Chapter III

DETERMINATION OF TAXABLE INCOME FROM AND INCOME TAX ON THE TRANSFER OF LAND USE RIGHT AND LAND RENT RIGHT

Article 10.- The following incomes from the transfer of land use right and land rent right shall be subject to income tax on the transfer of land use right and land rent right:

1. Cases of land use right transfer:

a/ Transfer of land use right without infrastructures or architectural works on land;

b/ Transfer of land use right associated with infrastructures on land;

c/ Transfer of land use right associated with architectural works on land;

d/ Transfer of land use right associated with infrastructures and architectural works on land.

2. Cases of land rent right transfer:

a/ Transfer of land rent right without infrastructures or architectural works on land;

b/ Transfer of land rent right associated with infrastructures on land;

c/ Transfer of land rent right associated with architectural works on land;

d/ Transfer of land rent right associated with infrastructures and architectural works on land.

Article 11.- Cases of land use right transfer and land rent right transfer not subject to income tax on the transfer of land use right or land rent right

1. The State assigns or leases land to business establishments.

2. Organizations engaged in goods production and trading and/or service provision return land to the State or have their land recovered by the State according to law provisions.

3. Organizations engaged in goods production and trading and/or service provision sell their workshops and transfer their land use right or land rent right for their relocation under plannings.

4. Organizations engaged in goods production and trading and/or service provision contribute capital with the land use right for production and business cooperation with Vietnamese or foreign organizations and/or individuals according to law provisions.

5. Organizations engaged in goods production and trading and/or service provision transfer their land use right or land rent right due to their division, separation, merger or bankruptcy.

6. Owners of private enterprises transfer their land use right in cases of inheritance or divorce according to law provisions; transfer of land use right between spouses, between parents and children; between paternal or maternal grandparents and their grandchildren; and between siblings.

7. Organizations engaged in goods production and trading and/or service provision donate their land use right or land rent right to the State or other organizations for construction of cultural, medical and physical training and sport works; transfer of land use right for charity purposes to social policy beneficiaries.

Article 12.- Payers of income tax on the transfer of land use right or land rent right are organizations engaged in goods production and trading and/or service provision with incomes from the transfer of land use right or land rent right

Business households and individuals engaged in goods trading and/or service provision, that have incomes from the transfer of land use right or land rent right, shall not have to pay income tax on the transfer of land use right and land rent right under this Decree, but pay income tax on high-income earners.

Article 13.- Taxable income from the transfer of land use right or land rent right shall be determined as being equal to the turnover for calculation of taxable income minus reasonable expenses related to the transfer of land use right or land rent right.

1. The turnover for the calculation of taxable income shall be determined according to the actual prices of transfer between organizations engaged in goods production and trading and/or service provision, which transfer their land use right or land rent right, and the transferees at the time of transfer.

The actual transfer prices shall be determined as follows:

- Being the prices inscribed in invoices or the money amounts actually paid by the land use right or land rent right transferees to the transferors.

In cases where the actual transfer prices are lower than the prices decided by the provincial/municipal People’s Committees, the turnover for calculation of income subject to tax on the transfer of land use right or land rent right shall be based on the prices decided by the provincial/municipal People’s Committees.

- Being the auction-wining prices in cases where the land use right or land rent right is auctioned.

The turnover for calculation of taxable income in some cases shall be as follows:

a/ In cases of transferring the land use right or land rent right associated with infrastructures on land, the turnover for calculation of taxable income shall include the turnover from the transfer of ownership right over the infrastructures and the turnover from the lease of infrastructures on land;

b/ In cases of transferring the land use right and/or land rent right associated with architectural works on land, the turnover from the sale of architectural works on land must be separated. For cases where this turnover cannot be separated, the turnover for calculation of taxable income shall include the turnover from the sale of architectural works on land.

2. Expenses for the transfer of land use right or land rent right:

a/ Expenses for obtaining the land use right or land rent right, including:

- The cost prices of land subject to right transfer, which shall be determined as follows:

+ For land assigned by the State with the collection of land use levy or land rents, vouchers on the collection of land use levy or land rents by the State shall be based on.

+ For land for which the land use right is received from other organizations or individuals, contracts and valid payment vouchers upon the reception of land use right or land rent right shall be based on.

+ In cases where organizations engaged in goods production and trading and/or service provision exchange works for the State’s land, the cost prices shall be determined according to the value of exchanged works.

+ Auction-winning prices in cases where land use right or land rent right is auctioned.

+ In cases where limited liability companies or joint-stock companies transfer the land use or rent rights, which have been contributed as joint-venture capital, the cost prices shall be determined according to capital-contribution minutes of the managing boards.

+ For land of organizations engaged in goods production and trading and/or service provision, which are inherited under civil legislation, donated or presented, with their cost prices being unable to be determined, the cost prices shall be determined according to the land prices decided by the provincial/municipal People’s Committees on the basis of the land price bracket, prescribed by the Government at the time of inheritance, donation or presentation.

