CIRCULAR No CIRCULAR No.70-TC/QLCS OF OCTOBER 7, 1997 GUIDING THE PAYMENT OF LAND RENT AND CONTRIBUTION TO JOINT VENTURE CAPITAL WITH THE VALUE OF LAND USE RIGHT BY ORGANIZATIONS IN THE COUNTRY AS PRESCRIBED IN DECREE No.85-CP OF DECEMBER 17, 1996 OF THE GOVERNMENT In execution of Decree No.85-CP of December 17, 1996 of the Government detailing the implementation of the Ordinance on the rights and obligations of the organizations in the country which are assigned or leased land by the State, the Ministry of Finance hereby guides the payment of land rent and the contribution to the joint venture capital with the value of the land use right by organizations in the country, the handling of cases in which payment of land use is made with money not issued from the State budget before September 9, 1996 (date on which the Ordinance on amendment and supplement to the aforesaid Ordinance takes effect): Part I PAYMENT OF LAND RENT I. SUBJECT TO LAND RENT PAYMENT: 1. Subjects which have to pay land rent: 1.1. Economic organizations in the country shall have to register and pay land rent: State enterprises, enterprises of economic and social organizations, defense and security enterprises, stock companies, companies with limited liabilities, and other business organizations which are using land for production and business purposes other than agriculture, forestry, aquaculture and salt-making must pay land rent according to the guidance in this Circular. 1.2. A number of other cases where registration and payment of land rent are mandatory. a/ Enterprises engaged in agricultural production, forestry, aquaculture and salt making are allowed to use land to set up headquarters (offices), repair shops, processing shops, or to conduct business and services. b/ The organizations which have been assigned land by the State do not have to pay land rent if the land is used for public utility purposes. However, if they use part of the land for production and business purposes, they must make declarations and register to pay rent on such area within the period the land is used for production and business purposes. c/ State agencies, political and social organizations, people's armed forces units which are allocated land to build working offices or for defense and security purposes or build works in the branches and areas of economic, cultural, social, scientific, technical and diplomatic activities in which part of the assigned land is used for production and business purposes shall have to make declarations and register to pay the rent for this part of land. d/ If a public utility works is assigned to the management of the enterprise for exploitation and use for production and business purposes, the enterprise shall have to pay the land rent for the area used for production and business purposes. Here are some concrete examples: + Regarding the ferries, sea ports, railway stations and bus stations, they shall have to pay only the rent of the land used for the building of the office of the organization, the waiting house, the ticket house, the parking lot, the catering area, the stands for the sale of commodities, souvenirs, storages ... directly used for production and business purposes (including the area assigned to the personnel on a contractual basis for the running of sales stands and shops...) + The airports shall not have to pay land rent for the runways, the flight safety areas (for civil airports) and for the whole of the area of the military airports managed by the Ministry of Defense. + The historical relics already recognized as such by the Government and the beauty landscapes shall have to pay the land rent for only the area used for service purposes such as the souvenir stands, the catering shops and other services. + The skate rolling and tennis courts, the gymnasiums for body building and aesthetic physical training directly managed by the administration of various levels in service of public welfare and without business purpose shall not have to pay land rent. e/ The enterprises assigned with the task of exploiting minerals, building materials, etc., shall have to pay the land rent for the whole area rented to them. When parts of the area under exploitation are returned to the State, the rent shall be changed accordingly. In case the enterprise has been using the land without the land rent decision of the competent State agency, it shall have to temporarily pay the rent for the area already exploited (if it is not yet filled up to be returned to the State), the area under exploitation, the area occupied by workshops for production and business, yards and storage for materials, products, head office and constructions in service of exploitation. An organization which is allowed to exploit minerals from the subsoil shall not have to pay land rent for the unused area on the ground. f/ For a multi storeyed house used by many units, the land rent shall be calculated for each storey according to the coefficient defined in Decree No.61-CP of July 5, 1994 of the Government. g/ If the house is intended as dwelling place for many households including apartment buildings within the compound of an organization, unless it lies in the planned population area of the State, the organization still have to pay land rent for the housing area. In cases mentioned in Point 1.2 of this Section, the land using organization has to make a declaration itself to register for paying land rent. The tax agency shall together with the land administration agency check the declaration in necessary cases in order to ensure its conformity with reality. 2. Subjects not liable to land rent payment: 2.1. The economic organizations which are assigned land by the State and have to pay for the land use: - Economic organizations which use land to build dwelling houses for sale to Vietnamese citizens or for rent; - Economic organizations which use land for investment in infrastructure construction in order to assign or lease the right to use the land together with this infrastructure. 2.2. Organizations in the country which are assigned land by the State without having to pay for the land use. These include: - State agencies, political and social organizations, People's Army units using land to build working offices, for defense and security, or to build projects in the branches and domains of non - business activities in economy, culture, social welfare, science, technique and diplomacy outside production and business purposes. - The enterprises and companies using land for public utility such as the construction of roads, bridges, culverts, pavements, water supply and drainage facilities, rivers, lakes, dykes, dams, schools, scientific research institutions, hospitals, markets, parks, flower beds, recreation places for children, public squares, stadiums, airports, sea ports and other public utility projects as prescribed by the Government; - State enterprises, enterprises of political and social organizations, defense and security enterprises, stock enterprises, companies with limited liabilities, collective economic organizations using land for agricultural production, forestry, aquaculture and salt production. 