Thông tư 145/2007/TT-BTC hướng dẫn Nghị định 188/2004/NĐ-CP và Nghị định 123/2007/NĐ-CP sửa đổi Nghị định 188/2004/NĐ-CP về phương pháp xác định giá đất và khung giá các loại đất do Bộ Tài chính ban hành

CIRCULAR

PROVIDING GUIDELINES FOR IMPLEMENTATION OF DECREE 188/2004/ND-CP OF THE GOVERNMENT DATED 16 NOVEMBER 2004 (AS AMENDED BY DECREE 123 DATED 27 JULY 2007) ON LAND PRICE DETERMINATION METHODS AND PRICE FRAMEWORKS FOR ALL TYPES OF LAND

THE MINISTER OF FINANCE

Pursuant to Decree 77/2003/ND-CP of the Government dated 1 July 2003 on the functions, duties, powers and organizational structure of the Ministry of Finance;
Pursuant to Decree 188/2004/ND-CP of the Government dated 16 November 2004 on price determination methods and price frameworks for all types of land (hereinafter referred to as Decree 188);
Pursuant to Decree 123/2007/ND-CP of the Government dated 27 July 2007 amending Decree 188 (hereinafter referred to as Decree 123);
Having reached agreement with the Ministry of Natural Resources and Environment, the Ministry of Finance provides the following guidelines on Decree 188 (as amended by Decree 123):

I. LAND PRICE DETERMINATION METHODS

1. Direct comparison method:

The following steps shall be taken in order to determine a land price in accordance with the direct comparison method:

(a) Step 1: Survey and gathering of information:

- Identify the sites of land parcels or vacant blocks (i.e.  land  on  which  there  has  not  yet  been investment in construction of buildings) which are comparable with the land parcel or vacant block subject to the price determination ["the land in question"]1, in order to gather information.

Select three to five land parcels or vacant blocks which adjoin or are situated in an area neighbouring the land in question and which have similar characteristics to the land in question in terms of land type,  location2,  land  area,  infrastructure,  legal  grounds  and  use  purpose  and  which  have  been successfully  sold  on  the  market  (comprising  traded  directly  between  individuals  and  organizations with  each  other,  traded  via  an  auction  of  land  use  rights,  or  successfully  traded  on  a  real  estate exchange floor).

- Period for gathering information:

Information gathered must have been created in the most recent period from the time of survey in order to determine a price for the land in question. If information in the most recent period cannot be gathered, information on assignments of land use rights in the period of one year before the time of land price determination may be gathered.

- Information on the following should be gathered:

+ Location.

+ Current use characteristics (land type, land area and measurements of borders, geographic features, assets on the land, current use purpose and zoned use purpose).

+ Conditions regarding infrastructure.

+ Environment  (comprising  the  natural  environment  including  landscape,  water  sources;  level  of pollution of air and water sources; noise pollution etc.; and the social environment including social order and security, and population density).

+ Legal characteristics (zoning and construction master planning of the land in question; certificate of land use right; whether financial obligations have been discharged and if so to what degree).

+ Time and price of successful assignment, transaction or auction of land use rights.

+ Date and conditions of such assignment, transaction or auction, and payment therefor.

- Conditions of information:

The above information must be gathered from results of actual market assignments of land use rights in normal conditions as stipulated in article 1.2 of Decree 123.

(b) Step 2: Comparison and analysis of information:

Information which is surveyed and gathered in Step 1 shall be analysed and compared in order to sort out the similar and the different elements between the land parcels or vacant blocks which are comparable with the land in question, and such elements shall be used to calculate and fix a price for the land in question.

(c) Step 3: Adjust the different price elements:

Adjust the different price elements of the comparable land parcels or vacant blocks in order to determine a price for the land in question.

The estimated value of the land in question shall be calculated by way of adjustment of the different price elements of the comparable land parcels or vacant blocks as follows:

Of which the amount of money for adjustment of the price between each comparable land parcel or vacant  block  and  the  land  in  question  is  to  adjust  the  difference  in  terms  of  prices  resulting  from differences  in  terms  of  location,  infrastructure,  legal  characteristics  and  level  of  environmental pollution etc. The difference in terms of prices between the comparable land and the land in question (which may be calculated as an absolute value or as a percentage of the price for assignment of land use  rights  in  normal  conditions  on  the  local  market)  shall  be  determined  on  the  basis  of  the evaluation  of  experts  and  the  price  determining  body  which  assisted  the  provincial  people's committee when the latter made its decision on specific prices in the locality.

Where a land price was changed during the period from the time of successful assignment of the land use right of the comparable land parcel to the time of price determination of the land in question, then before applying the above formula, the price for the assignment of the comparable land parcel must  be  adjusted  (increased  or  reduced)  by  the  current  fluctuation  indicator  for  land  of  such  type which may be taken and calculated from information collated by the Department of Finance or price consultants  pursuant  to  Circular  80/2005/TT-BTC of the Ministry of Finance dated 15  September 2005 providing guidelines for implementation of Decree 188, or the current fluctuation indicator for land of such type may be taken from statistics provided by the statistics body (if available).

(d) Step 4: The price for the land in question shall be determined by using the average of prices for three to five comparable land parcels or vacant blocks which has been adjusted for the price difference in Step 3.

Appendix 1 provides an example of determining a land price in accordance with the direct comparison method.

2. Income method:

The following steps shall be taken in order to determine a land price in accordance with the income method:

(a) Step 1: Calculation of total annual income derived from the land in question:

- With respect to a vacant block or land on which buildings (housing) have been constructed for lease, total annual income derived from the land in question is the rent for the real estate (comprising the land plus assets on the land) collectible annually.

- With  respect  to  agricultural  land  on  which  the  person  allocated  with  such  land  himself  organizes agricultural production, total income earned means:

+ For land for planting annual crops and for land for aquaculture, total income earned from the land in question is the total turnover from the above-mentioned production activities on the land collectible annually.

+ For land for planting perennial crops (fruit trees, industrial orchards and trees for wood production), total income shall be calculated on the basis of annual revenue, periodic revenue or one-off revenue depending on the type of trees planted.

