Vietnam: What is the minimum state budget contribution in money (M3)? Which agency has the power to collect state budget contributions in money (M3)?
What is the minimum state budget contribution in money (M3) in Vietnam?
Pursuant to point a, clause 3, Article 48 of Decree 25/2020/ND-CP, M3 is the investor's proposed state budget contributions specified in the bid in addition to the investor's liabilities to state budget prescribed by applicable law.
Pursuant to Point k, Clause 2, Article 47 of Decree 25/2020/ND-CP as follows:
Minimum state budget contribution (m3) calculated by the procuring entity as follows:
m3 = s x ΔG x k, where:
- S: area of levied land or leased land;
- ΔG: average increase in value after land use right auction per unit of area of land with the same uses in the same area.
In case such a land area is not available, land data of administrative divisions with similar socio-economic conditions may be used;
- k: coefficient of average increase in value after land use right auction, with account taken of the similarity of the land area of the project and other factors (if any).
This value is relative, is the basis for investors to propose state budget contribution, and independent from the land levy or land rent payable to the investor according to land laws..
Thus, when appointing contractors to select investors for projects using land, in case there is only 1 investor participating in the selection process, there is no competition, M3 amounts will be basis to help avoid losses to the State budget.
State budget contribution (M3) in Vietnam is the land use levy?
Based on the above analysis and the following legal bases, the minimum state budget contribution (M3) is not the land use levy, or incomes earned from selling land, or transferring land use rights:
- Pursuant to Point c, Clause 1, Article 59 of Decree 25/2020/ND-CP (amended by Clause 8, Article 108 of Decree 31/2021/ND-CP) stipulating as follows:
Contract conclusion and publishing of contract information
1. Rules for contract conclusion
..
c) Land levy or land rent payable as determined in accordance with regulation of law on land plus the amount of payment to the state budget as proposed by the selected investor shall be recognized as market price at the time of land allocation or land lease specified in the contract.
- Pursuant to Clauses 1 and 2, Article 60 of Decree 25/2020/ND-CP (amended by Clause 9, Article 108 of Decree 31/2021/ND-CP) as follows:
Initiation of a land-using project
1. After the contract is concluded, the investor shall cooperate with a specialized agency in proposing land expropriation and the plan for compensation, assistance and relocation to a competent authority in accordance with land laws. The selected investor or project enterprise established by the selected investor to execute a project shall pay M2 and M3 amounts as proposed in the bid to the competent authority according to the project progress. Interest shall not be charged on the payment for compensation, assistance and relocation.
2. Procedures for land allocation/land lease; determination of land levy/land rent:
a) After the compensation, assistance and relocation amount has been paid, the procedures for land allocation/land lease specified in Clause 3 Article 68 of the Government’s Decree No. 43/2014/ND-CP and its revising or replacing document (if any) shall apply.
b) The provincial land authority shall organize the determination of land levy/land rent, submit a report to the land pricing council before submission to the People’s Committee of the province for approval.
3. The selected investor or project enterprise established by the selected investor to execute a project shall initiate the land-using project in accordance with the contract, regulations of law on investment, construction, land, planning, housing real estate trading and relevant laws.
Thus, M3 amounts are not land use levy and land rent that investors must pay to the state budget.
Which agency has the power to collect state budget contributions in money (M3) in Vietnam?
Based on the above-mentioned legal bases and the conclusion in Official Dispatch 3784/TCT-KK in 2022, the General Department of Taxation responded to the Da Nang Tax Department about the M3 amounts not falling into the collecting power of the tax authority.
Accordingly, the General Department of Taxation has concluded that the state budget contributions in money (M3) is proposed in the bid:
- Be paid to functional state agencies along with the value of compensations, supports and resettlements.
- It is not the land use levy specified in Decree 45/2014/ND-CP and the Law on Tax Administration 2019.
- It is not income paid to the state budget from selling assets on land and transferring land use rights in accordance with the Law on Management and Use of Public Property under the State Budget and the Law on Tax Administration.
- It is other revenues belonging to the state budget collected by tax authorities.
Accordingly, the General Department of Taxation requested the Da Nang Tax Department to study and submit to the City People's Committee for assigning the functional agency collecting compensations, supports and resettlements to collect the state budget contributions in money (M3).
Currently, agencies collecting M3 amounts are other state agencies instead of tax authorities.
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