Vietnam: To apply a high tax rate for apartment buildings over 50 million VND/m2? To separate residential land and houses for real estate tax purposes?
Vietnam: Shall a high tax rate be applied to apartment buildings over 50 million VND/m2?
In Section D, Part 1, Appendix 2, the report on the Draft Law and Ordinance Development Program in 2024, adjusted in 2023, the Ministry of Justice is synthesizing opinions to improve the tax policy for real estate, specifically for apartment buildings, including land for the construction of condominiums, effectively promote the use of progressive tax rates, and overcome limitations of the FLA tax policy.
- About the value:
It is proposed to stipulate a taxable threshold for apartment buildings to ensure low regulation for users of low-value houses and affordable apartment buildings; does not affect the supply-ddemand of the real estate market, limiting the impact on the affordable apartment segment (for social housing, housing for workers will be tax exempt);
Implementing high regulations for high-class apartments (prices over 50 million VND/m2) contributes to ensuring fairness in income regulation for all classes of the population.
- About tax rates:
For apartment buildings, the taxable price is determined to include both land value and house value.
As a result, it is proposed that the tax rate for apartment buildings be applied from the first value, but the tax rate for land be lower, in order to ensure equity for residential land and individual houses.
Vietnam: To impose a high tax rate for apartment buildings over 50 million VND/m2? To separate residential land and houses for real estate tax purposes?
What is the process for the application of the non-agricultural land use tax in Vietnam?
In Section D, Part 1, Appendix 2, Report on the Draft Law and Ordinance Development Program in 2024 and adjusted in 2023, which is being summarized by the Ministry of Justice on the assessment of the current non-agricultural land use tax rates as follows:
The current non-agricultural land use tax rate is applied according to the progressive tariff for residential land (0.03% for the area within the quota, 0.07% for the area not exceeding 3 times the limit, and 0.15% for the area in excess of 3 times the limit) as specified in Article 7 of the Law on Non-Agricultural Land Use Tax 2010.
The new residential land allocation quota is used to determine taxable tiers; if the residential land has a limit prescribed before the effective date of the law but is higher than the new residential land allocation limit, the old limit shall apply; non-agricultural production and business land (0.03%); encroached land, occupied (0.2% and no limit applied); land used for wrong purposes, unused land according to regulations (0.15%).
Evaluation of the implementation process revealed two problems, which are as follows:
Firstly, the mobilizing rate for non-agricultural land use tax is very low; the tax rate is not large enough to strongly regulate people with the right to use a lot of land in an efficient and effective way.
In particular, because the tax rates of 0.07% and 0.15%, respectively, for the land area exceeded from more than 1 time to 3 times and over 3 times the residential land use limits are low. Due to low tax incentives, land is not used efficiently for production and business and is even left vacant, causing a waste of land resources.
Secondly, the provision of a progressive tax schedule for residential land is in line with international practices, contributing to the regulation of cases with large-area residential land use rights.
The provincial People's Committee, on the other hand, prescribes the regulation of the taxable threshold by area and determination according to the residential land quota (the new residential land allocation limit or the residential land recognition limit in the case of already existing residential land according to regulations before the effective date of the Law on Non-Agricultural Land Use Tax 2010, which is higher than the new residential land allocation quota), it makes it difficult for tax authorities to determine the taxable land limit of previous years because there is no complete land database system, so it is difficult to search.
Therefore, tax authorities usually use the area on the land use right certificate as the land limit for tax calculation, but most of the land area on the land use right certificate may be the area in excess of the limit set by the owner. Land users pay money to change the land use purpose and apply for a new land use certificate, causing a loss of state budget revenue due to an incorrect determination of the limit.
Should residential land and houses in Vietnam be separated for real estate tax purposes?
Also in Section D, Part 1, Appendix 2, and the Report on the Draft Law and Ordinance Development Program in 2024 and adjusted in 2023, the Ministry of Justice is synthesizing opinions on improving the tax policy for real estate and promoting it. As a result of the use of the progressive tax schedule, which overcomes the limitations of the non-agricultural land use tax policy, it is proposed to stipulate the property tax rate in the following direction:
- It is proposed to separate residential land and houses for real estate tax purposes to be simple, easy to calculate, easy to implement, convenient in tax collection management, and in accordance with international practices.
At the same time, the tax uses a partial progressive tax rate to ensure high regulation for high-value houses and land and low regulation for low-value houses and land, ensuring equality in regulating population income (the partial progressive tariff is determined by the threshold value with the progressive tariff tiers).
- About the threshold value:
The determination of the value threshold to apply the progressive tax table to residential land and houses needs to ensure the goal of creating consensus among the people in taxing, taking into account the level of regulation and the ability to pay taxes of the people, ensuring that most residential land plots and rural houses of low to medium value are below the threshold, ensuring a gradual narrowing of the gap between the rich and the poor, between the rural areas and urban areas, and contributing to the realization of the national goals of poverty reduction and sustainable social security.
- About the tax rates:
+ For residential land: It is proposed to raise the residential land tax rate (tax on the entire residential land area).
Raising the tax rate for residential land (including for business use) is necessary to be in line with international practices, contribute to ensuring the policy's promulgation objectives, and be in line with the policies of the Party and State.
The proposed tax on the entire residential land area comes from the principle of taxing according to the benefits, in accordance with the Constitution and relevant laws, and in accordance with international practices imposed by the majority of countries. Property is valued based on the land value first, regardless of whether the owner has a high or low income, and only a few countries, such as Indonesia, charge tax on the excess land value.
However, in order to avoid a great impact on people and businesses and at the same time ensure the goal of real estate tax policy development, it is necessary to study the real estate tax rate for residential land that is suitable and regulated. rationalize the incomes of organizations and individuals, and at the same time stipulate a roadmap for tax rate increases suitable to socio-economic development conditions in each period from the effective date of the law.
+ For housing: housing is regarded as a land investment.
In fact, the state encourages the construction of houses and other construction works, avoiding leaving the land abandoned and not making full use of the land's value.
Because new housing is taxed, it is necessary to eliminate the types of housing with low investment (temporary houses, unstable houses, and semi-permanent houses) when taxing real estate for housing. solidly...) out of the scope of regulation to avoid causing a tax burden on people with difficult circumstances or low-quality houses located in areas with difficult socio-economic conditions;
At the same time, to ensure the people's right to have housing as stipulated in the Constitution, propose not to tax the house value below the threshold; for the house value above the threshold, prescribe a roadmap for applying tax rates in stages from the effective date of the law in order to ensure feasibility and get the consent of taxpayers.
See the entire Appendix 2 to the Government's Draft Proposal on the Law and Ordinance Development Program in 2024; adjust the program for developing laws and ordinances in 2023 here.
LawNet
