VAT Increase To 12%: HOREA Is Concerned That Housing Prices Will Also “Chase”

The Ministry of Finance wants to increase Value Added Tax (VAT) from 10% to 12% because VAT is lower than other countries and the budget is under pressure due to import tariff reduction under the integration roadmap.

However, this has made HoREA worry that the price of raw materials, construction contracts, labor … will increase, leading to the increase in house prices.

HCMC Real Estate Association (HoREA) has issued recommendations related to the Ministry of Finance Report on the orientation of the Law amending and supplementing a number of articles of the Law on Value Added Tax (VAT), the consumption tax Special (SST), corporate income tax, personal income tax, natural resource tax …

The International increase, we also increase?

Explaining the reasons for wanting to increase VAT from 10% to 12%, the Ministry of Finance says that the number of countries applying VAT/tariffs on goods and services is increasing, from around 140 in 2004 to 160 in the year. 2014, 166 countries in 2016.

With the increase in the use of VAT to regulate consumption as well as increase revenues, the tendency to increase the VAT rate is widespread.

Ministry of Finance says that the number of countries applying VAT / tariffs on goods and services is increasing, from around 140 in 2004 to 160 in 2014 and 166 in 2016.

From 2009 to 2016, countries will increase the common tax rate. Specifically, the average tax rate in EU countries in 2000 is 19%, and by 2014 the average tax rate is approximately 21.5%. OECD countries also tend to increase the VAT rate from an average of 18% in 2000 to about 19% in 2014 and over 19% in 2016.

Asian countries also tend to restructure state budget revenues in the direction of increasing the share of consumption taxes in total revenue from VAT increases, such as the Philippines, India, and Japan.

According to World Bank statistics, with the tax rate of 112 countries, there are 88 countries with rates ranging from 12% to 25% (56 of them from 17% to 25%). 24 countries are popular at more than 10%. Neighboring countries such as Laos, Indonesia, and Cambodia also have a common tax rate of 10%; China has a common tax rate of 17% and a preferential rate of 13%. The Philippines has a tax rate of 15%.

Increase VAT and fears “home price”

According to Le Hoang Chau, Chairman of HoREA, in Clause 6, Article 5 of the VAT Law, the current regulation on “Transfer of land use right” is not subject to VAT is strictly legal (not to happen Taxation status), in accordance with the practical situation, and reasonable, especially in the case of transfer of housing associated with the transfer of land use rights.

Mr. Chau explained that the land use fee for the housing project was a state budget revenue (roughly equivalent to a tax) paid by the project owner. When selling a house together with the land use right transfer, the project owner is not required to pay VAT (ie, the buyer does not have to pay an additional tax) as stipulated in Clause 6, Article 5 of the VAT Law.

Now, the draft law is expected to apply VAT when transferring land use rights, leading to the situation of “overlapping tax”, which increases the selling price of the house that the buyer has to shoulder. Therefore, this unit proposes not to apply VAT when transferring land use rights, the more reasonable.

The increase of VAT has caused HoREA worries will lead to the price of raw materials, construction contracts, labor … increased, leading to higher home prices.

Expected to raise the VAT rate for real estate business under three options: Option 1 from 10% to 12%; Option 2 increased by the roadmap to 12% from January 1, 1919 and 14% from January 1, 2021, President HoREA proposed keeping the VAT rate of 10% from now until 2021, mesmerized.

“VAT has a great impact on the economy, all businesses, as well as the lives of the people.” The association found that in ASEAN countries, Indonesia, Laos, and Cambodia also applied the VAT rate of 10%; Singapore 7%, Thailand 5%.

For the real estate market, especially housing thousands of products used in more than 90 productions, construction, business and service sectors. The proposal to increase VAT to 12% from January 1, 2019 under the option of the Ministry of Finance will lead to the price of raw materials, construction contracts, labor … increased, the price Selling houses increased, “Chau analyzed.

Not only affect the value of real estate, in fact, this tax is actually hit the consumer and millions will be affected.

The HCM City Real Estate Association also recommends classifying real estate business into the manufacturing sector; The production area is 6 times the equity (6: 1); The remaining sectors apply 5 times the equity (5: 1).

On tax incentives for investment and renovation of old condominiums, HoREA’s leaders propose the application of VAT incentives at 5% similar to the VAT incentives for social housing projects to promote Encourage and support the owners to participate in the renovation and rebuilding of old condominiums.

You are reading the article VAT Increase To 12%: HOREA Is Concerned That Housing Prices Will Also “Chase” in the Real Estate category at https://realestatevietnam.com.vn/. Any information sharing, feedback please contact through
Hotline (+84) 898 898 688 (24/7) or email to contact.vietnamrealestate@gmail.com.
Special thanks!