Customers buy a flat for about 1.2 billion (excluding value added tax – VAT), when customers ask the seller how to calculate the VAT, they answer 10% of the total value contract.
With the VAT method applied to real estate, is the type of apartment so lawful yet? If not, then what is the right, on what basis? Through the article below, we will help you understand this further.
Pursuant to Clause 10, Article 7 of Circular No. 219/2013/TT-BTC effective from January 1, 2014, the VAT rate applicable to real estate transfer is specified as follows:
“10. For real estate transfer, the taxable price is the transfer price of real estate minus (-) the price of land to be deducted for VAT calculation.
A / The land prices to be subtracted for VAT calculation are specified as follows:
A.1. The land is allocated by the State for investment in infrastructure for construction of houses for sale, the land prices to be subtracted for VAT calculation include the land use levies which must be remitted into the state budget (excluding the use charge Land to be exempted, reduced) and compensation and ground clearance costs in accordance with the law.
A.2. In case of auction of land use right of the State, the land price to be subtracted for calculation of value added tax is the auctioned land price.
A.3 The land is leased for investment in infrastructure for lease, construction of houses for sale, land prices to be subtracted for calculation of value added tax are land rents payable to the State budget (excluding Land rent exemption or reduction) and compensation and ground clearance costs in accordance with the law. Particularly in the case of land rent to build houses for sale, as from July 1, 2014, comply with the provisions of the Land Law 2013.
A.4. A business establishment receives an assignment of land use rights from an organization or individual, the land price to be deducted for VAT calculation shall be the land price at the time of receipt of the land use right transfer including the price Infrastructure (if any); Business establishments are not allowed to declare and deduct the input VAT of the infrastructure already included in the value of land use right to be deducted not subject to VAT.
If the land price is subtracted which does not include the value of the infrastructure, the business establishment may declare and deduct the input value added tax of the infrastructure not yet included in the value of the land use right to be subtracted VAT tax.
If the land price can not be determined at the time of transfer, the land price is subtracted for calculation of value added tax by the People’s Committee of the province or city directly under the Central Government at the time of signing the contract getting transfer.
A.5. If a real estate business is carried out in the form of construction – transfer (BT) with the land use right value, the land price is subtracted for calculation of value added tax shall be the price at the time of BT contract signing in accordance with the law; If, at the time of signing the BT contract, the land price is subtracted for payment of the project, it shall be decided by the provincial-level People’s Committee according to the provisions of law.
A.6) In cases where real estate enterprises transfer their agricultural land use rights under the transfer contracts and then are permitted by competent state agencies to change land use purposes For residential land used for the construction of apartment buildings, houses … for sale, the land price subtracted when calculating the VAT is the agricultural land price transferred from the people and other expenses, including: State budget for converting the land use purpose from agricultural land to residential land, paying personal income tax on behalf of people having land transferred (if the parties have agreed on the real estate business enterprise on behalf of the land).
B) In case of building, trading in infrastructure, building houses for sale, transfer or lease, the VAT calculation price is the proceeds collected according to the project implementation tempo or the schedule for fee collection stated in the contract. The minus (-) subtracted land price shall correspond to the percentage of the proceeds of the total contract value. “
Particularly for construction works being high-rises, condominiums and mixed-use houses (hereinafter referred collectively to as condominiums) (except for cases of sale of state-owned houses under Decree No. 61 / CP of July 5, 1994 of the Government), according to the provisions of Circular No. 117/2004 / TT-BTC (amended and supplemented under Circular No. 93/2011 / TT-BTC) To calculate VAT is allocated to each user according to the distribution coefficient multiplied by the area of the house of each user as follows:
The distribution coefficient is determined by the ratio between the area of the house and the total area used by the users. In the case of a basement, 50% of the basement area is added to the total area of the houses used to calculate the distribution factor. Therefore, the calculation of 10% tax on the contract value is not in accordance with the law.
As stated above, homebuyers encounter cases where the investor does not determine the price of land to be deducted for VAT calculation but the VAT is calculated on the full value of the contract can complain to ask the owner. Investment must recalculate. In case of paying VAT on the whole contract value, the investor may request the investor to repay the surplus amount.