The Ministry of Finance’s proposal to impose 10 per cent value added tax (VAT) on the transfer of land use rights has met with objections, as it might increase land prices.

According to Nguyen Manh Ha, vice chairman of the Viet Nam Real Estate Association, the VAT proposed by the ministry in a recently circulated draft would have a significant impact on the property market, and even push up land prices.

Ha calculated that costs for transferring land use rights would increase 10-15 per cent and deter home buyers, adding that housing makes up 70 per cent of the real estate market.

Lawyer Bui Sinh Quyen, head of Phu Tho Law Firm, said that land or land use rights were not like regular goods or services. Quyen noted that the VAT law defined the tax imposed on the added value of goods and services arising from the process of production, distribution and consumption and thus did not cover land and land use rights.

Le Hoang Chau, chairman of HCM City Real Estate Association, agreed, saying that imposing VAT could cause double taxation, which would push up land prices for buyers. Current taxes and fees applied to the transfer of land use rights already include taxes on transfer of land use rights, registration fees and personal income tax on the sellers.

Viet Nam Chamber of Commerce and Industry (VCCI) asked whether only organisations and individuals involved in the real estate business would be taxed. Imposing this VAT only on organisations and individuals involved in the real estate business would create inequality as others would not be paying tax, while they might still make profits from selling properties.

The VCCI proposed leaving intact the current regulation exempting the transfer of land use rights from VAT. — VNS