). The International
Accounting Standards Board (IASB) has amended IAS 12 – Income Taxes,
allowing enterprises to be exempted from recognizing deferred tax related to
GMT, while still requiring detailed disclosure of the policy’s impacts.
For
auditors, this change increases their responsibility to assess the potential
impact of GMT on tax figures and demands a deeper analysis of tax-related
disclosures in financial statements.
Risk
transmission mechanisms from tax policy to auditing
Changes
in tax policy affect the auditing process through three main channels: inherent
risk, control risk, and detection
risk.
Inherent
risk
Inherent
risk increases significantly when tax policies undergo frequent changes,
particularly in the context of Vietnam’s first-time implementation of the
Global Minimum Tax (GMT). Determining whether an enterprise falls within the
scope of the minimum tax regime requires a complex assessment of ownership
structures, revenue scale, and the cross-border nature of business activities.
Furthermore,
the gap between Vietnamese Accounting Standards (VAS) and International
Financial Reporting Standards (IFRS) leads to discrepancies in determining
taxable income, thereby creating a heightened potential for material
misstatements in the calculation of tax liabilities.
Control
risk
Control
risk arises when enterprises fail to adjust their governance systems promptly
to meet new regulatory requirements. The consolidation of data from multiple
subsidiaries, the application of different accounting standards, or the absence
of effective internal control mechanisms in the top-up tax reporting process
can all result in material inaccuracies.
Enterprises
with complex operational structures often encounter difficulties in
coordinating among accounting, legal, and tax departments, which may lead to
non-compliance or errors remaining undetected in a timely manner.
Detection
risk
Detection
risk arises when auditors fail to identify unusual indicators or do not design
sufficient audit procedures for items affected by new tax policies. In the 2025
context, if auditors continue to apply outdated methodologies without
considering the implications of the Global Minimum Tax (GMT) or the 2025
Corporate Income Tax Law, the likelihood of overlooking material misstatements
becomes significantly high—particularly in disclosures related to current
income tax and deferred income tax.
Specific impacts on financial statements
For
enterprises
subject
to the global
minimum
tax
Enterprises
within the scope of the GMT regime will be required to pay additional top-up
taxes to ensure compliance with the minimum 15% effective tax rate. The
recognition of increased tax expenses reduces post-tax profit and consequently
affects key financial ratios, notably the return on equity (ROE).
For
enterprises
outside
the scope
of the global
minimum
tax
Although
not directly subject to the minimum tax regime, this group is still indirectly
affected by the 2025 Corporate Income Tax Law. Changes in deductible expenses,
methods of determining taxable revenue, and regulations on related-party
transactions may alter the taxable base. If enterprises fail to update their
accounting and tax systems accurately, the likelihood of misstatement in tax
obligations is high, leading to potential material misstatements in financial
statements.
Impact
on financial
disclosure
and transparency
The
amended IAS 12 requires enterprises to disclose the expected impact of the
Global Minimum Tax on tax obligations, even before its formal implementation.
This obliges companies to conduct early risk assessments and provide both
qualitative and quantitative information regarding potential future effects.
Non-compliance
with these disclosure requirements reduces the transparency of financial
reporting and increases the likelihood of scrutiny from auditors or tax
authorities.
PROPOSED AUDIT METHODOLOGY
Developing
an audit
plan based on tax risk
Auditors
should conduct a preliminary assessment of the scope of entities affected by
the new tax policies, identify enterprises subject to the Global Minimum Tax
(GMT), and design specific testing plans tailored to each case.
Evaluating
the internal
control system over tax compliance
The
audit process should include an examination of the existence and effectiveness
of the tax governance function, the efficiency of data consolidation
procedures, and the degree of coordination among departments. This assessment
enables auditors to evaluate an enterprise’s ability to identify and rectify
errors before financial statements are prepared.
Performing
detailed testing and data reconciliation
Auditors
should reconcile the effective tax rate (ETR), compare accounting data with tax
filings, and identify discrepancies between current tax and the tax amounts
reported in financial statements. For multinational enterprises, it is
essential to confirm information with the parent company to ensure consistency
in global tax consolidation.
Reviewing
disclosures and information presentation
A key
component of the 2025 audit process is verifying the completeness of
tax-related disclosures in accordance with IAS 12. Auditors must ensure that
enterprises have clearly presented:
·
The impact of the
Global Minimum Tax (GMT);
·
Additional
Disclosure Requirements
Enterprises
must clearly disclose the following information in their financial statements:
·
The legal status
of tax regulations at the reporting date;
·
Factors that may
affect future tax obligations.
RECOMMENDATIONS FOR ENTERPRISES AND
AUDITORS
For
independent auditors
Assess
the scope during the bidding stage:
Determine the potential impact of the GMT and the 2025 Corporate Income Tax
Law; assign audit personnel with international tax expertise.
Design
procedures specific to Pillar Two:
Test foundational data (entity listing, covered taxes, and accounting
adjustments), recalculate sample GloBE effective tax rates (ETR), and review
QDMTT/IIR documentation.
Verify
the “data bridge”: Conduct a walkthrough from the ERP system to the GloBE
spreadsheet, trace data across multiple levels, and identify control
breakpoints.
Review
disclosures: Use the amended IAS 12 checklist; verify whether
relevant laws have been enacted or substantively enacted; reconcile information
between separate and consolidated reports.
Communicate
promptly: Issue management letters highlighting material
findings within five working days of obtaining sufficient evidence, ensuring
necessary adjustments before the reporting close.
Evaluate
overall presentation: Compare
the accounting ETR with the GloBE ETR; assess the potential impact on going
concern assumptions if significant tax obligations arise.
Recommend
process improvements: Propose
enhancements with clear descriptions of expected benefits, timelines, and
costs; prioritize actions yielding immediate impact.
For
supervisory boards, internal audit committees, and boards of directors
Approve
a tax governance framework:
Adopt a “three lines of defense” model and require quarterly reports on top-up
taxes, disputes, and compliance status.
Monitor
key tax risks: Track
consolidated ETR indicators, top-up amounts by jurisdiction, and variances
between internal calculations and audit findings.
Allocate
resources strategically:
Prioritize budget for data analytics tools, GloBE spreadsheet automation, and
digital signature infrastructure upgrades.
Establish
early warning mechanisms: Set alerts when domestic ETR falls below 12% or when
tax incentive structures change, triggering special reviews.
Enforce
governance accountability: Link tax-related KPIs to financial leadership
performance evaluations and require remediation plans when material
discrepancies occur.
Macroeconomic
impact and future trends
The
2025 tax reform brings Vietnam closer to global standards, contributing to the
reduction of harmful tax competition among nations. However, the initial
implementation phase may increase compliance costs and impose additional
pressure on both enterprises and auditors.
In the
long term, greater transparency in tax obligations and standardized reporting
processes will enhance the credibility of Vietnam’s investment environment
while helping domestic enterprises strengthen their internal control systems
and mitigate legal risks.
CONCLUSION
The
year 2025 marks a period of profound transformation in Vietnam’s tax policy.
The implementation of the Global Minimum Tax and the enactment of the 2025
Corporate Income Tax Law have ushered in a new era of corporate financial
management and auditing. Although these changes may increase audit risks in the
short term, they ultimately contribute to the development of a transparent
financial reporting system aligned with international standards.
Enterprises
must proactively adapt to the evolving tax environment, while auditors need to
continuously update their methodologies and professional expertise to ensure
that every 2025 financial statement faithfully represents the enterprise’s true
financial position in an objective and reliable manner.
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