Thông tư 145/2016/TT-BTC Tiêu chuẩn thẩm định giá Việt Nam số 11 do Bộ trưởng Bộ Tài chính ban hành

CIRCULAR

VIETNAM’S VALUATION STANDARD NO. 11

Pursuant to the Price Law No. 11/2012/QH13 dated June 20, 2012;

Pursuant to the Government’s Decree No. 89/2013/NĐ-CP dated August 06, 2013 on providing detailed regulations on implementation of several articles of the Law on prices with respect to the valuation;

Pursuant to the Government's Decree No. 215/2013/NĐ-CP dated December 23, 2013 defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the request of the Director of the Price Management Department;

Minister of Finance hereby promulgates this Circular on Vietnam’s Valuation Standard No. 11.

Article 1. The Vietnam’s Valuation Standard No. 11 – Real Property Valuation is enclosed with this Circular.

Article 2. Effect

1. This Circular comes into force as of January 01, 2017.

2. The following Vietnam’s Valuation Standards, including the Standard No. 10 - Residual method and the Standard No. 11 – Profits Method, which are enclosed with Decision No. 129/2008/QD-BTC dated December 31, 2008 by Minister of Finance on promulgation of 06 Vietnam's Valuation Standards (3^rd stage) shall be invalid as of the entry into force of this Circular.  

Article 3. Implementation

1. The Price Management Department shall preside over and collaborate with relevant authorities in instructing and inspecting the implementation of regulations laid down in the Valuation Standard enclosed with this Circular and other relevant legislative documents.

2. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance for consideration./.

VIETNAM’S VALUATION STANDARD SYSTEM

Vietnam’s Valuation Standard No. 11

Real Property Valuation

(Code: TDGVN 11)

(Enclosed with the Circular No. 145/2016/TT-BTC dated October 06, 2016 by Minister of Finance)

I. GENERAL PROVISIONS

1. Scope of regulation: This standard provides regulations and guidance on the valuation of real property.

2. Regulated entities: The valuers who are practicing the valuation profession (hereinafter referred to as "valuers"), valuation enterprises and other organizational/ individual entities that carry out valuation operations under the provisions of the Price Law and other relevant laws.

3. The client who is provided with the valuation service and the third party who uses the valuation result (if any) under the signed valuation service agreement must have necessary knowledge about regulations enshrined in this standard in order to cooperate with the valuation enterprise in the course of valuation.

II. CONTENTS OF THIS STANDARD

1. When conducting the valuation of real property, the valuer may adopt valuation approaches and methods enshrined in the Vietnam’s Valuation Standards with respect of market approach, cost approach and income approach depending on each specific valuation case.  In addition, the valuer may apply the extraction method and the residual method prescribed in Point 3 and Point 4 of this Section to the determination of the value of the right to use land. The extraction method and the residual method are developed by combining the market approach, the cost approach and the income approach.

2. With respect of each valuation method, the valuer must select information to be collected with the aim of ensuring the accuracy of valuation result. The real property-related information collection form is stated in Appendix No. 3 enclosed with this Standard for reference.

3. Extraction method

a) The extraction method is a price appraisal method which is used to determine the value of the land use right over the land plot with properties on land by subtracting the contributory value of the properties on land from the total value of the real property (which is the sum of the value of the land use right and the value of properties on land).

b) Valuation steps:

Step 1: Make a survey and select at least 03 pieces of real property of which land plots have the same features with the land plot of the subject real property, particularly the location, area, shape, land use purposes, legal features, technical and social infrastructure factors and other factors that may cause impact on the land price. At the same time, the information about the properties on land of comparable pieces of real property.

Selected pieces of real property are those which have been transferred or offered to purchase or for sale on the market with the location of transfer or offering for sale/ purchase similar with that of the subject property at the valuation time or within the close proximity to the valuation time provided it must not longer than 2 years since prices are set forth in the Vietnam’s Valuation Standard with respect of the market approach.

Step 2: Value the properties on land of the comparable real property (which has been selected in Step 1) at the valuation time.

