Ministry of Finance abandons proposal to impose VAT on land use rights transfer
In the draft revised tax laws, the Ministry of Finance removed the proposal to impose VAT on land use rights transfer (red book).
In the draft revised tax laws recently submitted by the Ministry of Finance to the Ministry of Justice for review, there are a number of changes compared to the previous draft for public consultation.
Specifically, the Ministry of Finance has officially dropped the proposal to impose VAT on land use rights transfer activities.
Although, previously, in the draft amendment of 5 tax laws for public consultation, the Ministry of Finance proposed to remove the regulation "transfer of land use rights not subject to VAT" to the normal tax rate of 10%. Thus, when transferring the red book title through purchase and sale, people will have to pay an additional 10% VAT.
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| The Ministry of Finance has abandoned the proposal to impose VAT on red book transfer. |
The Ministry of Finance explained that the current VAT Law has created many problems regarding subjects not subject to VAT, including land use rights transfer, causing difficulties for businesses and tax management.
Currently, real estate prices do not include VAT, but many high-rise apartment projects have to allocate land use fees for each apartment, which is complicated; many high-rise apartment projects do not deduct the land price payable to the budget when determining the price for calculating VAT.
Besides, in the case of a business establishment receiving the transfer of land use rights through many other organizations and individuals over many years, it is difficult to determine the "land use rights transfer price or land rent payable to the state budget".
However, this proposal of the Ministry of Finance has met with opposition from many experts and associations.
Mr. Nguyen Manh Ha - Vice President of the Real Estate Association opposed this proposal and said that it would have a huge impact on the real estate market, even pushing up housing prices. According to his calculations, if VAT is also applied when transferring land use rights, each house sale transaction will increase the cost by 10-15%. In addition, the representative of this Association also said that 70% of the real estate market is currently housing.
"Many people need to improve their housing, but the price of houses and materials has already increased, and further tax increases will make the price increase a lot," he said at a consultation workshop of the Ministry of Finance.
In particular, the most enthusiastic is the Ho Chi Minh City Real Estate Association (HoREA). Mr. Le Hoang Chau, Chairman of HoREA, said that imposing VAT on land use rights transfers will lead to a situation of double taxation.
According to Mr. Chau, the current regulation that land use rights transfer is not subject to VAT is appropriate. Because the land use fee for housing projects is a state budget revenue that the project owner has paid, similar to a tax.