That is the opinion of the Ho Chi Minh City Real Estate Association (HoREA) on some amendments to the tax laws relating to real estate investment and trading activities that the MoF has just announced recently.
Accordingly, at Clause 6, Article 5 of the current VAT Law provides that "The transfer of land use rights is not subject to VAT”. However, according to the MoF, in reality, many problems have arisen in the high-rise real estate projects.
Therefore, to remove the obstacles in implementing and reforming the administrative procedures, the MoF proposed to shift the transfer of land use rights to be subject to VAT at a regular rate of 10%.
Regarding this proposal, Le Hoang Chau, Chairman of the HoREA said, the current VAT Law stipulates that "the transfer of land use right" being not subject to VAT is strictly legal (so that the tax-over-tax status will not occur).
Land use levy of a housing project is a kind of State budget revenue (roughly equivalent to a kind of tax) paid by the project owner. When selling houses together with transferring the land use right, the project owner does not have to pay VAT as stipulated in Clause 6, Article 5 of the VAT Law.
As a result, the proposed law may lead to a "tax-over-tax status", which increases the selling price of the houses. Therefore, Chau suggested VAT should not be applied to the transfer of land use rights.
Also, the VAT rate is projected to rise in two options. Option 1: from 10% to 12% from January 1st, 2019; option 2: following the roadmap, increasing to 12% from January 1st, 2019 and to 14% from January 1st, 2021. HoREA also said that the VAT increase would pose an enormous impact on the economy, all businesses, as well as the people.