Chapter III

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

Article 10.- Income from the following transfer of land use rights or land rent right is liable to income tax on transfer of land use rights or land rent right:

1. Cases of land use rights transfer:

a/ Transfer of rights to use land without infrastructure or architectural works built thereon;

b/ Transfer of rights to use land with infrastructure works built thereon;

c/ Transfer of rights to use land with architectural works built thereon;

d/ Transfer of rights to use land with infrastructure and architectural works built thereon.

2. Cases of land rent right transfer:

a/ Transfer of right to rent land without infrastructure or architectural works built thereon;

b/ Transfer of right to rent land with infrastructure works built thereon;

c/ Transfer of righ to rent land with architectural works built thereon;

d/ Transfer of right to rent land with infrastructure and architectural works built thereon.

Article 11.- Cases of land use rights transfer or land rent right transfer not liable to income tax on income from land use rights or land rent right transfer

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

2. Goods production and trading or service provision organizations return land to the State or have their land recovered by the State in accordance with law.

3. Goods production and trading or service provision organizations sell their workshops and transfer their land use rights or land rent right before their relocation according to plan.

4. Goods production and trading or service provision organizations contribute capital in the form of land use rights for production and business cooperation with Vietnamese or foreign organizations or individuals in accordance with law.

5. Goods production and trading or service provision organizations transfer their land use rights or land rent right due to their division, splitting, merger or bankruptcy.

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

7. Goods production and trading or service provision organizations donate their land use rights or land rent right to the State or other organizations for construction of cultural, healthcare or physical training and sport works; transfer land use rights as charities to social policy beneficiaries.

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

Business households or individuals engaged in goods trading or service provision and having income from land use rights or land rent right transfer do not have to pay income tax on land use rights and land rent right transfer under this Decree but pay tax according to the provisions of the Law on Land Use Right Transfer Tax.

Article 13.- Taxable income from land use rights or land rent right transfer is turnover for calculation of taxable income minus reasonable expenses related to the land use rights or land rent right transfer.

1. Turnover for calculation of taxable income is determined based on the actual price of transfer between a goods production and trading or service provision organization which transfers its land use rights or land rent right and the transferee at the time of transfer.

The actual transfer price is determined as follows:

- It is the price written in the invoice or the money amount actually paid by the land use rights or land rent right transferee to the transferor.

In case the actual transfer price is lower than that decided by the provincial/municipal People's Committee, turnover for calculation of income liable to land use rights or land rent right transfer tax shall be based on the price decided by the provincial/municipal People's Committee.

- It is the auction-wining price in case of auction of land use rights or land rent right.

In some cases, turnover for calculation of taxable income is determined as follows:

a/ In case of transfer of rights to use land or right to rent land with infrastructure works built thereon, turnover for calculation of taxable income includes the total of turnover from the transfer of ownership right over infrastructure works and turnover from the lease of those infrastructure works;

b/ In case of transfer of rights to use land or right to rent land with architectural works built thereon, turnover from the sale of such architectural works must be separated. If that turnover cannot be separated, turnover for calculation of taxable income includes also turnover from the sale of architectural works.

2. Expenses for land use rights or land rent right transfer:

a/ Expenses for obtaining land use rights or land rent right include:

- Cost price of land in question, which is determined as follows:

+ For land allocated by the State with the collection of land use levy or land rent, the voucher on the collection of land use levy or land rent by the State is required;

+ For land of which land use rights are received from another organization or individual, the contract and valid payment voucher for the receipt of land use rights or land rent right are required;

+ In case a goods production and trading or service provision organization exchanges a work for the State's land, the cost price of the land is the value of the exchanged work.

+ Auction-winning price in case the transfer of land use rights or land rent right is auctioned.

+ In case a limited liability company or a joint-stock company transfers the rights to use or right to rent land which has been contributed as joint-venture capital, its cost price is determined according to the capital contribution written record made by the board of directors.

+ For land of a goods production and trading or service provision organization, which is inherited under the civil law, donated or presented, with unknown cost price, its cost price shall be determined according to the land price decided by the provincial/municipal People's Committee on the basis of the land price bracket set by the Government at the time of inheritance, donation or presentation.

