Is the transfer of land use rights subject to value added tax in Vietnam?
Is the transfer of land use rights subject to value added tax in Vietnam?
Pursuant to Clause 6, Article 5 of the Law on Value Added Tax 2008 (as supplemented by Clause 1, Article 3 of the Law on Amendments to Tax Laws 2014, amended by Clause 1, Article 1 of Law No. 106/2016/QH13, amended by Clause 1, Article 1 of the Law on Value Added Tax Amendment 2013), the following is prescribed:
Subjects Not Subject to Tax
- Products from agriculture, animal husbandry, aquaculture, and fishing which have not been processed into other products or have only been preliminarily processed for sale by the producing or catching organization or individual, and at the import stage.
Enterprises and cooperatives purchasing such products which have not been processed into other products or are only preliminarily processed for sale to other enterprises or cooperatives shall not be required to declare or pay VAT but are eligible for input VAT deduction.
- Products that are breeds for livestock, plants including breeding eggs, breeding animals, plants, seeds, semen, embryos, genetic materials.
3a. Fertilizers; specialized machinery and equipment for agricultural production; offshore fishing vessels; animal feed, poultry feed, and feed for other animals.
- Irrigation and drainage; plowing and harrowing of land; dredging of inter-district canals and ditches serving agricultural production; agricultural product harvesting services.
- Salt products made of seawater, natural rock salt, refined salt, iodized salt with the main ingredient being Sodium Chloride (NaCl).
- State-owned houses sold by the State to current tenants.
6. Transfer of land use rights
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Additionally, Clause 7, Article 5 of the Law on Value Added Tax 2024 (effective from July 1, 2025), prescribes the subjects not subject to VAT as follows:
Subjects Not Subject to Tax
- Products from planting, forestation, breeding, aquaculture, and fishing which have not been processed into other products or have only been preliminarily processed for sale by the producing or catching organization or individual, and at the import stage.
- Breeds for livestock according to the law on livestock; plant breeding materials according to the law on cultivation.
- Animal feed according to the law on livestock; aquaculture feed according to the law on aquaculture.
- Salt products made of seawater, natural rock salt, refined salt, iodized salt with the main ingredient being Sodium Chloride (NaCl).
- State-owned houses sold to current tenants.
- Irrigation and drainage; plowing and harrowing of land; dredging of inter-district canals and ditches serving agricultural production; agricultural product harvesting services.
7. Transfer of land use rights.
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Thus, the transfer of land use rights is a subject not subject to VAT under the current provisions and the provisions of the new Law on Value Added Tax.
>>> See also: What is the transfer of land use rights? Why is it not called "buying and selling land" but "transfer of land use rights"?
Is the transfer of land use rights subject to value added tax in Vietnam? (Image from the Internet)
When is the time for determining VAT in Vietnam?
Pursuant to Article 8 of Circular 219/2013/TT-BTC which regulates the time for determining VAT as follows:
(1) For the sale of goods, it is the time of transfer of ownership or use rights of goods to the buyer, irrespective of whether payment has been received.
(2) For service provision, it is at the completion of the service provision or the time of issuing the service provision invoice, irrespective of whether payment has been received.
For telecommunication services, it is the time of reconciliating data on telecommunication connection charges according to the economic contract between telecommunication service providers, but no later than 2 months from the month of issuing the telecommunication connection charges.
(3) For electricity and clean water supply, it is the day of recording the consumption meter reading to be billed.
(4) For real estate business activities, infrastructure construction, housing construction for sale, transfer, or rent, it is the time of collecting payment according to the project's progress or the payment schedule in the contract. Based on the collected amount, the business calculates the arising output VAT in the period.
(5) For construction and installation, including shipbuilding, it is at the time of acceptance and handover of the completed work, project, or construction item, irrespective of whether payment has been received.
(6) For imported goods, it is the time of registration of the customs declaration.
Which entities are VAT payers in Vietnam according to current regulations?
Pursuant to Article 3 of Circular 219/2013/TT-BTC, the VAT payer is an organization or individual producing or trading goods and services subject to VAT in Vietnam, regardless of industry, form, business organization (hereinafter referred to as the business establishment) and the organization or individual importing goods or purchasing services from abroad subject to VAT (hereinafter referred to as the importer) including:
- Business organizations established and registered for business according to the Law on Enterprises, the Law on State Enterprises (now the Law on Enterprises), the Law on Cooperatives, and other specialized business laws;
- Economic organizations of political organizations, socio-political organizations, social organizations, socio-professional organizations, armed forces units, non-profit organizations, and other organizations;
- Enterprises with foreign investment and foreign parties participating in business cooperation under the Law on Foreign Investment in Vietnam (now the Law on Investment); foreign organizations and individuals doing business in Vietnam without establishing a legal entity in Vietnam;
- Individuals, households, independent business groups, and other entities engaged in production, business, or importation activities;
- Organizations and individuals engaged in production and business in Vietnam purchasing services (including services attached to goods) from foreign organizations without permanent establishments in Vietnam, and individuals abroad who are non-residents in Vietnam, must declare and pay VAT unless not required to do so.
Provisions on permanent establishments and non-resident subjects are implemented according to the corporate income tax law and personal income tax law.
- Branches of export processing enterprises established to engage in trading goods and activities directly related to buying and selling goods in Vietnam as per the law on industrial zones, export processing zones, and economic zones.
