In recent times, everyone has participated in real estate business, and with regulations that do not fully cover this field, real estate business activities still have potential loopholes that lead to tax losses.
Recently, due to the impact of the Covid-19 pandemic, real estate and land have changed from being a secondary asset storage channel to becoming one of the important investment transaction channels, attracting social capital resources. According to calculations, on average, each plot of land in rural areas, from January to April 2022, has an area of 150-200 m2The infrastructure built by the State is put up for auction at a price of 1.5-2.2 billion VND, with some lots being auctioned at double that, which is a significant amount of money that society has poured into land. In fact, in recent years, land exploitation has also been shown to be one of the sources of revenue for the provincial budget (in 2020, this source reached approximately 5,000 billion VND, in 2021 it was over 6,000 billion VND, and in the first 4 months of 2022, according to preliminary reports, many localities have completed up to 2/3 of the budget revenue plan from land exploitation).
Mr. Phan Thanh Mien - Chairman of Nghe An Small and Medium Enterprises Association shared: Under normal conditions, the bustling real estate business is a positive sign for the economy, because this is a business investment channel. However, the legal environment must be complete, the transaction products must meet the conditions to be listed on the trading floor, then the transaction will be safe and the State will also collect taxes and fees.
However, due to the incomplete legal environment for real estate business in our country, the State lacks information channels to monitor cash flow and the land prices prescribed by the State as the basis for calculating taxes are too inadequate compared to market prices, so tax losses are increasing. At forums implementing tasks in the past 2 years, a representative of the Vinh City Tax Department shared: From the actual procedures, just by paying attention to reconciliation, it is not difficult to realize that many transactions have prices recorded on transfer contracts that are too low compared to the actual transaction, but because they are not lower than the prices prescribed by the State, the industry cannot collect the tax that should have been collected.
The above reality shows that the tax loss in the real estate business sector exists and the risk of tax loss is increasing if the authorities do not have a solution. At forums, representatives of the Ministry of Finance have pointed out this reality. However, the current problem is that the number of land transfer transactions is increasing and the land price regulated by the State is always "weaker" than the market price. For example, according to regulations, when buying and selling land today, if there is additional income, the seller must pay 2% personal income tax, 0.5% land use purpose transfer fee and 45-50% land use purpose transfer tax.
However, to reduce the above taxes and fees, the parties often make 2 contracts with 2 prices, in which, 1 contract is for procedures at the State agency and 1 is a document showing the actual transaction value (to prevent disputes). In reality, there are many contracts made at the State agency that are lower, only 1/5 to 1/4 of the actual transaction price, so tax loss is real. The representative of the Propaganda Support Department of the Provincial Tax Department said: While some large properties such as cars, motorbikes, etc. have long had a price frame prescribed by the Provincial People's Committee for cases when doing transfer procedures, recently, some new properties, especially land prices, have not been close to the annual market price, if there is no solution, the risk of tax loss is increasing.
For example: Land price people sell on the market is 10 million VND/m2If it is garden land, converting it to residential land, you must pay 50% tax on purpose conversion, which means paying 5 million VND/m2.2budget, along with higher income tax and registration fees. However, because the State-regulated price is only 500,000 VND/m2So the tax for changing purpose is only 250,000 VND/m2This regulation is beneficial to the State in case of land acquisition leading to compensation, but due to the above price, tax loss is increasing.
Mr. Bach Sy Tuong - Head of Vinh City Tax Department, statistics: In the past 5 years, Vinh City Tax Department has processed over 15,000 transfer records each year, of which, in 2021, the land market had a "fever", so there were 17,200 records, processing an average of 1,400 transaction records per month. Similarly, in Nghi Loc district, in the past 2 years, due to the strong "fever" of the land market, about 200 transaction records came to the district's one-stop department every day. In 2021, although due to the Covid-19 epidemic, social distancing had to be implemented for 2-3 months, in Nghi Loc district, there were 31,000 transfer and land division transaction records, 5 times higher than before.
A cadastral officer of Nghi Thuan commune (Nghi Loc) shared: Previously, when the land was not "hot", land transfer transactions, if the two parties had reached an agreement, would go to the commune, if they could not do it themselves, they would ask the commune officials for guidance, declaration and land price so that the price stated in the contract was close to the actual price, but now most of the buying and selling transactions are guided and authorized by "brokers"; if the buyer or seller authorizes a "broker", they will find ways, including asking for notarization, to record a lower price than the actual market price to circumvent the law and evade taxes.
The reason why real estate transactions are increasingly complicated and difficult to monitor is because there is no strict and complete legal corridor. Previously, the Ministry of Construction issued a Circular stipulating that real estate investment and trading enterprises must put their products on the trading floor for sale, leading to the emergence of a series of land and real estate trading floors.
A representative of the Real Estate Management Department, Nghe An Department of Construction, said: At its peak, Nghe An had over 30 trading floors, including floors set up by companies to sell their investment products, but there were also floors that accepted products from investors. However, due to ineffective operations and the lack of inspection and supervision by the State, many floors are no longer in operation. Currently, the whole province has only about 10 floors in operation, the rest are mostly trading floors on social networks.
As far as we know, currently, land transactions are mainly conducted through personal trading floors on social networks. A floor owner who used to be a contractor in Nghi Phu commune (Vinh city) said: As a reputable address, there are many consigned products, on average, 5-7 transactions are carried out each month, each transaction only needs to have a profit of 10 million VND and during the "fever" of land, there are transactions with a profit of 500-700 million VND, better than being a construction contractor...
Mr. Le Quoc Tuan - Director of the Office of Land Use Rights Registration, Vinh City Branch said: On average, every day, the One-Stop Department of Vinh City People's Committee receives 250-300 land transaction records, of which 2/3 are transfer and subdivision transaction records. However, these are only transactions that complete name change procedures. In reality, there are also speculative transactions or notarized transactions that do not complete name change procedures to "avoid" taxes and fees.
The problem and loss of tax revenue in real estate business is that there are contracts for buying auctioned land or townhouses, with a clear price determination record, but in the transfer documents after the auction, there are still people who write a price lower than the auction price or the investor's quote to "avoid" tax, causing the authorities to blow the whistle and refuse. Therefore, if not corrected, the situation of tax loss in real estate business will become more and more common and the number is not small.
In 2021, along with receiving and processing 2,257/2,446 land records of organizations, Nghe An Department of Natural Resources and Environment received 210,525 registration records and issued Certificates of households and individuals.
(To be continued)