Where:

- Current costs of constructing the properties on land of the comparable real property at the valuation time shall be determined as the reproduction or replacement costs for generating the properties on land. Methods to determine reproduction or replacement costs are provided for in the Vietnam's Valuation Standard with respect of the cost approach.

- The amount of depreciation of properties on land of the comparable real property at the valuation time shall be determined by adopting guidance provided in the Vietnam's Valuation Standard with respect of the cost approach.

Step 3: Value the land use rights of the comparable real property at the valuation time.

Where:

- Transaction price of the comparable real property refers to the price of the successful transaction or unsuccessful transaction of which the price has been adjusted and which has the potential to become a successful transaction.

- Value of the properties on land of the comparable real property has been determined in Step 2.

Step 4: Value the land use rights of the subject real property.

The value of the land use rights of the subject real property shall be determined on the basis of values of land use rights of comparable pieces of real property upon the adjustments for differences in payment conditions, legal features, location, area, shape, technical and social infrastructure factors, and other factors that may cause impact on the land use rights as regulated in the Vietnam's Valuation Standard with respect of the cost approach. The valuer should present strong arguments for selecting the adjustment ratio of factors that influence on the land price.

The example of the extraction method is stated in Appendix No. 01 enclosed with this Standard.

4. Residual method

a) Residual method is a price appraisal method which is employed to determine the value of real property with development potential on the basis of the estimated value of presumptive development of the property (total development revenue) minus estimated costs that may arise to make such development (including investors' profits).

b) General formula:

V = DT – CP

V: Value of the subject property;

DT: Total development revenue;

CP: Total development costs.

c) Presumptions of time when development revenue and costs of the real property arise:

- Presumption 1: Both the real property’s development revenue and costs arise within one year. In such case, development revenue and costs of the real property shall be calculated according to the price level applied at the valuation time.

V = DT – CP (at the valuation time)

- Presumption 2: The development process of the real property lasts for several years; upon the completion of construction, the owner provides the entire or a part of the property for rent or sells each part of the property during several years.

Where:

V: Value of the subject property;

DT_t : Presumptive development revenue of the real property at the time t;

CP_t: Estimated development costs at the time t;

r: Discount rate;

n: Period of estimated future cash flows;

t: Year of estimation.

d) Valuation steps:

Step 1: Determine the highest and best use of the land plot.

Step 2: Determine the period of estimated future cash flows.

Step 3: Estimate total development revenue of the real property. In the case of presumption 2, total development revenue of the real property should be converted into equivalent value at the valuation time.

Step 4: Estimate total development costs to create the development value of the real property. In the case of presumption 2, total development costs of the real property should be converted into equivalent value at the valuation time.

Step 5: Determine the value of land use right by getting the figure achieved in step 3 minus (-) the figure achieved in step 4.

dd) The grounds for determining the highest and best use of the land plot:

- Features of the land plot;

- Information about the land planning, construction planning, planning for change of land use purposes and regulations on construction approved by competent authorities;

- Guidance on analysis of highest and best use of property is provided for in the Vietnam’s Valuation Standard with respect of valuation process.

e) Determination of the period of estimated future cash flows (n):

Determination of the period of estimated future cash flows is performed in accordance with instructions in the Vietnam's Valuation Standard on the cost approach with respect of the discounted cash flow method.

g) Determination of total development revenue:

Total development revenue of the real property is the total estimated revenue of the subject real property in conformity with the highest and best use of the land plot.

Total presumptive development revenue of the real property shall be estimated on the basis of survey, collection of information about the transfer price, rental and other components of revenue of pieces of real property which have similar features with the project being invested and constructed at the area where the subject land plot locates or the area that has profit-earning capacity and equivalent technical and social infrastructure conditions; the valuer should take into accounts the trends and changes in transfer price, rental and other components of revenue of the project which shall be invested and constructed in the future.

Total development revenue is calculated by employing the market approach or the income approach.

With regard to the presumption 1 at paragraph c of this point, the development revenue shall be calculated according to the price level at the valuation time in case all products of the finished real property is sold out at the valuation time or in case where the valuer cannot estimate the selling price or the rental at estimation years of each development period of the real property.