(b) Step 2: Calculation of expenses payable for generation of total income:

- Total expenses shall include specific costs such as land use fees, costs for investment in improvements, and production costs. These costs shall be calculated in accordance with the current State regulations; costs for which there is no relevant State regulation shall be calculated on the basis of actual prevailing prices in the local market where the business or production entity made the payment (specified in the contract or goods sale invoice published by the competent financial body).

- If there has been investment in construction of assets on the land in question, total annual expenses shall not include any item for depreciation of the assets on the land.

(c) Step 3: Annual net income shall be calculated in accordance with the following formula:

(d) Step 4: An estimated land price shall be determined in accordance with the following formula:

When a land price is determined in accordance with the income method, then the total income, total expenses and net income calculated at steps 1, 2 and 3 respectively must be the net average total income, total expenses and net income respectively of the location of land of the type subject to the land determination, with the correct land use purpose approved by the authority, and calculated as an average of the three years immediately prior to the time of the land price determination. If it is impossible to gather data for three years, then the data of the year immediately prior to the time of the land price determination shall be used. Total income and total expenses shall be calculated using prices stipulated in State regulations, or if there are no such applicable regulations than the market floor prices of goods, materials, services and labour remuneration and annual production volumes o as at the time of the land price determination.

The Vietnamese dong savings interest rate for a term of 12 months means the interest rate of the commercial bank with the highest interest rate in the locality.

Appendix 2 provides an example of determining a land price in accordance with the income method. With  respect  to  land  parcels  on  which  there  has  been  investment  in  construction  of  assets (comprising project works, housing or buildings; or perennial crops such as rubber tree, coffee, tea, pepper tree, cashew or fruit trees and so forth have been planted) in order to conduct business or production, then first and foremost the price of the land and assets must be estimated in accordance with  the  income  method, and  then  the value  of  the assets  on  the  land shall be  deducted and  the residual value shall be the value of the land in question.

The method of deduction of the value of assets on land shall be as provided in clause 3 (c) below of this Section 1.

3. Subtraction method:

The following steps shall be taken in order to determine a land price in accordance with the subtraction method:

(a) Step 1: Gathering of information:

- Gather market information in order to select at least three properties (comprising the land plus assets on the land) which have been successfully sold on the market  and which have similar characteristics to the land in question in terms of location, status quo, infrastructure conditions, legal grounds, use purpose, cost and so forth.

- The period for gathering market information shall be the same as stipulated in clause 1(a) above for the direct comparison method.

(b) Step 2: On-site survey:

- Conduct an on-site survey and obtain a complete and accurate description of the assets on the [three] properties mentioned above (assets comprising housing, buildings or perennial crops).

(c) Step 3: Determine a present value for the assets in question in accordance with the following formula:

Of which:

- Value of new construction calculated at the time of land price determination means the costs of either replacing the present assets on the land, or of constructing new assets with exactly the same use function as the current assets on the land. This value of new construction shall include both direct and indirect costs, and an appropriate profit margin for the person investor in construction.

- Wear  and  tear  of  assets  on  the  land  comprises  both  tangible  and  intangible  wear  and  tear,  and includes  a  reduction  for  damage  to  the  assets  during  their  use  process  and  an  allowance  for outdated function and for wear and tear due to the effect of outside factors.

- The method of calculating the value of new construction and of deducting a part of the value for wear and tear shall be implemented in accordance with current regulations of the Ministry of Construction and  the  Ministry  of  Finance,  and  the  Evaluation  Standards  of  Vietnam. If there is no specific regulation on such method, then calculations shall be made on the advice of consultants, experts or organizations directly conducting an evaluation on the basis of market information and data.

(d) Step 4: The value of a property as chosen in Step 1 shall be determined as follows:

(e) Step 5: A price for the land in question shall be determined as follows:

Adjust the different price elements of the properties as chosen in Step 1 in order to determine a price for the land in question (the same as Step 3 of the direct comparison method above).

The unit price of the land in question shall be the average adjusted unit price of the properties chosen in Step 1.

Appendix 3 provides an example of determining a land price in accordance with the subtraction method.

4. Surplus method:

The following steps shall be taken in order to determine a land price in accordance with the surplus method:

(a) Step 1: Determine the optimal use purpose and effectiveness of the land in question on the following bases:

- Special characteristics of the land in question.

- Regional and urban zoning; construction master planning and plans, and master plans and specific plans for land use as issued and approved by the competent authority.

(b) Step 2: Estimate the total developed value of the property:

- The total developed value of the property includes the total value of housing, of sub-divided plots etc. which it is proposed to sell after completion of the investment project.

- A determination of the total developed value of the property must be conducted on the basis of an investigation  and  survey  of  actual  prices  of  market  assignments  of  houses,  apartments,  buildings, sub-divided plots and so forth of other projects which have been completed and which have similar features  to  the  project  in  question,  and  these  other  projects  must  be  in  the  adjoining  area  or  in neighbouring  areas  with  similar  living  conditions  and  infrastructure  conditions;  there  must  also  be consideration of the current market orientation and market fluctuations in order to make a realistic estimate of the selling price.

(c) Step 3: Estimate the total costs of developing the property:

- Total costs of developing the property shall include all costs which the investor spends in order to construct the infrastructure (including roads, water supply and water drainage, power supply and so forth); to create the landscape; and to construct the houses, buildings or sub-divided plots in order to sell them correctly in accordance with the detailed zoning approved by the authorized body; and shall also include advertising costs, sales' costs, general management expenses, and an item for profit of the investor (to include an item for business risks).

Estimated total costs must be calculated on the basis of unit prices, drawdown of investment capital, and  standard  rates  stipulated  in  regulations  of  the  competent  authorities. If there are no such applicable regulations, then costs should be based on actual prevailing costs of similar projects in the adjoining or neighbouring areas.

If the investment project for development of the property extends for a number of years and has a number of different stages and revenue and expenses are calculated on an annual basis, then there must be a discount on revenue and expenses in terms of current prices at the time of determining the price of the land in question in accordance with the following formula:

H. Total developed value:

Total costs of developing the property:

In which:

TRi is the revenue in the nth year of the project.

