In case of natural disasters, shall there be a reduction in non-agricultural land use tax in Vietnam?

In case of natural disasters, shall there be a reduction in non-agricultural land use tax in Vietnam?

Based on Article 10 of the Law on Non-Agricultural Land Use Tax 2010, the regulations are as follows:

Tax Reduction

A 50% tax reduction is applicable for the following cases:

1. Land of investment projects in fields encouraged for investment; land of investment projects located in areas with socioeconomic difficulties; land used by enterprises employing from 20% to 50% of their workforce who are war invalids or people with work capacity reduction;

2. Residential land within the limit in areas with socioeconomic difficulties;

3. Residential land within the limit of war invalids of grades 3/4, 4/4; those entitled to the same policies as war invalids of grades 3/4, 4/4; work-capacity-reduction patients of grades 2/3, 3/3; children of martyrs who are not entitled to monthly allowances;

4. Taxpayers facing difficulties due to force majeure events if the value of damage to land and houses on the land is from 20% to 50% of the taxable value.

Under Clause 27, Article 3 of the Law on Tax Administration 2019, the definition of force majeure cases in tax management is as follows:

Definitions

In this Law, the following terms are construed as follows:

...

24. The arm’s length principle is the principle applied in declaring, determining the taxable value for taxpayers involved in related-party transactions to reflect conditions in such transactions equivalent to those in independent transactions.

25. The principle of the substance-over-form rule in tax obligation determination is the principle applied in tax management to analyze transactions, and business activities of taxpayers to determine tax obligations corresponding to value generated from the substance of these transactions and business activities.

26. The ultimate parent company of a group is a company having direct or indirect ownership in other companies of a multinational group, not owned by any other company, and the consolidated financial statements of the ultimate parent company are not consolidated into the financial statements of any other company worldwide.

27. Force majeure cases include:

a) Taxpayers suffering material damage due to natural disasters, calamities, epidemics, fires, unexpected accidents;

b) Other force majeure cases as prescribed by the Government of Vietnam.

Force majeure cases entitled to a reduction of non-agricultural land use tax include:

- Taxpayers suffering material damage due to natural disasters, calamities, epidemics, fires, unexpected accidents;

- Other force majeure cases as prescribed by the Government of Vietnam.

Thus, taxpayers are entitled to a 50% reduction in the payable non-agricultural land use tax if they suffer material damage due to natural disasters, and the value of the damage to land and houses on the land is from 20% to 50% of the taxable value.

In case of natural disasters, shall there be a reduction in non-agricultural land use tax in Vietnam? (Image from the Internet)

How to calculate the non-agricultural land use tax in Vietnam?

According to Article 6 of the Law on Non-Agricultural Land Use Tax 2010, the calculation of non-agricultural land use tax is stipulated as follows:

- The taxable value of land is determined by multiplying the land area by the price per square meter of land.

- The taxable land area is regulated as follows:

+ The taxable land area is the actual land area in use.

In case of having the right to use multiple parcels of residential land, the taxable area is the total area of the taxable parcels.In case the State allocates or leases land for industrial park construction, the taxable area does not include the area used for shared infrastructure construction;

+ For multi-storied residential buildings, apartment buildings including cases used for both residential and business purposes, the taxable land area is determined by the allocation ratio multiplied by the area of housing used by each organization, household, or individual.

The allocation ratio is determined by the area of land for construction of multi-storied buildings, apartments divided by the total area of houses used by organizations, households, or individuals.In case of buildings with basements, 50% of the area of the basement used by organizations, households, or individuals is added to their housing area to calculate the allocation ratio;

+ For underground construction projects, a 0.5 allocation ratio is applied, determined by the area of construction divided by the total area used by organizations, households, or individuals.

- The price per square meter of land is according to the land price table corresponding to the usage purpose and is stabilized over a 5-year cycle.

How to handle cases where taxpayers are eligible for both tax exemption and tax reduction on the same parcel in Vietnam?

Pursuant to Article 9 of Circular 153/2011/TT-BTC, the regulations are as follows:

Principles of Tax Exemption, Reduction

1. Tax exemption and reduction apply directly to taxpayers and are calculated only on the tax amount specified in the Law on Non-Agricultural Land Use Tax and guidelines in this Circular.

2. Tax exemption or reduction for residential land applies only to residential land at one location where the taxpayer holds title and selects, except for cases specified in Clause 9 of Article 10 and Clause 4 of Article 11 of this Circular.

3. If a taxpayer is eligible for both tax exemption and reduction on the same parcel, the exemption will apply; if a taxpayer meets two or more conditions for tax reduction under Article 11 of this Circular, the tax will be exempted.

If a taxpayer is eligible for a 50% tax reduction and the household has one or more members eligible for a 50% tax reduction, the household will be exempted from tax. These family members must be related as grandparents, parents, children, grandchildren, and must be listed in the permanent household registration of the family.

4. If a taxpayer has multiple investment projects eligible for tax exemption, reduction, the exemption, or reduction applies to each investment project.

In cases where the taxpayer is eligible for both tax exemption and tax reduction on the same parcel, the tax will be exempted.