Tax incentives have not been fully legalized
Experts say that one of the major barriers that has caused a series of projects to renovate old apartments and develop social housing to be delayed is the lack of specific and attractive tax policies to encourage businesses to participate. These are all sectors with high social characteristics, which need to be strongly supported by financial instruments to create investment motivation, reduce costs and financial risks for investors.
Sharing with Lao Dong reporter, Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA) said that it is necessary to amend and supplement a number of articles in the Draft Law on Corporate Income Tax (CIT), emphasizing the addition of tax incentives for two areas with special social roles but facing many barriers: renovation, reconstruction of old apartments and development of social housing for rent.
According to HoREA, the 2023 Housing Law clearly stipulates in Article 63 that investors of apartment renovation and reconstruction projects are entitled to preferential mechanisms, including tax incentives. However, the Draft Law on Corporate Income Tax has not specifically mentioned this type in the list of industries eligible for tax incentives.
This is a major bottleneck that makes businesses not interested in old apartment renovation projects, because this type already has many potential risks such as high site clearance costs, long implementation time, compensation mechanisms and complicated resettlement rates.
Therefore, the Chairman of HoREA proposed adding a new point to Clause 2, Article 12 of the Draft Law, including investment, renovation and reconstruction of apartment buildings according to the provisions of Point d, Clause 1, Article 63 of the Housing Law in the list of industries entitled to corporate income tax incentives.
In addition, to increase the effectiveness and attractiveness of the policy, the Association proposes to apply a tax rate of 10% on income from investment activities in renovating and rebuilding apartment buildings - equivalent to the current tax rate applied to social housing projects.
Clear policy direction for social housing for rent
In the latest comments sent to the National Assembly Standing Committee, HoREA proposed a preferential tax rate of 6% for social housing projects for rent only. This is the type identified as the main orientation in national housing policies, but in reality, it is very difficult to attract investment due to low profits and long capital recovery time.
Citing reality, HoREA said that the 2014 Housing Law once stipulated that social housing for rent will enjoy higher tax incentives than social housing for sale or rent-to-own. Decree 100/2015/ND-CP even clearly states that the corporate income tax rate for this type is 6%, 70% lower than the normal tax rate.
However, due to the lack of specific regulations in the Law on Corporate Income Tax, over the years, the 6% preferential tax rate has only existed on paper and cannot be implemented in practice. Enterprises still have to pay the same 10% tax rate as social housing projects for sale, causing the orientation of developing social housing for rent to almost "frozen".
Therefore, HoREA proposes to add to Point b, Clause 2, Article 13 of the Draft Law the following content:
"For the income of enterprises from investment activities in the construction of social housing for rent, a tax rate of 6% on corporate income tax is applied".
At the same time, HoREA also proposed to keep the tax rate at 10% for the remaining types of social housing, such as for sale and lease-purchase.