C is the expenses in the nth year of the project.

r is the discount rate3  (calculated at the interest rate charged by commercial banks for lending to perform investment projects for development of properties).

n is the number of years required to implement the project (calculating from the commencement of building works until the date of completion of the project).

(d) Step 4: An estimated land value shall be determined as follows:

Appendix 4 provides an example of determining a land price in accordance with the surplus method.

5. Conditions for application of land price determination methods:

5.1 When  applying  any  of  the  land  price  determination  methods,  the  information  and  data  which  is gathered must be in normal market conditions, and any information which is chosen and analysed must be accurate and reliable.

5.2 The direct comparison method shall be the principal method used to determine a land price when sufficient information and data has been gathered in order to apply all four methods.

5.3 In  the  following  cases,  a  combination  of  at  least  two  of  the  land  price  determination  methods specified in this Circular shall be used to examine and compare estimated prices for the purpose of determination of a specific price:

- The assignment of land use rights is not prevalent on the market and the data gathered is not systematic;

- Market prices for assignment of land use rights fluctuated irregularly and do not reflect the relationship between supply and demand for land in normal conditions;

- An estimated land price resulting from application of one of two land price determination methods exceeds the maximum price in the price framework provided by the Government in clause 1 of article 5 of Decree 123.

5.4 The above land price determination methods shall be applied to determine a value of a specific land parcel  or  vacant  block  which  shall  be  used  as  the  basis  for  determining  the  price  of  each  class [location 1, location 2, location 3 etc.] of location in accordance with the guidelines provided in Part II of this Circular.

II. SPECIFIC PRICE DETERMINATION IN LOCALITIES

1. Preparatory work before making a land price determination:

(a) Classifying boundaries of regions according to their administrative boundaries defined at the commune level into plains [or delta], midlands and mountainous regions in order to apply the price framework  for  all  types  of  agricultural  land,  residential  land  and  non-agricultural  land  used  for production  or  business  purposes  in  rural  areas  as  provided  by  the  Government  on  the  basis  of regions, namely [classifying] plains, midlands and mountainous regions into each type of commune in the locality (province or city) for conformity.

(b) Deciding the locations of the following types of agricultural land: land for planting annual crops; land for planting perennial crops; land for aquaculture; forest land for production; protective forest land; specialized use forest land and other agricultural land in accordance with the principles stipulated in article 1.7(b) of Decree 123.

- The locations of agricultural land shall be formulated into classes of location namely location 1, location 2, location 3 etc., and the main basis for this shall be distance from the residence of the land user and distance from the market for the sale of produce, the proximity and level of convenience of traffic  because  producers  will  incur  travelling  and  other  costs  (to  buy  raw  materials  and  costs  of selling their produce), combined with other elements which create advantages:

- Class 1 location shall include all areas which have the same socio-economic conditions, the same infrastructure, and the same land use purpose; and which have from 1 to 3 features regarding place of residence, market position and traffic conditions combined with other advantages for agricultural production:

+ The following places are [close or near] in the adjoining area or in neighbouring areas:

* Residence of the land user (measured from the centre of the hamlet of the land user);

* Market for selling the agricultural produce (rural or urban market or location for collecting  the produce);

* Road (comprising a highway, inter-provincial road or inter-district road, or in the case of a place which does not have such roads, then the inter-commune road; and including a waterway being a river, stream or channel in the case of am area which uses such waterways as the main source of transportation).

+ The area has the best features for agricultural production comprising smooth terrain, self-irrigating conditions, a high level of land fertility, and climactic and weather conditions which are favourable for production and business.

- Class 2 location, class 3 location and so forth shall have less favourable conditions than those mentioned above for class 1 location.

- In a number of specific cases, the following matters shall be taken into consideration when classifying locations:

+ Even if an area has the best advantages for agricultural production but it has from 1 to 3 features of a long distance from the residence of the land user, from the market or from a road, then such location shall be classified below class 1.

+ An area shall still be classified as a class 1 location if one of the three features namely residence, market or road is in the adjoining or neighbouring area but the degree of such advantage can only be said to be average or below average.

- A provincial people's committee shall stipulate the criteria and the distances from land locations for the order of class 1 location, class 2 location and so forth, and shall also stipulate the number of such locations depending on the special characteristics of each type of agricultural land within its area and the special characteristics of agricultural production and sale of agricultural produce, ensuring that the criteria and the classifications are appropriate for the actual conditions within its locality.

(c) Providing specific criteria for locations of land from location 1, location 2 and onwards in conformity with  the  conditions  of  the particular  locality  and  determining  quantities  of  locations  of  land  for  salt production and locations of types of non-agricultural land in rural areas in order to determine land prices in accordance with the general criteria specified in clauses 1(b) and 2 of article 9 of Decree 188, as follows:

- With respect to land for salt production: Subject to specific conditions in the locality, the provincial people's  committee  shall  classify  locations  on  the  basis  of  the  criterion  of  the  distance  from  the saltern [or saltworks] to the salt warehouse in the production area or the distance from the saltern to an inter-district road (or if no inter-district traffic road runs through the area, then the distance to the inter-commune road).

- With respect to residential land, and non-agricultural land used for production or business purposes in rural areas:  Subject  to  the  specific  conditions  in  the  locality,  the  provincial  people's  committee shall determine land areas for which land prices should be determined; classify locations of land, and decide a quantity of locations in each land area for price determination.

(d) Providing specific criteria on locations of land in order to classify locations of land and to decide on a quantity of locations of land in each type of street; and classifying streets and deciding on a quantity of streets from type 1 street onwards in conformity with the conditions of the locality in each category of urban area in order to determine land prices in accordance with the general criteria specified in article 10 of Decree 188.

Subject  to  specific  conditions  in  its  locality,  the  provincial  people's  committee  may  decide  not  to classify streets but to classify locations of land and provide a quantity of locations of land for each section of street or specific street for land price determination. The classification of locations of land and  divisions  of  each  section  of  street  or  each  street  of  each  urban  category  for  land  price determination shall also be performed in accordance with the general principles specified in article 10 of Decree 188.