When the land of a goods production and trading or service provision organization was inherited, donated or presented before 1994, its cost price shall be determined according to the land price decided in 1994 by the provincial/municipal People's Committee on the basis of the land price bracket set in the Government's Decree No. 87/CP of August 17, 1994.

- Compensation for land damage not yet subtracted from land use levy or land rent;

- Compensation for crop damage;

- Support for relocation to new residential places;

- Support for removal of graves and tombs;

- Other supports for ground clearance.

- Assorted charges and fees related to the grant of land use rights as prescribed by law.

b/ Expenses for soil improvement and ground leveling;

c/ Expenses for construction of infrastructure and architectural works on land;

d/ Expenses specified in Article 5 of this Decree. In case a goods production and trading or service provision organization conducts different business lines, these expenses shall be allocated according to the proportion of turnover from land use rights or land rent right transfer to total turnover from goods production and trading or service provision activities.

e/ If turnover for calculation of taxable income covers the value of architectural works on land, these expenses include the value of those architectural works.

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

1. The tax rate on income from land use rights or land rent right transfer is 28%.

2. After calculating income tax at the tax rate specified in Clause 1 of this Article, the remaining income is liable to additional income tax according to the following partially progressive tariff:

PARTIALLY PROGRESSIVE TARIFF

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

Article 16.- Goods production and trading or service provision organizations which transfer the ownership of architectural or infrastructure works on land shall carry out procedures for the transfer of land use rights or land rent right associated with infrastructure or architectural works on land.

Article 17.- Tax declaration and payment procedures applicable to goods production and trading or service provision organizations which do not regularly carry out land use rights or land rent right transfer are as follows:

Basing themselves on dossiers and documents on land use rights or land rent right transfer sent by land management agencies, the tax offices shall request goods production and trading or service provision organizations to declare turnover, expenses, taxable income and payable tax amounts according to a form set by the Ministry of Finance and submit their declarations to the tax offices directly managing them within 10 days after receiving the tax offices' requests. Basing themselves on invoices and vouchers in the business establishments' accounting books, the tax offices shall check and verify the accuracy of tax declarations and issue notices on tax amounts on land use rights or land rent right transfer and the payment time limit. The tax payment time limit indicated in a tax notice is 15 days after that tax notice is issued. Transferees of land use rights or land rent right will be granted land use rights or land rent right certificates only after they produce receipts or vouchers on payment of land use rights or land rent right transfer tax for transferred land areas.

Article 18.- Goods production and trading or service provision organizations which are specialized in dealing in land and houses, infrastructure and architectural works on land shall pay and finalize enterprise income tax according to Chapter IV of this Decree, but shall make separate finalization of income tax on land use rights or land rent right transfer. If the temporarily paid tax amount is smaller than the payable tax amount as stated in the tax finalization reports, the goods production and trading or service provision organization shall fully pay the deficit within 10 days after the date of submission of the tax finalization reports. If the temporarily paid tax amount is larger than the payable tax amount as stated in the tax finalization report, the goods production and trading or service provision organization may account the surplus into the outstanding enterprise income tax amount for other business activities or into the enterprise income tax amount payable for land use rights or land rent right transfer in the subsequent period. If suffering from a loss in the land use rights or land rent right transfer, the goods production and trading or service provision organization may transfer such loss into taxable income from land use rights or land rent right transfer in subsequent years for a duration specified in Article 42 of this Decree.

Article 19.- Tax offices may impose tax-related administrative sanctions on business establishments that submit late their declarations and finalization reports of income tax on land use rights or land rent right transfer; and impose fines for their late tax payment according to law. In the course of inspection of declaration and finalization of income tax on land use rights or land rent right transfer, if tax offices detect that transfer prices, expenses and income liable to land use rights or land rent right transfer tax reported by business establishments are inaccurate, they may re-determine these transfer prices according to actual market prices, as well as reasonable expenses and incomes in order to ensure accurate and full collection of income tax on land use rights or land rent right transfer; and at the same time, shall sanction business establishments for their false tax declaration or tax evasion according to law.