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Recently, the Ministry of Finance has just reported on the tax policy for real estate to establish the property tax law. The taxable properties are real estate, land; especially people own many houses, from the second one onwards.
This tax law will help the healthy development, transparency, sustainability of the real estate market, preventing speculation and wasteful use of real estate and contributing to redirect cash flows. Instead of investing in real estate, we will change to investment in manufacturing, trading and service, increase market supply, create more supplies for people who need to buy the house, and increase stable, long-term, and sustainable growth rate of State Budget revenues. In addition, the tax law will also lead secondary investors to the selection of established real estate business enterprise rather than individual business like today.
In Vietnam, the only current non-agricultural land use tax became effective on January 1st, 2012 has defined the types of non-agricultural land. The land in urban areas is the taxable object with the applicable tax rate 0.03% in the land price of the land area in the limit; 0.07% of the land area at no more than 3 times exceeded the limit; and 0.15% of the land area in excess of 3 times the limit.
The taxable land price is calculated on base the land price list in the city only about 30% – 40% of the real market price. Therefore, the very low tax rates lead to the low State Budget revenues, only 0.03% of GDP and 0.15% of the total State Budget revenues.
Besides the function of creating the State Budget revenues, a tax is also the tool to regulate the economy, the operation and behavior of production, investment, business, service. The property tax law legislation is only reasonable when we simultaneously modify policies and mechanisms of land use levy in accordance with the land law which is currently very inadequate.
The land use levy is neither tax nor fee, but it is really big revenue in local budgets. It is also a burden for enterprises and buyers, not transparent, and creates “ask and give” mechanism.
The land use levy accounts for the large proportion of the cost housing, approximately 10% for condominiums, about 30% for townhouses, upper and lower 50% for villas. Hence, if the property tax law is enacted without modifying policies and mechanisms of collecting land use levy, it will be unreasonable.
The application of land use tax when the government allocated or allowed to change the purpose of land use in the early years will have the effect of reducing revenues of land use under the provincial budget. It is currently an important income of local budget, but it will help enterprises and buyers reduce the burden of the current land use levy, the cost of housing. Businesses can predict land use tax costs to investment projects.
You are reading the article Proposed Property Tax Law Legislation in the Real Estate category at realestatevietnam.com.vn/.
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