(e) A provincial people's committee shall, on the basis of decisions establishing and classifying urban areas  within the  province  as  approved by  the  authority,  apply  the  price  framework  for  all  types  of residential land, and of non-agricultural land used for production or business purposes in rural areas as provided by the Government.

2. Price determination and adjustment of prices for specific types of land:

(a) A land price must be decided in accordance with the correct land use purpose stated in one of the following documents:

- The certificate of land use right issued in accordance with the law on land, or the land use purpose stated  in  one  of  the  documents  specified  in  article  50  of  the  2003  Law  on  Land.  If  the  land  use purpose  is  not  stated  in  such  document,  then  it  shall  be  the  main  use  purpose  of  the  land  in conformity with land use zoning at the time of price determination of the land;

- The decision of the authorized State body allocating or leasing land or permitting conversion of the land use purpose;

- Registration for conversion of land use purpose in conformity with the law on land.

With respect to land for which no certificate of land use right or document specified in article 50 of the 2003 Law on Land has been issued; or if there is not yet any land use zoning or the land use zoning is available but has not yet been implemented; or if the land use right has not yet been registered, then the land price shall be determined in accordance with the current use purpose.

Where a land user has used all or part of a land parcel other than for the use purpose recognized by law or approved by the authorized body; or has used agricultural land comprising all types specified in article 13.1 of the 2003 Law on Land for intercropping or for joint ecological-environmental tourism business or has used non-agricultural land combined with other purposes, then the land use purpose as specified in the above certificate of land use right, decision of the State allocating or leasing land, land use zoning or planning, or registration of land use rights shall still be used as the basis for land price determination.

(b) Specific  prices  for  locations  of  land  of  all  land  types  shall  be  provided  by  provincial  people's committees in Vietnamese Dong for one square metre unit (m2) and shall not fall outside the price framework and permitted limits for all types of land specified in article 1.5 of Decree 123, except as follows:

- If the actual land use right transfer prices for the following types of land are less than the minimum price level stipulated by the provincial people's committee pursuant to article 1.5 of Decree 123, then such people's committee may decide to apply a lower more appropriate price and at the same time send such decision to the Ministry of Finance for its inspection if it considers it necessary:

+ In a number of isolated cases where land prices have already been announced on 1 January in any one year, but the relevant regions are deep-lying and remote areas, plains, midlands or mountainous regions,  or  islands  in  which  the  natural  and  socio-economic  conditions  are  difficult  or  especially difficult pursuant to standards stipulated by the State or by the provincial people's committee, and if there is no infrastructure or very poor infrastructure in such areas (including if they have been zoned as  residential  land  or  non-agricultural  production  and  business  land  but  there  is  not  yet  any infrastructure).

+ In the following cases:

* Where the State allocates land without collection of land use fees or leases land but not in the form of auctioning a land use right or tendering for a project using land;

* Where the State recovers land; or

* Where a State owned enterprise undergoing equitization chooses the form of land allocation: and for such land the provincial people's committee on 1 January issued land prices but at the time of allocating the land, or at the time of the decision recovering the land, or at the time of valuing the land for the purposes of equitization the price is inconsistent with actual market prices for assignment of land use rights in normal market conditions, then the provincial people's committee shall rely on such actual market prices within its locality and on the land price determination methods stipulated in this Circular in order to adjust the specific prices which it announced on 1 January (after obtaining the opinion of the standing committee of the provincial people's council).

- [In  the  above  cases],  The  Department  of  Finance  in  any  one  province  shall  preside  over  co- ordination with other relevant departments and branches in order to fix specific prices for submission to  the  provincial  people's  committee  to  make  the  final  decision;  and  in  a  case  where  experts  or consultants are hired, such Department shall contact the other relevant departments and branches to evaluate the advice of the experts or consultants prior to submitting the proposed specific prices to the provincial people's committee, ensuring that they are as close as possible to actual market prices for assignment of land use rights in normal conditions.

- In the above cases, the prices shall not be subject to the restrictions stipulated in article 1.5 of Decree 123 but must not be higher than the actual market prices.

- The  above  provisions  shall  only  apply  to  each  isolated  project,  and  are  aimed  at  achieving  the following objectives, namely calculation of land use fees when the State allocates land other than via an  auction  of  a  land  use  right  or  tendering  for  a  project  using  land;  calculation  of  the  amount  of compensation for loss after the State recovers land, and calculation of the value of a land use right on equitization of a State-owned enterprise which chooses the form of land allocation. In all other cases  the specific  prices  stipulated  by the  people's  committee  as  applicable to  each  land location within the region shall apply.

- The provisions in sub-clauses (d) and (dd) of article 1.10 of Decree 123 shall also apply when specifying land prices and announcing same on 1 January in any one year.

- In the case of rural residential land and non-agricultural land for production and business also within rural areas and lying in the special locations stipulated in article 1.10 dd [or e] of Decree 123, namely land lying next to a main road (highway or inter-provincial road) or lying next to a traffic hub, trade zone, tourist resort or industrial zone, then the provincial people's committee may stipulate a specific price  for  the  best  locations  of  the  above-mentioned  two  types  of  land,  consistent  with  the  local markets  prices  for  assignment  of  land  use  rights  in  normal  conditions,  but  such  price  must  not exceed 5 times the maximum price level in the framework for rural non-agricultural land for business and production stipulated by the Government in Lists 6 and 8 issued with Decree 123 (but excluding the 20% band stipulated in article 5.2 of Decree 123).

+ When the competent authority amends land use zoning or land use plans, if the market prices of land within  such  zoning  has  changed  as  compared  with  the  prices  announced  on  1  January,  then  the provincial  people's  committee  must  also  amend  the  prices  of  the  land  in  accordance  with  current regulations for consistency.

+ When the competent authority issues a decision agreeing to a conversion of land use purpose, the provincial  people's  committee  shall  also  amend  the  price  framework  in  accordance  with  the  latest regulations issued by the Government.

