MoF agrees not to tax land use rights transfer

By An Chi - Jan 10, 2018 | 07:11 AM GMT+7

TheLEADERHaving encountered quite fierce protests from many organizations about the proposal to impose value added tax (VAT) on the transfer of land use rights, the Ministry of Finance (MoF) confirmed that it would not impose the tax.

MoF agrees not to tax land use rights transfer
The MoF accepts to take a step back in amending the tax law.

The Ministry of Finance has just collected the opinions from the ministries and relevant agencies about the VAT on land use rights transfer. Accordingly, it is still not subject to VAT.

Previously, in late August 2017, the MoF drafted a bill to amend and supplement some articles of the tax law. Regarding the VAT on land use right transfer, the Ministry has proposed to tax it at the standard VAT rate of 10 per cent.

This proposal immediately faced the adverse reactions from the real estate sector. According to many experts, the increase of VAT will increase the price of properties and significantly affect the absorption rate of the market by putting a damper on the housing demand of the people.

Nguyen Manh Ha, Vice President of Real Estate Association of Vietnam (VNREA), remarked that selling land is selling the land use rights, as the people are not entitled to own land. Thus, the land use rights are still the same. Currently, when selling the house, the sellers are subject to the registration tax rate of 0.5 per cent and the personal income tax rate of 2 per cent.

If the transfer of land use rights is subject to VAT, the tax may hike to 12-15 per cent (up seven times compared to the previous 2 per cent rate). This puts a massive burden on home buyers and the whole real estate market.

Commenting on this bill draft, the Vietnam Chamber of Commerce and Industry (VCCI) also proposed to keep the current regulations. According to VCCI, the land is the property of the State, land users are only allowed to transfer, donate or give the land use rights. Thus, the transfer of land use rights is not a kind of goods. Land use levy is a kind of State budget revenue. Hence, if the proposal is implemented, the taxes will overlap one another.

Receiving the comments on the proposal, the MoF confirmed that it would not impose the tax. The remaining problems will be reported to the Government and given the detailed guidance in by-law documents.