When Can FDI Financial Violations Lead to Criminal Liability in Vietnam?

Financial misconduct within a foreign-invested company (FDI company) may expose its director to criminal investigation in Vietnam. When does this risk arise? And what should foreign executives do to protect themselves?

When Can Financial Misconduct in an FDI Company Expose a Director to Criminal Liability?

Many foreign directors and investors operating FDI companies in Vietnam assume that financial mistakes usually result only in administrative penalties or tax reassessments.

However, in certain circumstances, such violations may be reviewed by Vietnamese authorities under criminal law.

In practice, many foreign directors only realize the seriousness of the issue when they are summoned to work with the police, investigation authorities, or tax authorities. At that moment, several urgent questions often arise:

• Which financial violations can lead to criminal prosecution?
• Can a director be held responsible for misconduct committed by accountants or employees?
• What should a foreigner under investigation in Vietnam do to protect their legal position?

This article explains the boundary between administrative violations and criminal liability in financial misconduct cases involving FDI companies, and provides guidance on how to respond if legal risks have already emerged.

Common Financial Violations in FDI Companies in Vietnam

Through our legal advisory work with foreign-invested businesses, we have observed that many financial risks often arise from internal management weaknesses, misunderstandings of Vietnamese law, or insufficient supervision of accounting departments.

Tax violations and inaccurate financial declarations

One of the most common risks for FDI companies is tax-related violations.

Under the Law on Tax Administration 2019 and the Vietnamese Criminal Code 2015 (as amended in 2017), if a company commits tax evasion involving a large amount of tax or repeated violations, responsible individuals may face criminal liability for the crime of tax evasion under Article 200 of the Criminal Code.

Common examples include:

• Maintaining two sets of accounting books
• Underreporting revenue or inflating expenses to reduce tax obligations
• Using illegal invoices
• Failing to declare actual revenue
• Transferring profits abroad under the guise of fictitious expenses

In many cases, investigative authorities do not only examine the company itself, but also the responsibility of the director or legal representative, particularly if that individual approved financial statements or directed related decisions.

Violations involving invoices and accounting documents

Another risk that may lead to criminal liability is the illegal use or trading of invoices.

Under Article 203 of the Criminal Code, the illegal trading of invoices or documents related to state budget payments may constitute a criminal offense if the violation reaches a certain level of seriousness.

Examples include:

• Purchasing invoices to legitimize false expenses
• Selling invoices to help other companies increase deductible costs
• Issuing invoices for non-existent transactions

In some investigations, authorities determine that company management knew or should have known about these activities but still allowed them to continue.

In such cases, legal responsibility may extend beyond the accounting staff to the company’s leadership.

When Can an FDI Company Director Be Criminally Liable?

Not every financial violation committed by a company leads to criminal liability for its director. Vietnamese law generally considers the role, level of involvement, and fault of each individual.

However, in certain situations, the director—especially the legal representative of the company—may become the subject of a criminal investigation.

When the director directly orders or approves the misconduct

The most straightforward case occurs when investigators determine that the director directly instructed, approved, or participated in the violation.

Examples may include:

• Instructing accountants to prepare inaccurate financial statements
• Allowing the use of false or illegal invoices
• Approving fictitious financial transactions
• Participating in illegal overseas fund transfers

In these situations, the director may be considered an organizer or accomplice in the criminal case.

Possible criminal charges may include:

• Tax evasion (Article 200)
• Illegal trading of invoices or documents (Article 203)
• Violations of accounting regulations causing serious consequences (Article 221)

Depending on the severity of the damage and the individual’s role, penalties may include fines, non-custodial reform, or imprisonment.

When a director fails to supervise and serious consequences occur

In some cases, a director does not directly commit the misconduct but fails to properly supervise the company’s financial activities, resulting in significant consequences.

Examples may include:

• Failing to review accounting systems for a prolonged period
• Allowing employees to independently manage all financial activities without oversight
• Not supervising the issuance and use of invoices

If investigative authorities determine that such lack of supervision contributed to serious consequences, the director may still be examined for legal responsibility.

However, assessing liability in these situations is often complex and highly fact-specific, depending on factors such as:

• The company’s internal governance procedures
• The director’s scope of authority
• The level of awareness and oversight exercised by management

This is one reason why many foreign directors choose to engage criminal defense lawyers in Vietnam at an early stage of an investigation.

What Should Foreigners Do If They Are Being Investigated for Financial Misconduct?

When a foreign director or investor receives an official invitation or summons from Vietnamese police or investigative authorities, the initial reaction is often anxiety or confusion.

However, decisions made at this early stage can significantly affect the legal development of the case.

Avoid providing explanations without legal advice

A common mistake is attempting to explain the situation directly to investigators without consulting a lawyer.

In many cases, statements that appear harmless may later be interpreted differently or included as evidence in the investigation file.

For foreigners, language barriers and differences between legal systems may significantly increase this risk.

Having legal counsel involved early can help:

• Clarify your legal rights and obligations
• Prepare appropriate documents and supporting evidence
• Avoid mistakes during interactions with investigative authorities

Conduct an internal legal and financial risk review

In many investigations, authorities review the entire financial system of the company, not just a single transaction.

Therefore, conducting an early internal review can help:

• Identify the scope of potential violations (if any)
• Prepare documents demonstrating the responsibility of each individual
• Develop an appropriate legal strategy

Lawyers experienced in criminal cases involving foreign investors and businesses often work together with accountants, auditors, or financial experts to conduct a comprehensive assessment.

An Important Legal Note for Foreign Directors and Investors

It is important to understand that every criminal case has its own facts and evidence. Therefore, it is impossible to predict the outcome of a case based solely on initial information.

Being invited to work with investigative authorities does not automatically mean that a person will be found guilty. However, this is a critical stage that requires careful handling and an appropriate legal strategy.

DEDICA Law – Legal Support for Foreigners in Criminal Cases in Vietnam

Over the years, DEDICA Law has advised and represented many clients who are foreign nationals involved in criminal matters in Vietnam.

We understand that facing an investigation in a foreign country can place individuals under significant pressure, including:

• Differences in legal systems
• Language barriers
• Concerns about personal and corporate rights

The lawyers at DEDICA have experience working with international law firms and multinational corporations, allowing us to navigate complex legal situations involving FDI companies and foreign investors in Vietnam.

DEDICA can assist clients with:

• Legal advice when invited to work with investigative authorities
• Criminal defense or legal representation in criminal proceedings
• Supporting communication with Vietnamese authorities
• Reviewing legal and financial risks within the company

We approach every case with the goal of protecting our clients’ legitimate rights in a careful and legally compliant manner.

Contact DEDICA Law Firm for Professional Legal Support

📞 Hotline: (+84) 39 969 0012 (Available via WhatsApp, WeChat, Zalo)

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Contact us today for a free initial consultation with our experienced lawyers!