+ When the competent authority issues a decision upgrading an urban category, then the provincial people's committee must also adjust the land prices for consistency.

- In all of the above-mentioned cases of price adjustment within any one year, the provincial people's committee must first seek an opinion from the standing committee of the provincial people's council prior to issuing a decision.

(c) Determination  of  specific  prices  for  each  location  of  land  of  all  types  for  which  the  Government provides a land price framework:

- With respect to land for planting annual crops, land for planting perennial crops, land for aquaculture and forest land for production, prices shall be determined for each location of land. Land of class 1 location  shall  be  subject  to  the  highest  price,  and  land  of  subsequent  classes  shall  be  subject  to lower prices.

Where crops or livestock of different kinds are raised in the above agricultural land of one type, there shall be only one uniform price provided for each location of land in the region in which a main crop or livestock is raised (for example land for rice cultivation in a region for planting annual crops); and land prices shall not be provided on the basis of different crops or livestock for the same land location of the same type of agricultural land in the same region.

- Land for salt production shall also be classified into locations, so that class 1 location shall have the highest price and the subsequent locations shall have a lower price.

- In  the  case  of  rural  residential  land  and  non-agricultural  land  for  business  and  production  in  rural areas,  the  people's  provincial  committee  shall  also  classify  the  land  into  locations  for  the  three separate regions in the locality.  The people's committee shall also formulate location coefficients, so that land of class 1 location in any one region shall have the highest price of land in such region, and land of a lower class 2 or 3 etc. in such region shall have lower prices and so forth.

- For these types of land, the people's committee must formulate specific criteria and make a decision on the number of classes of location of such land.

- In the case of urban residential land, and non-agricultural land for production and business in urban areas,  the  people's  committee  must  provide  land  prices  according  to  the  type  of  each  street  in different urban categories.

Subject  to  the  specific  conditions  in  the  locality,  either  of  the  following  methods  may  be  used  for serial price determination for classes of land of each location:

+ The first method:  Direct price determination for each location of land:

Serial price determination for each location of land shall be based on results of price determination of a number of specific land parcels of such location of land as follows:

For each location of land of a specific land type, select at least three parcels of land   with different special characteristics and which are representative of the land in question. After that, determine a price for each land parcel using the price determination methods provided in Part I of this Circular and calculate the price for a land area unit (m2) of each land parcel.

The price for each location of land (calculated for a square metre) shall be fixed as the average price of prices of the land parcels selected as above.

+ The second method:  Determining a price for land of class 1 location, then use land class coefficients to determine prices for the remaining classes of location.

The method of determining a price for land of class 1 location shall be carried out the same as a direct determination for each class of location in the first method.

A  provincial  people's  committee  shall,  on  the  basis  of  the  criteria  for  classifying  land  locations, formulate location coefficients for land price determination for each type of land in the region, and for each  type  of  street  or  for  each  street  on  the  following  principle:  Land  at  location  1  shall  have  a coefficient of 1, and land at subsequent locations shall have lower coefficients and shall be subject to lower prices.

The above location coefficient for land price determination of all the above-mentioned types of land is a ratio to compare the actual prevailing market prices for assignment of use rights of land at each location compared to location 1, or a ratio to compare the criteria of each land location.

Prices for all types of land which are calculated on the basis of the above land locations shall be calculated by way of multiplying the price fixed for land of class 1 location by the relevant coefficient for land price determination for each type of land.

For  example:  Assume  that  the  price  determining  body  is  pricing  residential  land  in  street  H  in  a special  urban  area  in  order  to  submit  a  plan  on  land  prices  to  the  provincial  people's  committee. Applying the land price determination methods, the price determining body has fixed the price of land of class 1 location at 54,000,000 Dong/m2. Land in street H is divided into four different locations; and based on the criteria for classifying locations of land and the actual prices of market assignments of land use rights in the area, the price determining body has formulated location coefficients for price determination for locations 1 to 4 in street H at 1; 0.45; 0.35 and 0.30 respectively, so that land prices for subsequent locations following location 1 shall be as follows:

With respect to residential land and non-agricultural land used for production or business purposes in

towns and townships which have not yet been classified by the authority as an urban area and do not adjoin land which has already been classified into the urban area category, then upon specific land price  determination,  the  price  framework  for  residential  land  and  non-agricultural  land  used  for production  or  business  purposes  in  urban  areas  of  category  IV  shall  be  used  for  towns  and  of category V shall be used for townships, but not to exceed the prices of actual market assignments of land use rights in normal conditions at the time of the land price determination.

With respect to residential land and non-agricultural land used for production or business purposes in new urban areas which adjoin land which has already been classified by the authority into the urban area category, then upon specific land price determination, the price framework for residential land and non-agricultural land used for production or business purposes in adjoining urban areas or in the nearest  neighbouring  urban  area  shall  be  used,  but  not  higher  than  the  prices  of  actual  market assignments of land use rights in normal conditions at the time of the land price determination.

(d) Specific price determination for types of land for which the Government has not provided any land price framework:

- With respect to protective forest land and specialized use forest land: Prices for protective forest land and specialized use forest land shall be determined on the basis of specific prices for forest land for production provided by the provincial people's committee. The procedures for price determination for protective forest land and specialized use forest land shall be carried out the same as for forest land for production specified in clause 2(c) of Part II of this Circular.

- Specific maximum prices for each location of protective forest land and specialized use forest land shall  not  exceed  specific  prices  already  provided  by  the  provincial  people's  committee  for  each location of forest land for production.

- With respect to specialized use forest land

- With respect to other agricultural land as stipulated in clause 4(dd) of article 6 of Decree 181: Prices for other types of agricultural land shall be determined on the basis of specific land prices provided by the provincial people's committee for adjoining agricultural land types or for neighbouring areas in the same region (if there is no adjoining land).

Specific maximum land prices for each type of other agricultural land shall not exceed the specific [highest] price provided by the provincial people's committee for adjoining agricultural land types or for agricultural land in neighbouring areas.