2.3. The organizations using land which is originally under lawful family or individual use after the competent State agency has allowed the use of that land for the construction of office or workshop for production and business purposes. 3. If an organization in the country which uses land assigned by a competent State agency and which has to pay and has paid for the land use in conformity with the regime of payment to the State budget before January 1st, 1995, such a payment not originating from the State budget, now under Decree No.85-CP of December 17, 1996 of the Government if it is a land renter it has to pay land rent as from January 1st, 1997, and shall continue to pay as provided for by the Ordinance on house and land tax in force if it is assigned land to be paid for the use. 4. If the land organization is in the category of land users having to pay for the land rent, it has to make a declaration to register for payment of land rent with the local tax agency according to the form attached to this Circular (form No.1). II. DETERMINATION OF LAND RENT AND ITS PAYMENT: 1. Determination of one-year land rent: Land rent for one Area of Unit price of year/Dong/year) = the land x one year 's rent on rent (m2) (Dong/m2/year) in which: - The area of rented land is the entire enclosure under the organization's management for use in production and business. This area is determined on the basis of the declaration for registration of the organization with reference to the existing area of land of the organization: the dossier on land assignment, the dossier of land assignment to the production or business establishment attached to the dossier on assignment of land for use, the dossier on land rent... The dossier shall be readjusted according to reality when it comes to officially determining the area. - The unit price of land rent for 1 year shall be determined as follows: Unit price of land rent for one year (Dong/m2/year) = Price of one square meter of land set by the People's Committee of provincial level under Decree No.87-CP of August 17, 1994 of the Government X Coefficient for determining the land price applicable to each group of trades and businesses defined in Article 2 of the Regulation on Price Frame for Land Rent Applicable to the Organizations in the Country to Which the State Rents Land issued together with Decision No.1357 TC/QD/TCT of December 30,1995 of the Minister of Finance The organization which is leased land by the State to build business infrastructure at the export processing zones and industrial parks shall have to pay land rent at the rate for material production lines, construction and transport services. A land leasing organization, apart from the annual land rent to be paid at the above unit price, also has to pay compensation to the person whose land is recovered and leased to it according to State regulations. In case the land for rent is allowed by the competent State agency to change the use purpose, the land price shall be determined at the price table having the same new use purpose as from the date of the change of the use purpose. However, the practical conditions of each plot of land shall be taken into consideration in order to determine an appropriate land price. In case the plot is a large plot lying far from the road bed, the Tax Service shall report to the Tax Department so that the Tax Department might coordinate with the related branches to possibly divide it into many smaller plots to determine the price for each smaller plot or to determine an average price for the calculation of the price in conformity with the real price land in the locality. In case the plot is used for business purpose in many branches and trades with different land rent, the land rent shall be determined on the basis of the use area for each branch or service. If the use area for each service or trade cannot be determined, the land rent for the whole plot shall be determined by the rent of the land used by the main business line. If such a business line cannot be determined, the overall land rent shall be the rent of the business line having the highest unit price of rent. The rent on an area which the land assignee asks to return to the State shall be calculated up to the time of its return to the State. In case an organization has filed a written proposal to return the land to the State but the State has not acknowledged reception, the organization shall not have to pay land rent for this area within one month after the competent State agency receives the written proposal. The agency which directly collects the land rent has to check carefully each concrete case in order to avoid mistakes. The land rent for the first and last years shall be determined as follows: Land rent Land rent for one year ( Dong ) for the first or = -------------------------------------- X Number of months of actual rent last year (Dong) 12 months 2. The time to calculate the land rent shall be determined as provided for in Article 4 of the Regulation on the Price Frame for Land Rent Applicable to Organizations in the Country which are Leased Land by the State issued together with Decision No.1357-TC/QD/TCT of December 30, 1995 of the Minister of Finance. For cases which are temporarily exempted from land rent as instructed in Circular No.856-LB/DC-TC of the General Land Administration and the Ministry of Finance and which are now liable for land rent payment, the time for land rent payment shall be calculated from January 1, 1997. 