With regard to the presumption 2 at paragraph c of this point, the conversion of total development revenue of the real property into equivalent value at the valuation time shall be made according to the following formula:

h) Determination of total development costs:

Total development costs refer to all necessary costs estimated for a real property with development potential in conformity with applicable laws (on technical - economic norms, consumption of materials and accounting of production and investment costs) and ensuring the highest and best use of the subject land plot. Total development costs include:

* Investment and development costs:

- Infrastructure costs and other relevant costs;

- Construction costs include costs for demolition of buildings, site leveling, construction of works, work items, or construction of temporary works or auxiliary works serving the primary construction;

- Equipment costs include costs for purchase of building equipment and technological equipment; costs for training and technological transfer (if any); installation, testing and calibration costs; transport and insurance costs; taxes and other fees and costs;

- Project management costs include costs for performing project management activities during the preparation, execution and completion of the project when the project is put in to operation;

- Consultancy costs include costs for survey and preparation of pre-feasibility study reports (if any), feasibility study reports, technical – economic reports, design costs, consultancy costs for supervision of construction works and other relevant consultancy costs;

- Contingency costs include contingency costs for additional workload (if any) and contingency costs for price slippage.  The contingency costs for price slippage shall be applied during the execution of the project lasting for several years;

- Other costs (such as costs for verifying total investment and insurance premiums of the construction works, etc.);

- Operating costs;

- Costs of loan interests, taxes, etc.

Costs for compensation and site clearance include compensation, subsidies for relocation, costs for conducting compensation and site clearance works which are not included in the total development costs.

When calculating these cost items, the valuer must comply with competent authorities’ current regulations on methods for determining total investment costs of the project, economic - technical norms (including materials, machinery, equipment, workers, etc.), and current prices according to each estimation year in conformity with the construction progress of real property. In addition, the valuer must present strong arguments for using the said cost items on the basis of comparison of such cost items with those of similar projects and/or price levels on the market (price of materials, machinery, equipment and workers, etc.) at the valuation time and relevant contents specified in the Vietnam’s Valuation Standard with respect of the cost approach.

Total development costs shall be calculated by employing the market approach or the income approach.

With regard to the presumption 1 at paragraph c of this point, the development costs shall be calculated according to the price level at the valuation time in case all products of the finished real property are sold out at the valuation time or in case where the valuer cannot estimate the unit price, prices of materials, machinery, equipment and workers at estimation years of each development period of the real property.

With regard to the presumption 2 at paragraph c of this point, the conversion of total development costs of the real property into equivalent value at the valuation time shall be made according to the following formula:

* Investor’s profits

Investor’s profits shall be determined according to the following order of priority:

- Investor’s profits are determined in accordance with regulations of competent authorities (if any).

- Investor's profits are determined on the basis of the proportion of average profit on the market to total costs (including direct costs, indirect costs and excluding financial costs) of at least 03 real property projects with similar features in locality.

- Investor's profits are determined as the average of profit percentage before corporate income tax (which has been audited or accounted) and total costs of at least 03 operating real property enterprises.

i) Discount rate:

The annual discount rate of the project is determined on the basis of the average of interest rates of medium-term commercial real property loans of 04 state commercial banks (including Vietnam Bank for Agriculture and Rural Development (Agribank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank)) with provincial-level head offices or branches at the valuation time.       

The example of the residual method is stated in Appendix No. 02 enclosed with this Standard.

5. Valuation of real property which is land

a) Applied valuation methods:

- Comparative method;

- Extraction method;

- Direct capitalization method;

- Discounted cash flow method;

- Residual method.

Specific contents of the comparative method, direct capitalization method, and discounted cash flow method are prescribed in the Vietnam’s Valuation Standards by Ministry of Finance. The extraction method and residual method are prescribed in Point 3 and Point 4 of this Section.

b) Cases of application:

The comparative method is used to determine the value of the land use right of the land plot in case information about transactions of land plots having similar features with the subject land plot is available.