- With respect to land for construction of offices of bodies and construction of works of professional institutions;  land  used  for  objectives  of  national  defence  and  security;  land  used  by  religious organizations  (comprising  land  used  by  religious  organizations  and  land  on  which  there  are communal  houses,  temples,  shrines,  pagodas,  worship  halls  and  family  shrines);  and  other  non- agricultural land (including land on which there are museums, houses to preserve or display works of art, or houses of cultural and artistic compositions) the provincial people's committee shall, on the basis of prices of adjoining residential land or prices of land in the nearest neighbouring area (if there is no adjoining land) as already decided, and on the basis of the provisions in article 10.1 of Decree 123, determine the specific land price level. If the above types of lane are in rural areas, then land prices in such rural area shall be the basis; and if the above types of lane are in urban areas, then land prices in such urban area shall be the basis.

- Based on the special characteristics of each type of land (size of the land area, construction density, rights and obligations of the land user), the provincial people's committee shall issue an appropriate specific price for each location of the type of land mentioned above, which shall not be higher than the  specific  [highest]  price  provided  for  adjoining  equivalent  locations  or  for  residential  land  in  the nearest neighbouring area (if there is no adjoining land).

- With respect to land used for public purposes pursuant to Government regulations; and other types of non-agricultural land (including land for other private construction works which are not attached to residential land and which are not for business purposes; land with holiday homes, tents or farms for employees;  urban  land  used  for  construction  of  sheds  for  planting  purposes  including  the  form  of planting  not  directly  on  soil;  for  construction  of  pens  to  breed  animals  as  permitted  by  law;  for construction of stations and farms for agricultural, forestry, salt production and aquatic research and experiment;  for  construction  of  barns  and  buildings  for  family  households  and  individuals  to  store agricultural  produce,  plant  protection  agents,  fertilizer,  machinery  and  other  tools  for  agricultural production),  the  provincial  people's  committee  shall,  on  the  basis  of  prices  of  adjoining  non- agricultural production and business land or such prices in the nearest neighbouring area (if there is no adjoining land) as already decided, and on the basis of the provisions in article 10.1 of Decree 123, determine the specific land price level.

Specific [maximum] land prices for each location of the types of land mentioned above shall not be higher than the specific [highest] price provided  by the provincial people's committee for adjoining equivalent  locations  of  non-agricultural  land  used  for  production  or  business  purposes  or  for  such land in the nearest neighbouring area (if there is no adjoining land).

- With respect to land used for cemeteries and graveyards, the provincial people's committee shall, on the basis of prices of types of adjoining land as already decided, determine the specific land price level. If there are many types of land in the adjoining area, then the type of land with the highest price should be taken.

Specific [maximum] land prices for each location of the type of land mentioned above shall not be higher than the specific [highest] price provided  by the provincial people's committee for adjoining equivalent locations of such type of land.

- The  price  framework  of  land  for  cultivation  of  aquaculture  products  shall  apply  to  land  containing rivers,  canals,  channels,  ditches,  streams  and  specialized  water  surfaces  for  cultivation  of aquaculture  products;  if  such  land  is  used  for  non-agricultural  purposes  or  for  non-agricultural purposes  combined  with  cultivation  and  exploitation  of  aquaculture  products,  then  the  provincial people's committee shall, on the basis of prices of adjoining non-agricultural land or prices of non- agricultural land in the nearest neighbouring area (if there is no adjoining land) as already decided, and on the basis of the provisions in article 10.1 of Decree 123, determine the specific land price level.

3. Price determination for land in bordering areas:

(a) Prices for land in areas bordering provinces and cities under central authority:

- If the land in an area bordering provinces and cities under central authority has the same natural and infrastructure conditions, and the same current use purpose and the same use purpose pursuant to zoning, then price determination must be based on article 12.1 of Decree 188 and on article 9.1 of Decree 123.

- Before  conducting  price  determination  for  land  in  bordering  areas,  provincial  people's  committees must consult and confer each other on the proposed prices to be published to ensure compliance with article 1.11 of Decree 123.

- Where local authorities fail to agree on a price for land in their bordering area, the matter shall be reported to the Prime Minister of the Government for his decision.

- If such land has different natural and infrastructure conditions, and a different current use purpose and  different  use  purpose  pursuant  to  zoning,  then  provincial  people's  committees  shall  decide  a specific price for such land in the area bordering provinces and cities under central authority based on the actual conditions in each locality.

(b) Land prices for areas bordering districts, small towns and townships within provincial cities and cities under central authority:

- Subject to actual conditions in its locality, a provincial people's committee shall provide land prices for land in bordering areas in conformity with the following principle: the width4 of land shall be provided by the provincial authority and prices shall be the same if the natural and infrastructure conditions, the current use purpose and the use purpose pursuant to zoning are the same.

- Where the infrastructure conditions in a bordering area are not the same, then prices for land in such bordering area shall be determined on the basis of actual conditions of each area.

- With  respect  to  residential  land  in  rural  areas  surrounding  an  urban  area  (including  communes adjoining the inner city, an inner township in a special urban area and category I urban area, and hamlets adjoining the inner city, and small towns in other urban areas), prices for land in these areas shall  be  determined  on  the  principle  of  price  determination  for  adjoining  land  parcels  and  on application of the price framework provided by the Government for the adjoining urban area.

- Provincial people's committees shall issue specific provisions on residential land prices in rural areas surrounding urban areas.

III. ORGANIZATION OF IMPLEMENTATION

1. Provincial people's committees shall, on the basis of the Law on Land 13-2003-QH11, Decree 188, Decree  123 and  the  guidelines  provided  in  this  Circular,  determine specific  land prices,  announce them publicly, and inspect implementation of price lists within their localities.

2. Provincial people's committees shall allocate an annual sum from the local budget in order to carry out the investigation, survey and keeping statistics of prices for assignment of land use rights; shall engage consultants specialized in land prices and price determination of all types of land; shall hold training courses on implementation of decisions on land prices, and shall train officials engaged in management of land prices in their locality. Such budget funding shall be managed in accordance with the applicable State regulations.

