HCMC Real Estate Association (HoREA) has just submitted a written proposal toward the draft law on amending and adding a number of articles of the value added tax (VAT) law, special consumption tax, Corporate income tax, personal income tax, natural resources tax of the Ministry of Finance.
In the draft, the Ministry of Finance proposed to remove the regulation on not subject to VAT as transferring land use rights to taxing 10% of VAT.
At the same time, the Ministry also proposed to remove the regulation on the price for VAT calculation for real estate business activities which are deducted the price of land use rights transfer or payable land rental rate to the State budget.
For this proposal, Mr. Le Thanh Chau, Chairman of HoREA, said that Article 6, Article 5 of the current Law on Value Added Tax stipulates the transfer of land use rights not subject to VAT is completely true. As a result, there will not happen the state of tax overlapping tax, consistent with the actual situation, and “rational”.
“At present, the draft law is expected to tax VAT when transferring land use rights will lead to the the situation of tax overlapping tax, which will increase the house’s selling price that the buyer has to be born. Therefore, the proposal of HoREA on not apply VAT when transferring land use rights is more rational,” stated in the writing document signed by Mr. Le Hoang Chau.
For the plan of The Ministry of Finance to raise the VAT rate under option 1 (up from 10% to 12%) or option 2 (increase according to the roadmap to 12% from January 1, 2019 and 14% from January 1, 2021, HoREA supposed that it should keep the current tax rate of 10% unchanged from now until 2021.
According to HoREA, this is because many ASEAN countries are maintaining the same or lower tax rate (Indonesia, Laos, Cambodia with 10% VAT rate, Singapore 7%, Thailand 5%).
Mr. Chau said that HoREA thoroughly understood the difficulties of state budget revenue when implementing the commitment on schedule of reducing major tariffs in the process of integrating into the world economy as well as when signing regional and bilateral free trade agreements, and also cover recurrent and spend for development investment. But VAT has a huge impact on the economy, all businesses, as well as the lives of people.
“The real estate market, especially housing, uses thousands of products from more than 90 sectors of manufacturing, construction, business and services. Therefore, the proposal to increase VAT to 12% will lead to price increase of raw materials, construction cost, labor .., and the housing price as well, “said Mr. Chau.
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