The extraction method is used to value the land use right of the vacant land plot in case only information about transactions of land plots with properties on land which have similar features with the subject land plot is available but the information about transactions of similar vacant land plots is not enough.

The direct capitalization method and the discounted cash flow method are used to determine the value of the land use right of the land plot that generates income for land user.

The residual method is used to determine the value of the real property with development potential, particularly vacant land for construction or land with buildings on land which may be improved or demolished to construct new buildings with the aim of ensuring the highest and best use of land.

6. Valuation of residential houses

a) Residential houses prescribed in this Standard are defined as properties that are available for occupation and serving daily activities of families or individuals for non-business purposes, including apartment buildings and detached houses (such as single-detached villas, semi-detached villas, luxury villas, townhouses, terraced houses with garden, traditional rural houses).

- Primary valuation methods: Comparative method, substitute cost method, and replacement cost method.

- Cases of application:  

The comparative method is used to determine the value of a residential house located in a crowded residential area when the valuer can collect information about similar real property on the market.

The substitute cost method or the replacement cost method is usually used in combination with the comparative method. To be specific: With regard to vacant land, the valuer shall use the comparative method to value the land use right and the substitute cost method or the replacement cost method to determine the value of the building on land which is residential house.

b) Commercial houses prescribed in this Standard are defined as properties which are invested and constructed for the purpose of occupation in combination with business, lease or lease purchase, including types of residential houses prescribed in paragraph a of this point and tourist villas.

- Primary valuation methods: Direct capitalization method, discounted cash flow method, comparative method, substitute cost method or replacement cost method (used in case of comparison).

- Cases of application:

The direct capitalization method and the discounted cash flow method are used to determine the value of the real property which is commercial house.

The comparative method is used to determine the value of a commercial house located in a crowded residential area or crowded commercial area when the valuer can collect information about similar real property on the market.

The substitute cost method or the replacement cost method is usually used in combination with the comparative method. To be specific: With regard to vacant land, the valuer shall use the comparative method to value the land use right and the substitute cost method or the replacement cost method to determine the value of the building on land which is residential house.

7. Valuation of commercial properties

Commercial properties prescribed in this Standard include shopping malls, office buildings and hotels.

a) Shopping mall prescribed in this Standard refers to the property forming a complex of shops and service providers, halls, meeting halls and offices for lease, etc. which are established within one or several terraced buildings in conformity with required standards on commercial area, technical facilities and qualifications of managers or organization of business activities, and employ modern and convenient service methods in order to meet demand for development of business activities of businesspeople as well as customers’ demand for goods and services.

- Office for lease prescribed in this Standard is defined as the property which is leased by agencies or organizations to use as working places. Office for lease may be a part of a multi-functional building or private house leased for using as office.

- Hotels prescribed in this Standard are defined as properties that meet demand of tourists and travelers with different services such as lodging, parking, recreation, telephone, meals and beverages, etc.

b) Primary valuation methods: Direct capitalization method, discounted cash flow method, comparative method, substitute cost method or replacement cost method (used in case of comparison).

c) Cases of application: are same with cases of application of commercial houses prescribed in paragraph b Point 6 of this Section.

8. Valuation of industrial properties

a) Industrial property prescribed in this Standard includes land and buildings which are constructed in conformity with the land use purposes as regulated by laws. E.g. cement plant, non-ferrous metallurgy plants, aquatic processing plants and foods processing plants, etc.

- Industrial properties are designed and used to serve specific or specialized purposes with the attrition rate higher than the normal one.

- Location-related elements cause considerable impacts on industrial properties (including power source, water, roads, slope, treatment of soil or pollution, etc.).

b) Primary valuation methods: Substitute cost method or replacement cost method, direct capitalization method and discounted cash flow method.

9. Valuation of other real properties

The valuer shall, depending on the valuation purposes, grounds of value of property, legal features, technical – economic features and the availability of property-related information of each type of real property, select an appropriate valuation method or combine different valuation methods in accordance with regulations on valuation methods in the Vietnam’s Valuation Standard System and in conformity with regulations of relevant laws (if any)./.