The project is turning profit into loss.
The leader of a famous real estate company in Ho Chi Minh City said that the biggest problem of real estate projects today is calculating land use fees (LUR), including additional LUR. Previously, many projects were given incentives by the city to temporarily calculate LUR so that businesses could carry out construction and sales, but now when the project has been handed over and people have lived in it for many years, LUR is calculated at the present time, not from the time of land handover. This has caused a lot of damage and frustration not only for businesses but also for home buyers.
Ho Chi Minh City requested the Lakeview City project to pay an additional land use fee of more than VND 4,664 billion, causing the company to fall into a difficult situation and suffer losses.
"The law stipulates that the time for land valuation and land use tax calculation is the time when there is a decision to allocate land or change land use purpose or allocate land in the field. But in reality, when there is any change that causes the land use tax calculation to be prolonged, the competent authority will re-evaluate the land and land use tax at the current time. Another difficulty is that the enterprise cannot take the initiative in the progress and the amount of money to be paid. The enterprise does not have the expertise and is not allowed to discuss reasonable land use tax calculation methods with the competent authority.
Therefore, enterprises have to hire another valuation company to find a harmonious result. Currently, enterprises still depend on the calculations of the authorities and are not allowed to object. Meanwhile, to be safe, land use rights are calculated very high by state officials. Many projects in the past had land use rights provisionally calculated at a certain number and enterprises used that number to structure the selling price for customers. Now, after many years, the authorities have recalculated land use rights and the number is many times higher than the provisional number. This causes many profitable projects to suddenly suffer heavy losses, and enterprises are even unable to close the deal," he said.
Having just sent a document to the Prime Minister and the Ministry of Finance to comment on the draft, Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, proposed that when there is a decision to adjust the detailed planning, the land use tax should be recalculated for the entire project at the time of the decision to adjust the planning. The land use tax that the enterprise has previously paid will be recalculated at the time of re-approval of the planning and deducted from the land use tax after recalculation, the deducted amount must not exceed the land use tax payable.
In case the enterprise has not paid the land use tax before adjusting the detailed planning of the project, the enterprise must pay the land use tax at the time of planning adjustment. The amount of land use tax paid (if any) will be recalculated at the time of planning adjustment, taking into account the inflation factor and deducted from the land use tax after recalculation. The deducted amount shall not exceed the amount of land use tax payable. At the same time, the enterprise must pay late payment of land use tax if there is a notice of land use tax payment.
Mr. Chau cited a commercial housing project in District 7 (HCMC) built on a 5.2-hectare land plot for which a competent state agency issued a land allocation decision from January 2021 with a land use coefficient of 3.05 times, a maximum construction density of 35%, including an apartment building with a maximum height of 27 floors with 903 apartments and a low-rise townhouse area with 110 townhouses. In March 2021, the enterprise paid VND 850 billion in land use tax. After that, the investor requested to adjust the detailed planning to increase the land use coefficient to 4.57 times, a maximum construction density of 40%, bringing the total number of apartments to 1,355, approved by the competent state agency in March 2024. According to the draft Decree, the project must pay additional land use tax of 425 billion VND, but according to Mr. Chau's proposal, the enterprise only has to pay additional land use tax of 325 billion VND.
"If the enterprise has sold and collected money, then with the calculation method of the draft Decree, the enterprise will have to pay out of pocket, leading to the risk of loss. If the project has not been sold, the land use right will be added to the selling price and thus will push up the house price, at which point the home buyer will be the one to bear the ultimate burden," Mr. Chau calculated.
There is only one case of land rent exemption left.
According to the draft Decree, there is currently only one case of land use for production and business purposes in the investment incentive sector in the investment incentive area exempted from land rent. The draft has significantly narrowed the cases of land rent exemption compared to the current regulations. If this regulation is passed, many investors, including foreign investors, will no longer enjoy the land rent exemption policy because these localities are not in the investment incentive area.
Not only that, according to Mr. Le Hoang Chau, the draft Decree no longer stipulates the policy of exempting land use fees during the basic construction project period or after the period of exemption from land rent and water surface rent during the basic construction period, so it does not inherit the current investment incentive policy stipulated in Decree 46. The new regulation has invalidated the special investment incentive policy stipulated in the Investment Law 2020 and Decision 29 of the Prime Minister regulating special investment incentives. This may negatively impact the investment attraction policy, reducing the attractiveness of the investment environment in Vietnam in the eyes of foreign investors.
"This is a very big issue, so the Government and competent state agencies need to pay special attention to consider before issuing the Decree to build a framework of preferential investment policies that are superior and highly competitive, ensuring both national and ethnic interests in the short term and in the medium and long term, while ensuring the legitimate and legal interests of investors. Especially in the context of fierce competition between countries to attract foreign direct investment (FDI), especially in the fields of finance, high technology, chips, and semiconductor technology; typically, even the US has just issued a law on chips and semiconductor technology," Mr. Chau suggested.
Lawyer Tran Minh Cuong (Ho Chi Minh City Bar Association) analyzed that while the Land Law stipulates that annual land rent is applied stably for a 5-year cycle from the time the State decides to lease land, allowing the change of land use purpose associated with the transition to the form of State land lease with annual land rent payment. The adjustment rate is regulated by the Government for each period, but the increase in land rent can be equal to or lower than inflation. However, the draft Decree stipulates that the rate of land rent increase is equal to inflation. Therefore, the Decree needs to consider limiting the increase in land rent for each 5-year cycle not to exceed the increase in CPI but not greater than 15%. This helps businesses reduce financial risks, be ready to invest in large projects, and recover capital over time.
After consulting with enterprises, the Vietnam Chamber of Commerce and Industry (VCCI) also said that compared to the current policy in Decree 46, the exemption and reduction policy in the draft is less attractive. Because according to current regulations, there are cases where enterprises are completely exempted, not just reduced land rent for a certain number of years. Some cases that are exempted from 100% of land rent for the entire lease term according to current regulations include: investment projects in the field of special investment incentives invested in areas with special socio-economic difficulties; projects using land to build student dormitories with money from the state budget, the unit assigned to manage and use for students is not allowed to include land rent costs in the rental price; agricultural land for ethnic minorities; land for implementing protective forest planting projects, reforestation projects, etc. Therefore, the Decree needs to consider regulations in the direction of expanding the cases of land rent exemption, instead of just reducing rent. If this can be done, it will attract investment capital into difficult areas or especially preferential fields.
Source: https://thanhnien.vn/bat-cap-cach-tinh-tien-su-dung-dat-185240630222853391.htm
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