The Ministry of Finance has recently proposed the imposition of value-added tax on the transfer of land use rights under the revised Law on Value-Added Tax (VAT).
The transfer of land use rights, which is not liable to VAT under the current VAT Law, will be subject to a VAT rate of 12 percent from January 1, 2019.
Chairman of the Board of Directors and Director General of Hung Thinh Corp. Nguyen Dinh Trung said land was not treated as a goods so the legal term “transfer of land use rights” was often used instead of “land (use rights) sale” in market transactions. Therefore, the proposal was inappropriate to the VAT Law in particular and the nature of the law in general, he said.
Deputy Director General of Deloitte Vietnam Co. Ltd., Phan Vu Hoang shared the view that under the Commercial Law, the land use rights are neither regarded as a goods nor liable to VAT.
Costs of constituent parts of a realty product were already inclusive of various taxes and charges, including VAT, said Trung, adding that the imposition of VAT would directly affect consumers and push up real estate selling prices.
According to Bui Quang Tin from the Ho Chi Minh City Banking University, the land use rights value makes up around 20-30 percent of condo apartment prices and if such value is liable to VAT, condo apartment prices will rise by 2-3 percent, let alone the VAT rate hike from current 10 percent to 12 percent on construction materials.
Tin said the tax policy would make realty prices go up, thus affecting buyers, particularly the poor, and slow down the settlement of non-performing loans.
At present, land use levy makes up 8-15 percent of condo apartment prices, around 30 percent of streetside house prices and around 50 percent villa prices, said Chairman Le Hoang Chau of the Ho Chi Minh City Real Estate Association (HoREA).
HoREA suggested not taxing the transfer of land use rights, said Chau, noting that condo apartment prices would consequently rise by some 1.5 percent; those of streetside houses, 3 percent and those of villages, 5 percent if the VAT rate of 10 percent is imposed.- (VLLF)