Under the new circular, land rent, from August 15, will be as high as 1.5% against the land rent list issued yearly by city and provincial governments, according to Vietnam News Agency. For land to be used for developing urban towns, commercial services and residential projects which can generate better profits, annual land rent will depend on local governments’ land prices, but it is not allowed to double the basic land prices issued every year.
The circular states that land rent for each project will be kept stable for five years. After that period, if the land prices set by local governments increase below 20% over the land prices used to calculate the current land rent, rent will be revised up to the new level for the next five years. Once land price increases over 20% as compared with the land price used for current land rent calculation, city and provincial finance departments will adjust land rent.
Enterprises decry over land rent
Around 200 companies in northern provinces early this month got together at a conference hosted by the Vietnam Chamber of Commerce and Industry (VCCI) to look into difficulties arising from land rent that must be on a level with market prices in line with Government Decree 121.
Nguyen Thanh Canh, chairman of the Association of Small and Medium Enterprises in Halong City, said policy changes had prompted land rent to increase five times as compared to 2006. The ratio used to calculate land rent increased significantly.
“It is unreasonable. Land rent has picked up 4.5 to 15 times within five years,” Canh said.
To Ngoc Thanh, chairman of Hong An Co, shared Canh’s view, saying his company had received a notice from the taxman, requiring the company to pay land rent that is 18 times higher than in 2010.
“That is seen as a double challenge for enterprises that are now facing a lot of difficulties,” said Dao Xuan Binh, chairman of the business association in Le Chan District in Hai Phong City. He said the land rent in the northern coast city had surged 20 times over the previous year.
At the conference, most companies agreed on the need to adjust land rent in accordance with economic changes to use effectively land resources. However, the rises should be done in a gradual approach along with the nation’s growth.
They attributed the sharp increase in land rent to vague guidelines that have led to wrong interpretations. That has impacted significantly on their production.
Some reckoned that it was unreasonable to calculate land rent based on prices of land transferred on the market.
Others said the current regulations were unfair as they applied to local companies while foreign ones were allowed to pay land rent for up to 50 years.
Commenting on the issue, Deputy Finance Minister Do Hoang Anh Tuan said Decree 121 came at a time when most companies are facing challenges such as inflation, high interest rates and credit crunch. In addition, many local governments have applied the same duty to all companies, instead of deciding on a case-by-case basis. For example, leasing a lot for condo development is quite different from building a factory.