Old apartment buildings in District 5, HCM City. The Ministry of Finance proposed that the Government offer a preferential corporate income tax of 10 per cent for firms that renovate deteriorating apartment blocks. — VNA/VNS Photo Hoang Hai

HA NOI (Biz Hub) — The Ministry of Finance proposed the government should offer a preferential corporate income tax of 10 per cent tor firms that are renovating deteriorating apartment blocks.

This is aimed at attracting developers to participate in restoring unsafe old apartment buildings, which are a pressing problem in terms of living standards, safety and the urban landscape in major cities such as Ha Noi and HCM City.

Under the proposal, which will be submitted to the National Assembly for comments in October, firms will enjoy a preferential tax rate of 10 per cent in the 2017-20 period, compared to the current popular rate of 20 per cent.

Firms must declare the income of each project separately to enjoy this preferential tax rate, according to the ministry's proposal.

Tran Duc Thang, director of Cienco 1, one in three property companies involved in renovating the C1 Thanh Cong apartments in Ha Noi said this was good news, noting that developers might consider lowering housing prices in response.

However, a representative from another company said the 10 per cent tax rate was applicable for only a three-year period, which is too short as it usually takes at least five years to complete renovations before earning any revenue or profit.

According to Pham Dinh Thi, director of the Tax Policies Department, after 2020, the ministry might consider signing the proposed corporate income tax into law for these firms.

Incentives and policies to encourage firms to participate in renovating deteriorating apartment blocks have become essential, as firms remain hesitant because of low profits and complicated regulations.

After the government issued Resolution 34/2007/NQ-CP in 2007 on measures to renovate these apartment blocks, the results were still far below expectations.

For example, in Ha Noi, only 1 per cent of old apartment buildings were renovated over the past decade.

Statistics from the Ministry of Construction showed that there were some 4,000 old apartment buildings, built before 1991, covering a total area of more than 3 million sq.m., of which 1,516 were in Ha Noi and 900 in HCM City. More than 200 buildings were severely dilapidated and needed to be rebuilt. — VNS