3. Payment of land rent: Land rent shall be paid annually and accounted for in the annual production and business cost of the land renting organization. In case of one-time payment for many years, the payment shall be staggered over these years and accounted in the production and business cost corresponding to these years. In case the organization is rented land by the State prior to January 1st, 1996 and has not paid the rent, it shall have to make back payment. If payment has been made for the rent in 1997 at the time of the payment, the payment already made shall be deducted from the rent as stipulated in this Circular. The land rent shall be paid to the State budget at the State treasury in the same locality where the land is used. Payment shall be made periodically twice a year, each time representing 50% of the rent for one year. The first payment shall be made on June 30 at the latest, the second on October 30 of the same year at the latest. The land rent shall be paid into the State budget at the State Treasury on the current budget contents. The Treasury shall make the procedure of collecting land rent according to current regulations. The land renting organization has the duty to pay the rent on time and fully into the State Treasury and submit itself to the guidance of the tax office directly managing the collection of land rent. 4. Land rent exemption and reduction: 4.1. If the land renting organization is in the process or carrying out survey for capital construction under the plan already approved by the competent level, it shall have to pay only 50% of the annual land rent and this shall be accounted for in the expenditures on capital construction. 4.2. The following reduction shall apply to the land rent payment at one time for many years: - Reduction by 10% for a periodical payment over five years. - Reduction by 10% for a periodical payment over the first five years and an additional 2% for each year from the 6th year according to the partially progressional method, but the maximum reduction shall not exceed 30% of the rent to be paid under the land rent contract. For instance: Enterprise B is leased a plot of land for a rent of 100 million dong per year. The enterprise is paying land rent for the first 8 years right in the first year. The reduction shall be effected as follows: - Reduction for the first five years: 100 million Dong x 5 years x 10% = 50 million Dong - Reduction for the 6th year: 100 million Dong x 1 year x 12% = 12 million Dong - Reduction for the 7th year: 100 million Dong x 1 year x 14% = 14 million Dong - Reduction for the 8th year: 100 million Dong x 1 year x 16% = 16 million Dong Total reduction = 92 million Dong Total payment at the beginning for 8 years: (100 million Dong/year x 8 years) - 92 million Dong = 708 million Dong 4.3. For the hotels, rest houses, guest houses conducting business on a seasonal basis, if they have fully paid the land rent as prescribed in this Circular and have operated at a loss, they shall be considered for land rent reduction. The reduction shall correspond with the losses but the maximum reduction shall not exceed 50% of the rent which is due to be paid. The supervision of the land rent reduction stipulated in this Point shall be decided by the Head of the General Tax Department after checking the annual statement of accounts of the organization. Part II ON THE CONTRIBUTION TO THE JOINT VENTURE CAPITAL WITH THE VALUE OF LAND USE RIGHT OF THE ORGANIZATIONS IN THE COUNTRY WHICH ARE ASSIGNED OR LEASED LAND BY THE STATE 1. For the economic organizations which are assigned land by the State for use in agriculture, forestry, aquaculture and salt production: 1.1. In case of joint venture with organizations and individuals in the country: a/ If the joint venture still uses land for agriculture, forestry, aquaculture and salt production, the value of the land use right of the land contributor shall be agreed upon by the parties to the joint venture, but the land price used to determine the value of the land use right must not be lower than the land price prescribed by the People's Committee of the province according to the land price frame issued by the Government. The value of the land use right used to contribute capital to the joint venture is the budget capital allocated by the State to the party contributing land to the joint venture capital. Each year, the party which contributes land to the joint venture shall have to pay tax on agricultural land use as prescribed by law. It shall not have to pay land rent and to pay for the use of capital. b/ In case the joint venture changes the land use purpose, the party contributing land to the joint venture capital shall have to change to the form of renting land from the State. The value of the land use right contributed to the capital of the joint venture shall be determined by the land rent paid to the State budget for the new use purpose corresponding to the term of the joint venture. It shall be calculated as follows: Value of the land use right as contribution to the joint venture capital (Dong) = Area used to contribute to the joint venture capital (m 2 ) X Price unit of land rent for one year for the new use purpose (Dong /m 2 /year) X Term of the joint venture (year) 1.2. Any joint venture with foreign organizations or individuals shall have to get the permission of the competent State agency stipulated in Decree No.12-CP of February 18, 1997 of the Government. The party having land to contribute to the joint venture capital shall have to change to the form of renting land from the State. The value of the land use right as contribution to the joint venture capital shall be determined by the rent price of the land, the water surface or sea area applicable to the forms of foreign investment in Vietnam within the period when the land use right is allowed to be contributed to the joint venture capital. 2. For the organizations which are assigned land by the State and which have to pay for the land use right: 2.1. For a joint venture with organizations and individuals in the country: The value of the land use right contributed to the joint venture capital shall be agreed upon by the parties but must not be lower than the land use payment to the State budget at the time of the contribution to the joint venture capital. The party which contributes the land use right value to the joint venture capital shall have to pay land tax as prescribed by the Ordinance on Current Land and House Tax throughout the term of the joint venture. 2.2. In case of joint venture with foreign organizations or individuals: the value of the land use right as contribution to the joint venture capital shall also be agreed upon by the parties but in any case shall not be lower than the value of the land use right within the term of the joint venture based on the rate of land rent to foreign investors. 3. For the organizations to which the State leases land: 3.1. For the joint ventures with organizations and individuals in the country: The value of land use right as contribution to the joint venture capital shall be agreed upon by the parties but must not be lower than the value of land rent use right by multiplying (x) the land area contributed to the j

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