Is the 3224/HD manual practical?
According to many investors, the determination of land prices by the surplus method in Instruction 3224 is not close to reality and does not ensure business benefits. Investors must pay land use fees 150% higher than Decision 3311/QD-UBND dated September 25, 2019 of the People's Committee of Hai Duong province.
According to the opinion of the enterprise, participating in bidding for real estate projects in Hai Duong province, being selected as investors according to the decisions recognizing the winning bid results of Hai Duong Provincial People's Committee, signing investment contracts with Hai Duong Provincial People's Committee and districts, cities and towns with projects. The projects are all implemented according to Decree 30/2015/ND-CP and Decree 25/2020/ND-CP of the Government detailing the implementation of a number of articles of the Bidding Law on investor selection. At the same time, these projects have been allocated land for 2-4 years now, and have basically completed the items: Site clearance, technical infrastructure construction... but have not yet determined the land use fee, and do not meet the business conditions according to regulations. At the time of bidding, investors proposed bids based on economic, technical and legal parameters in the bidding documents and the legal regulations in effect. Including Decision No. 3311/QD-UBND, dated September 25, 2019 of Hai Duong Provincial People's Committee on general regulations on a number of criteria as a basis for determining land prices.
On November 7, 2022, the People's Committee of Hai Duong province issued Instruction 3224 on calculating land use fees to replace Decision 3311/QD-UBND and apply to all projects that have not yet determined land use fees. The unrealistic instruction has changed all calculations of investors when participating in bidding, changing the content of bidding documents and project contracts. In particular, land use fees of projects increased nearly 2 times, a sharp increase compared to the calculation when bidding. When applying Instruction 3224/HD-UBND, the result of calculating land use fees is up to 150% higher, while construction costs are reduced by nearly 40% compared to when applying Decision 3311/QD-UBND.
Through research, the reporter learned that the application of Instruction 3224/HD - UBND has many inappropriate points for projects that were bid and allocated land before the time of issuance of the instruction. The determination of the time of allocating construction costs and the time of determining revenue is not consistent with the time when the enterprise wins the bid. According to the provisions of the 2013 Land Law and Decree 43/2014/ND-CP dated May 15, 2014 of the Government, in order to be able to do business in accordance with regulations, investors need to complete technical infrastructure and be accepted, and be granted a Certificate of Land Use Rights. That is, at least until the 30th month (for projects with a scale of 20 - 50 hectares) investors are eligible to do business, leading to a difference in the time to start business of 18 months. On the other hand, projects have not yet been determined for land use fees, so the actual time of business is even longer. Up to now, many projects have delivered land for 24 - 44 months.
On the other hand, the construction cost determined according to Instruction 3224/HD – UBND is inconsistent with the cost of building technical infrastructure of the Project in the bidding documents. The construction design estimate has been examined at the Construction Quality Appraisal Center – Hai Duong Department of Construction, including: Investment capital rate, special costs outside the rate: stone embankment, project boundary, electricity transfer, traffic connection, drainage, etc. The use of comparable assets to determine land use fees is not similar to the assets assessed according to Circular 36/2014/TT – BTNMT of the Ministry of Natural Resources and Environment. The comparable assets are located at an unusually high auction price compared to other auction areas in the area, inconsistent with the common price on the market.
Instruction 3224/HD-UBND also does not consider reducing unfavorable factors when comparing land lots in the Project (location, shape, area...).
Regarding the calculation of land use fees, Party A unilaterally calculated and then notified Party B of the amount to be paid (Party B was not allowed to participate or object). This action is imposed and not in accordance with the content of the contract signed by both parties. Enterprises have sent written recommendations to the People's Committee of Hai Duong province, but they have not been considered or responded to... The People's Committee of the province still issued a Decision to collect land use fees. For projects that were bid and allocated land before the issuance of Instruction 3224/HD - Hai Duong Provincial People's Committee still applied this, which is not in accordance with regulations. Real estate prices increase and decrease cyclically, according to Instruction 3224/HD - People's Committee fixed + 5%/year, which is not in accordance with reality.
The shortcomings need to be "resolved"
Working with reporters from the Natural Resources and Environment Newspaper, Mr. Nguyen Trong Hai, Deputy Director of the Hai Duong Department of Construction, confirmed: According to the law, when the winning investor conducts site clearance until the Provincial People's Committee has a land allocation decision, the province must calculate land use fees for the investor. The investor must pay taxes (complete financial obligations to the State) before being allowed to start infrastructure construction. Some investors of the Projects have basically completed the items: Site clearance, technical infrastructure construction... (now only land use fees are calculated) which is not in accordance with the regulations.
The reason is due to some previous objective factors, such as: Covid 19 epidemic, the province focused on fighting the epidemic and could not calculate land use fees, investors have started construction. Because Hai Duong province calculated land use fees at the time of the land allocation decision (2-4 years ago) when the land was "feverish", now real estate is frozen, land prices have dropped... leading to the story of many investors petitioning about calculating land use fees.
Regarding the content, the time of determining revenue is not suitable for the time when the enterprise wins the bid (Regulation from 6 months to 36 months, for Projects). The actual increase in real estate prices, according to Instruction 3224/HD – UBND fixed at 5%/year is not suitable for reality - according to Mr. Hai, this is a hypothetical method according to Circular 36/2014/TT – BTNMT of the Ministry of Natural Resources and Environment, to apply for calculating land use fees (not a regulation). This hypothetical method needs to be considered and implemented to ensure it is consistent with reality (there needs to be specific regulations, instead of assumptions).
Regarding the application of investment capital rates for construction of technical infrastructure works in urban areas, the Department of Construction of Hai Duong has sent a document to the Ministry of Construction asking for opinions on the application of the calculation method for projects under 20 hectares. Accordingly, the Ministry of Construction has responded, but not specifically: “… When applying the investment capital rates announced by the Ministry of Construction to determine the preliminary total investment. The total investment for a specific project needs to be adjusted and converted according to the provisions of the law on management of related construction investment costs announced annually by the Ministry of Construction, ensuring the principles of correct, sufficient, economical and effective calculation.”
The Department of Construction has consulted and calculated the investment capital rate of neighboring provinces, such as: Hung Yen, Bac Ninh, Thai Binh... In these provinces, the investment capital rate is calculated according to the regulations of the Ministry of Construction for projects of 20 hectares or more (applicable to projects). Special works: Moving power lines, building embankments, bridges, culverts... are not included in the investment capital rate. The Department of Construction has proposed the People's Committee of Hai Duong province to consider and give instructions on calculating the investment capital rate and special works of the projects appropriately.
Hai Duong province needs to consider: Determining land prices by the surplus method, the reason for the delay in calculating land use fees, are the reasons given objective and convincing? Responsibilities need to be clarified to avoid causing damage to investors. The land use fees are applied by the province at the price at the time of "land fever" while currently the land market is "frozen", so it needs to be reviewed to "harmonize business interests".
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