7 cases of land prices being deducted for tax calculation
The Ministry of Finance is drafting a Decree guiding the implementation of a number of articles of the Law on Value Added Tax (2nd draft). One of the important contents is the proposal for detailed regulations on taxable prices in real estate business activities.
Accordingly, the price for calculating value-added tax (VAT) for real estate will be the selling price without VAT, deducting land use fees or land rent paid to the state budget. Specifically, the draft clearly states 7 cases of land price deduction when calculating taxes.
1. In case of land allocation, land lease with one-time payment
In cases where the State allocates land, leases land with one-time payment for the entire lease term (through auction or without auction), changes land use purposes, adjusts land allocation or lease decisions, extends or adjusts land use term... the land price to be deducted is land use fee, land rent paid at one time according to current regulations.
2. In case of receiving land use rights transfer
If a business establishment receives a transfer of land use rights from an organization or individual, the land price to be deducted from tax is the land use fee or land rent paid to the state budget, excluding the value of infrastructure. Business establishments can still declare input VAT deductions for infrastructure (if any).
3. In case of receiving capital contributions using land use rights
When an organization or individual contributes capital using land use rights, the land price deducted for tax calculation is the land use fee or land rent that the contributor has paid to the state budget.
4. In case of implementing a BT contract and being paid by land fund
For projects under the public-private partnership (PPP) method, if the business establishment receives payment in land funds, the deducted land price will be the land fund value paid according to the law.
5. In case of construction, business of infrastructure, housing for sale or lease
The VAT calculation price in this case will be the amount collected according to the project progress or the fee collection progress stated in the contract, minus the land price deducted corresponding to the percentage of the amount collected on the total contract value.
6. In case of building apartments, multi-storey houses for sale
The land price is deducted from each square meter of house for sale determined by the total land price deducted from the above cases, divided by the total construction floor area, excluding shared areas such as corridors, stairs, and basements.
7. In case the land use fee or land rent cannot be determined
If the land use fee or land rent paid to the state budget cannot be determined, there are two solutions:
Option 1: The tax authority provides data on land use fees or land rent that have been paid based on management data.
Option 2: If it is not possible to determine the land price to be deducted at the time of transfer, the VAT price will be the real estate transfer price.
Impact of the new proposal
This draft aims to clarify how to calculate taxes in real estate business activities, avoid disputes over deducted land prices, and at the same time create favorable conditions for businesses in the tax declaration process.
Currently, the Ministry of Finance is continuing to collect opinions from relevant parties to complete the regulations before submitting them to the Government for promulgation.
