In the draft of the amended tax law, the Ministry of Finance has officially removed the VAT proposal with the transfer of land use rights (red book).
Remove VAT proposal to red book name, happy home buyer
The fact that the Ministry of Finance rejected the proposal to charge VAT to the name of the red book is considered good news for both home buyers and real estate companies.
Previously, in the draft amendment of five tax laws for public comment, the Ministry of Finance explained that the current VAT law has raised many obstacles on subjects not subject to VAT, including the transfer land use rights, causing difficulties for enterprises and tax administration. Therefore, the Ministry of Finance proposed to amend the name of the red book into the group subject to VAT.
The Ministry of Finance explains that real estate selling prices do not include VAT, but many apartment buildings have to allocate land use fees for each apartment so complicated. Many high-rise apartment projects do not deduct the land price payable to the budget when determining the VAT calculation price.
In addition, in cases where a business establishment receives a land use right transfer through other organizations or individuals over the years, it is difficult to determine the “transfer price of the land use right or land rent payable to the state budget. country”.
Therefore, to remove difficulties, the Ministry of Finance proposed to remove the regulation of transfer of land use rights not subject to VAT to VAT (usually 10%). Accordingly, apart from buying and selling real estate, activities for donation, inheritance … real estate when the red book name is subject to VAT.
At the same time, the Ministry of Finance also proposed to amend the regulations, instead of land use fees, land rents to be remitted into the state budget, which is now deducted from the taxable price, which will be added to the taxable price.
However, this proposal of the Ministry of Finance faced the opposition of many experts and associations.
Nguyen Manh Ha, deputy chairman of the Real Estate Association, opposed the proposal and said it would have a huge impact on the real estate market, even pushing home prices up. According to his calculations, if applied to the VAT on the transfer of land use rights, each sale of houses will add 10-15% of the cost. In addition, representatives of the Association also said that real estate market is currently 70% housing.
“A lot of people need to improve their homes, but the price of housing, materials that have risen, and taxes have increased,” he said at a Treasury consultation conference.
In particular, the Ho Chi Minh City Real Estate Association (HoREA) is the most eager. Le Hoang Chau, Chairman of HoREA, said that the transfer of land use right tax would lead to the taxation of taxation.
According to Chau, the current regulations, the transfer of land use rights are not subject to VAT is appropriate. Because the land use fee for housing projects is a state budget revenue that the project owner has paid is similar to a tax.
No tax increase is justified
As the unit has made many recommendations on the unreasonableness of the VAT to the name of the red book, Le Hoang Chau, chairman of the Association of Real Estate Ho Chi Minh City, said: “We welcome and excited when the petition is received by the management agency. The abandonment of the VAT proposal has received the sympathy of the business community and the people. “
According to Chau, it is reasonable to reject the VAT proposal because, under the current regulations, the transfer of land use rights is not subject to VAT. Because residential land use fees are a state budget revenue that the project owner has paid is similar to a tax. If the VAT is levied when transferring the land use right, it will lead to taxation, which will increase the selling price of the house.
“The real estate market, especially housing, uses thousands of products from more than 90 manufacturing, construction, business and service sectors. Therefore, the application of VAT will lead to the price of raw materials, construction contracts, labor … increased, the price of housing increased, “Chau analysis.
Copperman, Dr. Ngo Tri Long said VAT tax with the transfer of land use rights will push the house price up. When buying land and houses, if the tax is included, the home buyer must pay a tax overlap: land use fees, 10% VAT on land use fees, 10% construction costs and other costs. Many people will have to pay VAT from the purchase of land, then buy the house must pay VAT. This is a burden for the poor to buy a home.
“When VAT is pushed up will negatively impact the real estate market. Moreover, if VAT is charged at the beginning of 2019 may also be the time when the real estate market is on the downward momentum. Resonating these factors, surely the picture of the real estate market may be very gloomy, “Long said.
Economic expert Nguyen Tri Hieu also pointed out that when applying VAT to the name of the red book, generally raising taxes with the real estate industry will cause the market fluctuations, chain impact on other sectors and the implications for both economies. House price increase will tighten spending, do not go to buy houses, the real estate companies do not sell goods, not profit, even inventory, bad debt, the state lost tax. So the rules go to the name of the red people will be asked.
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