In cases where land of organizations engaged in goods production and trading and/or service provision is inherited, donated or presented before 1994, the cost prices shall be determined according to the land prices decided by the provincial/municipal People’s Committees in 1994 on the basis of the land price bracket, prescribed in the Government’s Decree No. 87/CP of August 17, 1994.

- Compensation for land damage not yet accounted into land use levy or land rents;

- Compensation for crop damage;

- Support for relocation to new residential places;

- Support for tomb removal;

- Other support for ground clearance.

- Assorted charges and fees related to the granting of land use right according to law provisions.

b/ Expenses for soil improvement and ground leveling;

c/ Expenses for investment in the construction of infrastructures and architectural works on land;

d/ Expenses prescribed in Article 5 of this Decree. In cases where organizations engaged in goods production and trading and/or service provision deal in different branches and lines, these expenses shall be allocated according to the proportion of the turnover earned from the transfer of land use right or land rent right to the total turnover earned from goods production and trading and/or service provision activities.

e/ If the turnover for calculation of taxable income cover architectural works on land, such expenses shall include the value of architectural works on land.

Article 14.- Rates of income tax on the transfer of land use right or land rent right

1. The tax rate on income from the transfer of land use right or land rent right shall be 28%.

2. After calculating income tax at the tax rate prescribed in Clause 1 of this Article, the remaining income shall be subject to additional income tax according to the following table of partially progressive tax rates

Table of partially progressive tax rates

Article 15.- The preferential tax rates, tax exemption and reduction prescribed in Chapter V of this Decree shall not apply to income earned from the transfer of land use right or land rent right.

Article 16.- Organizations engaged in goods production and trading and/or service provision, which transfer the ownership right over architectural works or infrastructures on land, shall have to carry out procedures for the transfer of land use right or land rent right associated with infrastructures or architectural objects on land.

Article 17.- Tax declaration and payment procedures applicable to organizations engaged in goods production and trading and/or service provision which do not regularly carry out the transfer of land use right or land rent right shall be prescribed as follows:

Basing themselves on dossiers and documents on the transfer of land use right or land rent right sent by land-managing agencies, the tax offices shall request organizations engaged in goods production and trading and/or service provision to declare turnover, expenses, taxable income and payable tax amounts according to form prescribed by the Ministry of Finance and submit the declaration forms to their managing tax offices within 10 days after receiving the tax offices’ requests. Basing themselves on invoices and vouchers reflected on business establishments’ accounting books, the tax offices shall check and verify the accuracy of the tax declaration forms and issue notices on the amounts of tax on the transfer of land use right or land rent right and deadlines for payment thereof. The tax-payment deadline inscribed in the tax notices shall be 15 days counting from the date of issuing the tax notices at the latest. The transferees of land use right or land rent right shall be granted land use right or land rent right certificates only after they obtain receipts or vouchers on the payment of tax on the transfer of land use right or land rent right for the transferred land areas

Article 18.- Organizations engaged in goods production and trading and/or service provision, which are specialized in dealing in land and house, as well as infrastructures and architectural objects on land shall pay and settle tax according to Chapter IV of this Decree, but they must make separate settlement of the income tax on the transfer of land use right or land rent right. If the temporarily-paid tax amounts are lower than the payable tax amounts as stated in the tax settlement reports, organizations engaged in goods production and trading and/or service provision shall have to fully pay the deficit tax amount within 10 days as from the date of submitting their tax settlement reports. If the temporarily-paid tax amounts are higher than the payable tax amounts as stated in the tax settlement reports, organizations engaged in goods production and trading and/or service provision shall be allowed to account such surplus amounts into the deficit enterprise income tax amounts for other business activities or into the payable enterprise income tax amounts for the transfer of land use right or land rent right in the subsequent period. If organizations engaged in goods production and trading and/or service provision suffer from loss in the transfer of land use right or land rent right, they may transfer such loss into the taxable income from the transfer of land use right or land rent right in subsequent years for a duration prescribed in Article 46 of this Decree.

Article 19.- Tax offices shall be entitled to impose tax-related administrative sanctions on business establishments which submit tax declaration forms and settlements of income tax on the transfer of land use right and land rent right late; and impose fines for late tax payment according to law provisions. In the course of inspecting and examining the declaration and settlement of tax on the transfer of land use right or land rent right, if tax offices detect that the transfer prices, expenses and incomes subject to tax on the transfer of land use right or land rent right reflected by business establishments are inaccurate, they shall be entitled to re-determine the transfer prices according to the actual transfer prices on the market, as well as reasonable expenses and income in order to ensure the accurate and full collection of income tax on the transfer of land use right or land rent right; and at the same time, sanction business establishments for their false tax declaration and evasion  according to law provisions.