The draft decree amending some provisions of Decree 103 (July 30, 2024) on land use and lease fees, and Decree 104 on the Land Development Fund, is under review by the Ministry of Finance. 

The draft has caught the special attention of the public as it retains the rule that projects with decisions on land allocation, leasing, land-use purpose conversion, changing from annual to one-time lease payments and with detailed planning, but without finalized land prices, must pay supplemental fees of 5.4 percent per year on the amount payable.

Unfair in principle and practice

It is unreasonable to ask businesses to pay supplemental land use fees before land prices are set, yet compliance is mandatory to proceed with project implementation and sales, according to Nguyen Quoc Hiep, Chair of GP.Invest and the Vietnam Construction Contractors Association.

He told VietNamNet that in addition to the land use fee of VND500 billion, his company had to pay VND27 billion in supplemental fees for a PhuTho project as well.  However, this amount is not too large if noting that other businesses have to pay much more, because they received the land allocation decision in 2014 and 10 years have elapsed.

“This is unreasonable. The delay in paying land use fees must not be blamed on businesses, but businesses have to pay the penalty for others’ fault. We have made many recommendations but the Ministry of Finance has not yet agreed. In the localities where we develop projects, they (local authorities) also say the rule is unfair, but can’t change it as they’re bound by law,” he said.

Pham Duc Toan, CEO of EZ Property, also said that requiring supplemental payments before land pricing is finalized is unreasonable. “Some localities demand full payment of land use fees before issuing construction permits. Land pricing is the state’s responsibility. Penalizing businesses for delays they didn’t cause is akin to coercion.”

The delay in calculating land use fees causes great losses to enterprises. That is, project implementation progress is prolonged, leading to increased costs due to the increase in land prices every year.

He said that 5.4 percent/year calculated on the land use amount paid for the period when land use fees have not been calculated is a fairly large penalty. For example, for a project with a land use fee of 1,000 billion VND, if the State delays calculating land use fees for only 1 year, the enterprise will have to pay an additional amount of VND54 billion.

If a business is late in paying taxes, it will bear a penalty with a fairly high interest rate of 0.03 percent/day, if the business has not paid in full after 90 days from the date of the notice of land use fee payment.

“This will be double taxation,” Toan said.

Vu Cuong Quyet, CEO of Dat Xanh MienBac, said that determining land use fees is the responsibility of the government agency.

Many projects had been pending for 3-5 years before land use fees are determined, and then enterprises are imposed a penalty of 5.4 percent/year on the amount to be paid when waiting for land price calculation.

“The regulation is quite unfair for businesses, because the late payment is not due to their fault, but they are still punished," Quyet said.

He added that land prices are determined based on market prices and adjusted annually. The land prices keep increasing, which means that if the state is slow in determining land use fees businesses have to pay, the amounts of money businesses have to pay will be higher.

“The land price increase, along with the fine and other costs, will be included in the selling price, and the buyer will be the final party to bear these costs,” Quyet noted.

Supplemental fee abolishment proposed

Toan of EZ Property proposed scrapping the supplemental land fee requirement. 

“If land pricing is delayed, responsibility should be blamed on appropriate agencies. Land use fees will be collected once prices are officially set,” he said. 

“Some localities do not dare to set prices, leading to a situation that no project has had its financial obligations on land determined for many years. The problem lies in the mechanism. If it is resolved, local officers will be confident in implementing, instead of laying the blame on the enterprises," Toan said.

Hong Khanh