Calculating land rental prices in Nghi Phu commune (Vinh city): Need to ensure general regulations

(Baonghean) - Starting operations in 2006, up to now, Nghi Phu Industrial Park has had 20 enterprises operating in production and business, creating jobs for over 600 workers. In recent times, enterprises here have enjoyed many preferential mechanisms and policies to attract investment from the province and Vinh City. Recently, some enterprises have been petitioning the province about the issue of high land rental prices, we have investigated this issue.

Recently, at the 2015 Business Dialogue Conference organized by the Provincial People's Committee, a representative of the Small and Medium Enterprises Association reflected that the land tax rate is generally high but the recommendations of businesses at Nghi Phu Industrial Park have not been resolved. When calling for investment, businesses invested in signing land lease contracts with Vinh City at a price of 1,000 VND/m2/year. During the process of increasing according to the roadmap of 5 years/time but not exceeding 10-15%, but at times it increased to 3,800 VND/m2/year - 4,500 VND/m2/year - 5,000 VND/m2/year.

To better understand the content of the reflection, we returned to Nghi Phu Industrial Park. Mr. Nguyen Van Thao - Director of Viet My Company Limited was built at Nghi Phu Industrial Park right after the industrial park was formed. In addition to producing various types of fertilizers, the company also participates in the business of supplying fertilizers to a number of other brands. In 2014, the company produced 15,000 tons of various types of NPK fertilizers, with sales reaching 300 billion VND; in the first 8 months of 2015, the output reached 800 tons, with sales of 50 billion VND. Currently, the company creates jobs for 35 workers. The company's sales method is through farmer associations, cooperative channels, and the main markets of the company are Nghe An and Ha Tinh.

Produced at Viet My Fertilizer Factory.

Production and business are increasingly difficult, competition is fierce. However, in that context, land rental prices are constantly increasing. Viet My Co., Ltd. has a rented land area of ​​4,168.2m2 at Lot 8, Nghi Phu Industrial Park, which was granted land in 2007. During the period 2007 - 2012, the land rental price was about 15 million VND/year. By the end of 2012, there was a decision approving the land rental price for the next 5 years for Viet My Co., Ltd. as: 24,107 VND/m2/year. Therefore, in 2012 and 2013, the total amount of water surface land rental to be paid increased to 100,482,797 VND/year. In 2014 and 2015, it was 88 million VND. Thus, according to the new price, the land rental that Viet My Co., Ltd. has to pay is about 6 times higher than the old price.

At Thanh Trung Trading Joint Stock Company, which rented 3,094.5 square meters, in 2011 the total land rent payable was just over 15 million VND; in 2012 it increased to 23,719,000 VND; in 2013 it increased to 117,616,000 VND (unit price 38,008 VND/m2); in 2014 and 2015 it was 88,172 million VND (unit price 28,493 VND/m2).

Mr. Nguyen The Kinh, Director of Thanh Trung Trading Company, said that the Provincial People's Committee needs to consider adjusting the land rental rates applied to enterprises at Nghi Phu Industrial Park. According to Decree 121/CP of the Government, Nghe An can only increase by 2-2.5 times, while according to the announcement of the functional sector, the collection rate at times increased by 600-800% compared to the previous year. We hope to have a direct dialogue with the Provincial People's Committee and the Department of Finance on this issue.

Talking to us, Mr. Hoang Minh Quan, Head of Price and Public Asset Management Department (Department of Finance) said: Enterprises in Nghi Phu Industrial Park were issued a decision by the Provincial People's Committee to lease land and signed a land lease contract with the Department of Natural Resources and Environment after 2006, so they must pay land rent according to the calculation method and principles prescribed in Decree 142 dated November 14, 2005 of the Government, Decision 67/2006 dated July 7, 2006 of the Provincial People's Committee. In fact, based on the process of approving land prices as a basis for determining land rent prices according to current regulations of the State, the Department of Finance has proactively determined the land prices for production and business for 6 enterprises in Nghi Phu Industrial Park in 2012, 2013, 2014 as a basis for determining land rents. However, because the land rental price determined by the regulations increased 6-8 times compared to the stable period of 5 years ago, enterprises in Nghi Phu Industrial Park complained and according to the conclusion of the interdisciplinary inspection team, based on the price of the independent valuation agency, the Department of Finance requested the Department of Natural Resources and Environment to give opinions to submit to the Provincial Land Valuation Council and the Provincial People's Committee for decision. Up to now, the Provincial Land Valuation Council has agreed on the land price for production and business proposed by the Department of Natural Resources and Environment and the Department of Finance, in which 4 enterprises have higher land prices and 2 enterprises have land prices equal to the land price previously determined by the Department of Finance.

The adjustment of land rental prices according to the provisions of Decree 142/2005 dated November 14, 2005 of the Government on land and water surface rental collection has been supplemented and amended in Decree 121/2010/ND-CP dated December 30, 2010 of the Government and Decision 36 dated August 1, 2011 of the People's Committee of Nghe An province. According to the Provincial Tax Department, to reduce difficulties for enterprises when adjusting land rental prices, the Government has had solutions to remove difficulties for production and business, support market development of the Government, reduce land rental fees for enterprises, economic organizations, households and individuals who are leased land by the State and the amount of land rental fees to be paid according to the provisions of Decree 121 increased more than 2 times compared to the payment level in 2010.

In case the land rent after reduction is still greater than 2 times the land rent payable in 2010, the land rent will be further reduced to 2 times the land rent payable in 2010. According to the above regulations, from March 1, 2011 to now, any enterprise whose land rent stabilization period has expired (land rent applied 5 years before this time, from 2006, 2007, 2008) must readjust the land rent price and will have to adjust both factors: land rent determined according to the land price table regulated by the Provincial People's Committee and the percentage rate for calculating the land rent price of the land plot from 0.5% - 0.7% to 1.5% - 1.56%. Thus, the land rental price of enterprises in Nghi Phu Industrial Park in 2012 and 2013 will increase from 2 to 8 times compared to 2006 - 2008 depending on the location, as reflected by the enterprises. However, this rental price is in accordance with the regulations of the Government, the Provincial People's Committee and provincial agencies are not allowed to calculate lower than the prescribed level.

“In Clause 1, Article 7, Circular guiding the implementation of Decree 46, land lease projects that pay annual land rent before the effective date of Decree No. 46/2014/ND-CP and are in the period of stabilizing land rent prices but the land rent prices being submitted are higher than the land rent prices prescribed in this Decree, the land rent prices will be adjusted according to the provisions of Article 4, Decree No. 46/2014/ND-CP. Accordingly, enterprises that compare the above regulations and are eligible for price adjustment must submit documents to the tax authority for adjustment from January 1, 2015” – said a representative of the Tax Department.

Thus, regarding the issue of businesses operating at Nghi Phu Industrial Park claiming that they signed a land lease contract with Vinh City for 100 VND/year and during the operation period, the land lease price will increase every 5 years but not exceed 10-15%, the Tax Department affirmed that it still maintains the same viewpoint of applying Decree 121 of the Government and Decision 36 of Nghe An Provincial People's Committee.

Because this rental price is in accordance with the regulations of the Government, the Provincial People's Committee and provincial agencies are not allowed to calculate lower than the prescribed level. However, in our opinion, although the Tax Department has issued a document guiding businesses to prepare documents to adjust the price, the Tax Department needs to proactively calculate and adjust according to the percentage of the land rental price prescribed by the Provincial People's Committee to provide a stable price, ensuring the rights of businesses.

Article and photos:Thu Huyen