A provincial people's committee shall direct its Department of Finance to organize a network in order to monitor and keep statistics of actual market prices for assignment of land use rights in the locality, and shall submit periodical reports to the Ministry of Finance in accordance with regulations. Where actual market prices for assignment of land use rights in a locality are constantly changed over a long period resulting in large price differences, such changes must be reported to the Ministry of Finance for submission to the Government to consider an adjustment of the price framework for all types of land.

3. This Circular shall be of full force and effect after fifteen (15) days from the date of its publication in the Official Gazette.

This Circular shall replace Circular 114-2004-TT-BTC of the Ministry of Finance dated 26 November 2004 providing guidelines for implementation of Decree 188.

People's committees are requested to report any problems arising during implementation of this Circular to the Ministry of Finance for guidance for resolution.

APPENDIX 1

EXAMPLE OF THE DIRECT COMPARISON METHOD
(Issued together with the Circular No. 145/2007/TT-BTC of the Ministry of Finance dated December 6, 2007)

Apply the direct comparison method to determine the land price (to make it simple and understandable, this example only presents the direct comparison method to determine the price of the land in question with one comparable land parcel or land block).

Assuming that in the course of determining the price of a residential land block of 20,000 m2 in a grade-V urban center (coded as land block B), the pricing agency has collected information on an adjacent land block of 25,000 m2 which is comparable with the land in question and already put up for a successful land use right auction for the construction of dwelling houses (coded as land block A), which took place in the period nearest the time of determining the price of land block B. The total money amount earned from the auction of land block A is VND 125 billion, with the unit price per square meter being VND 5 million (VND 5 million/m2).

With all collected information, the pricing agency compares land block A and land block B as follows:

Through comparison, the pricing agency has drawn out 7 similar criteria and 4 different criteria between the two land blocks. To determine the difference between comparable elements of the land blocks in order to adjust the price, the pricing agency should apply the expert method in combination with the statistics method to calculate the coefficient of difference between the criteria.

It can use the method of marking using a point scale with the highest point 10 given to the criterion with the best conditions, (example, when taking location into consideration, the land occupying the best location shall be given 10 points; or when taking street grade into account, land lying in the street of the highest profitability and with the most convenient infrastructure shall be given 10 points). Other points under 10 shall be given to identical criteria with poorer conditions. Based on the practical situation, localities shall draw up point scales to determine specific prices:

For every point less, the price of the comparable land block (A) shall be reduced by 5%; vice versa, for every point more, the price shall be increased by 5%. The number of points less or more and its corresponding percentage must totally depend on market survey results. With such assumption:

On the basis of the successful auction price, VND 125 billion, of the comparable land block A, used for determining the price for land block B, the price of land area B shall be reduced as follows:

- Frontage width: B is inferior to A: 2 points or 10% less = VND 12.5 billion.

- The land block’s length: B is inferior to A: 1 point or 5% less = VND 6.25 billion.

- Road: B is inferior to A: 1.5 point or 7.5% less = VND 9.375 billion.

The total price reduction due to B’s inferiorities to A: VND 28.125 billion

B shall be added with:

- Dustiness: B is superior to A: 1 point or 5% more = VND 6.25 billion

The total price increase due to B’s superiorities over A: VND 6.25 billion

Land block A’s price readjusted (coded A’) according to different elements of land area B shall be calculated as follows:

A’ = 125 - 28.125 + 6.25 = 103.125 (VND billion).

So, the unit price per square meter is:

VND 103,125 million : 25,000 m2 = VND 4.125 million/m2.

Similarly, it is assumed that the pricing agency additionally selects two land blocks C and D for comparison with land block B. On the basis of the results of analysis and comparison, it has been determined that land block C’s unit price already adjusted according to elements of land block B is VND 4.5 million/m2 and land block D’s adjusted unit price is VND 4.05 million/m2.

Land block B’s unit price is determined to be the average price of the three above adjusted prices:

(4.125 + 4.5 + 4.05) : 3 = 4.225 (VND million/m2).-

APPENDIX 2

EXAMPLE OF THE INCOME-BASED METHOD
(Issued together with the Circular No. 145/2007/TT-BTC of the Ministry of Finance dated December 6, 2007)

Application of the income-based method to determine the prices of agricultural land under annual crops in commune A (a delta commune) of district C, province X in the Mekong River delta. The land field selected for price determination has an area of 4,000 m2, classified as land at location 3 and cultivated with three plain rice crops a year. The land pricing agency has conducted field investigations and surveys and collected data in three consecutive years as follows:

Note: (*) Assume that this is the annual average interest rate for savings with a term of 12 months at a commercial bank which has the highest interest rate for savings in the locality.

+ The total income of 3 years is VND 49,250,000/ha

+ The total production cost of three years is VND 24,538,000/ha.

+ The average annual net income is:

+ The average interest rate for Vietnamese dong savings with a term of 12 month at the state-run commercial bank is 8.3%/year.

+ The value of the paddy field of 4,000 m2 calculated according to the formula mentioned at Step 4, Section 2, Part I of this Circular is:

or         »          VND 24,811/m²

which is rounded up to VND 25,000/m2.-

APPENDIX 3

EXAMPLE OF THE SUBTRACTION METHOD
(Issued together with Circular No. 145/2007/TT-BTC of the Ministry of Finance dated December 6, 2007)

The land pricing agency is determining the price of a residential land parcel of 90m2 (with a frontage width of 5m and a length of 18m, on which exists a four-story house) facing an internal road of 8m wide in a completely built new urban center in Hanoi capital.

The subtraction method is applied to determining the price of the above land parcel as follows:

Step 1: Through market surveys, the land pricing agency has collected information on several dwelling houses already sold and purchased in the above urban center which have a construction floor similar to the land in question.

To make it simple, this example only deals with one real estate among the successfully traded real estate, namely a house of 100 m2 (with four stories and a frontage with of 5m) lying adjacent to another road also of 8 m wide and crossing the road of the land in question. The selling price of the real estate (both house and land) in the successful transaction is VND 3,000 million. This house was sold 4 months ago. During these months, the land prices on the market are almost unchanged. However, the land in question is located at a more convenient location and in a better direction. So, the land in question has a unit price about 6% higher than that of the land parcel on which the successfully sold house exists.

Step 2: Through field and market surveys, the following data are collected:

- Construction area: 75 m².

- The construction unit price of a house with similar quality and utilities on the market at the present time is VND 2.8 million/m² floor (package unit price inclusive of the construction contractor’s profit).

- The house has been used for 12 years; its expected economic life is 70 years. Thanks to good maintenance and use, the house can be used for another 63 years.

Step 3: Determining the residual value of the house:

- Total construction floor area of the house: 75 m² x 4 = 300 m²

- Cost of building a new house with similar area and utilities:

VND 2.8 million/ m2 x 300 = VND 840 million

- The value of wear is determined as follows:

+ Wear ratio: Apply the method of determining the wear ratio based on the house’s life:

+ The value of tangible wear: VND 840 million x 10% = VND 84 million

The residual value of the house:

VND 840 million - VND 84 million = VND 756 million

Step 4: Determining the price of the land parcel of the real estate

The value of the land parcel:

VND 3,600 million - VND 756 million = VND 2,844 million.

The unit price of the land parcel:

VND 2,844 million; 100 m² = VND 28.44 million/ m², which is rounded up to: VND 28.5 million/m².

Step 5: Determining the price of the land parcel concerned

Adjust the unit price of the above real estate based on the land location difference to determine the land price of the to be- priced land parcel:

VND 28.5 million + (VND 28.5 million x 6%) = VND 30.21 million/ m², which is rounded up to VND 30.5 million/m².

Conclusion: The unit price of the land in question is about VND 30.5 million/m².

APPENDIX 4

EXAMPLE OF THE SURPLUS METHOD
(Issued together with Circular No. 145/2007/TT-BTC of the Ministry of Finance dated December 6, 2007)

The land in question has an area of 10,000 m2 in District X of a grade-I city. The State has leased this land block to an enterprise for industrial production. At the end of the contractual lease term, due to environmental pollution, the municipal People’s Committee has decided to lease to the enterprise land in an industrial park in the suburban area. It is intended that this land block will be allocated to a urban housing company to build infrastructure and houses for sale. At present, on the land block exists a production workshop of 6,000 m2 (one story, brick walls, steel frames, corrugated iron roof and cement floor.); according to experts’ evaluation, the residual quality is 30%.

According to construction regulations, for this project, the maximum percentage of land for building dwelling houses is 55%; the total construction area is 5,500 m².

Under the project, it is allowed to be built a 12-story apartment building on a ground area of 3,000 m²; and divide a land area of 2,500 m2 for selling house foundations (with 25 lots, 100 m2 each).

Assume that the project will be completed in one year and the investor only has to pay compensation for the value of the workshop to the enterprise from which the land is recovered.

On the basis of the planning, the project’s detailed design and data supplied by the investor; through surveying and analyzing the real estate and construction markets, the land pricing agency has collected the following information:

- The unit price of construction of a new workshop with similar structures: VND 800,000/m2.

- Average cost of building infrastructure: VND 600,000/m2

- Cost of project designing and planning: VND 1,000 million.

- Average cost of building an apartment building: VND 3,000,000/m2.

- Cost of building water tanks, pump stations and standby generator to serve the apartment building: VND 1,000 million.

- Cost of dismantlement of the old workshop: VND 100 million and the value of recovered waster materials is equal to 20% of the residual value of the workshop.

- The investor has to borrow bank loans accounting for 60% of the construction cost at an annual interest rate of 10%.

- The advertisement and sale cost: 1% of turnover.

- Project management expense: 5% of the project’s total expense.

- The investor’s profit: 20% of the project’s total turnover.

- The average sale price of an apartment: VND 7 million/m2. The total area of apartments accounts for 80% of the total construction floor area of the apartment building; The divided land parcels are expected to be sold at VND 15 million/m2, which is exclusive of value added tax.

The surplus method is applied to determine the price of this land block as follows:

Step 1: Determining the best and most effective use purpose of the land block, that is for the residential purpose; of which the most reasonable structure is that 55% of the land block is for building a high-rise apartment building and the remaining 45% will be divided into smaller lots for sale.

Step 2: Estimating the total turnover

- Turnover from the sale of apartments:

(3,000 m2 x 12 x 80% x VND 7 million/m2 = VND 201,600 million

- Turnover from the sale of divided land lots:

2,500 m2 x VND 15 million/m2 = VND 37,500 million

Expected total turnover:

VND 201,600 million + VND 37,500 million = VND 239,100 million

Step 3: Estimating total expenses

- Cost of infrastructure:

10,000 m2 x VND 600,000/m² = VND 6,000 million

- Cost of designing and planning = VND 1,000 million

- Cost of building the apartment building:

(VND 3,000 m2/story x 12 stories) x VND 3 million/m² = VND 108,000 million

- Cost of building water tanks, pump stations and standby electricity generator to serve the apartment building: VND 1,200 million

- Cost of dismantlement of the old workshop: VND 100 million

- Compensation for the workshop

(6,000 m2 x VND 800,000/m²) x 30% = VND 1,440 million

- The recovered value of waste materials to be subtracted: VND 1,440 million x 20% = VND 288 million

- Advertisement and sale cost: 1% x VND 239,100 million = VND 2,391 million

Total direct construction expense: VND 119,843 million

- Bank loan interests to be paid

(VND 119,843 million x 60%) x 10% = VND 7,190.58 million

- Management expense: 119,843 million x 5% = VND 5,992.15 million

- The investor’s profit: VND 239,100 million x 20% = 47,820 million

Total of expenses and profit: VND 180, 845.73 million

Step 4: Determining the land price

The estimated value of the land block

VND 239,100 million – VND 180,845.73 million = VND 58,254.27 million, which is rounded up to: VND 58,000 million, or 5.8 million/m2

Conclusion: The value of the above land block is about VND 58 billion or 5.8 million/m².