CIRCULAR

Guidelines for Implementing Decree No. 71/2001/NĐ-CP dated October 5, 2001 of the Government on Investment Incentives for Building Housing for Sale and Rent

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Pursuant to Decree No. 71/2001/NĐ-CP dated October 5, 2001 of the Government on Investment Incentives for Building Housing for Sale and Rent;

Pursuant to Decree No. 178/CP dated October 28, 1994 of the Government stipulating the tasks, powers, and organizational structure of the Ministry of Finance;;

The Ministry of Finance provides guidelines for implementing land use fee incentives, land rental fee incentives, land use tax (land tax), and corporate income tax incentives for investment projects incentivized for building housing for sale and rent as follows:

A. APPLICABLE OBJECTS

I. Domestic enterprises that are investors implementing investment projects to build housing as prescribed in Article 2 of Decree No. 71/2001/NĐ-CP of the Government shall be entitled to tax incentives including:

1. Domestic enterprises:

- State-owned enterprises established and operating under the Law on State-Owned Enterprises;

- Enterprises established and operating under the Enterprise Law;

- Enterprises of political organizations, political-social organizations, professional associations; security and defense enterprises established and operating in accordance with the law;

- Cooperatives established and operating under the Law on Cooperatives;

- Enterprises directly invested in Vietnam by overseas Vietnamese; enterprises directly invested in Vietnam by foreigners residing long-term in Vietnam; enterprises jointly established by Vietnamese citizens with overseas Vietnamese or with foreigners residing long-term in Vietnam.

2. Foreign-invested enterprises established and operating under the Law on Foreign Investment in Vietnam.

II. Subjects eligible for incentives as set out in Point I Part A of this Circular to enjoy tax incentives and other revenue incentives as prescribed in Decree No. 71/2001/NĐ-CP of the Government must meet the following conditions:

- Registering business operations in housing construction in accordance with the law;

- Implementing high-rise residential projects (five floors or more in Hanoi and Ho Chi Minh City, three floors or more in other provinces and cities); having a closed apartment structure with common staircases and corridors; residential projects with a land use structure of at least 60% of the total construction area being high-rise apartments, prioritizing sales and rentals to specified groups as provided in Article 5 of Decree No. 71/2001/NĐ-CP of the Government; Selling prices and rental prices for high-rise apartments must be determined based on the principle of capital preservation and business interests; For selling prices and rental prices of high-rise apartments, they shall not be included in the calculation of land use fee incentives, land tax incentives, and land rental fee incentives (as stipulated in Clause 1, Article 6 of Decree No. 71/2001/NĐ-CP).

- Fully and correctly complying with accounting laws, invoices, and certificates; separately accounting for the results of business operations of projects benefiting from tax incentives and revenues from land use.

B. LEVELS OF TAX AND LAND REVENUE INCENTIVES

I. FOR DOMESTIC ENTERPRISES:

 Domestic enterprises mentioned in Point I.1 of Part A of this Circular, implementing housing projects as prescribed in Article 2 of Decree No. 71/2001/NĐ-CP of the Government, referred to as project investors entitled to tax incentives, are as follows:

1. Land use fee incentives:

a) Exemption from land use fees for the area used to construct high-rise apartment buildings;

b) Reduction of 50% of land use fees for non-high-rise apartment buildings within the scope of the project (if applicable);

c) Exemption from land use fees for projects constructing various types of housing in areas with difficult economic and social conditions or extremely difficult conditions (as listed in Category B or C of the annex accompanying Decree No. 51/1999/NĐ-CP dated July 8, 1999 of the Government);

d) Delayed payment of land use fees for the portion of land subject to land use fees, in line with the construction progress of each project as decided by the provincial or city People's Committee, but the maximum period for delayed payment of land use fees shall not exceed five years, starting from the date of land allocation.

e) Investors of projects allocated land who must pay land use fees and compensate for land losses as stipulated in Clause 2, Article 8 of Decree No. 71/2001/NĐ-CP dated October 5, 2001 of the Government may deduct the compensation amount from the land use fees payable, but the deduction shall not exceed the total land use fees payable by the investor.

Investors shall not include relocation support costs as stipulated in Clause 1, Article 8 of Decree No. 71/2001/NĐ-CP dated October 5, 2001 of the Government in the compensation for land losses to be deducted from land use fees payable or from other payments to the state budget (if applicable).

2. Incentives for land use tax and construction land tax: Project investors are exempt from land use tax and construction land tax for a period of three years from the date of land allocation for the area used to construct high-rise apartment buildings. If the high-rise apartment construction is completed and sold or transferred to users before the three-year exemption period, the tax exemption period ends upon completion of the transfer.

3. Corporate income tax rate incentives:

a) A tax rate of 15% for investments in constructing high-rise apartment buildings and other types of housing in areas with extremely difficult economic and social conditions (as listed in Category C of the annex accompanying Decree No. 51/1999/NĐ-CP dated July 8, 1999 of the Government).

b) A tax rate of 20% for investments in constructing high-rise apartment buildings and other types of housing in areas with difficult economic and social conditions (as listed in Category B of the annex accompanying Decree No. 51/1999/NĐ-CP dated July 8, 1999 of the Government).

c) A tax rate of 25% for investments in constructing high-rise apartment buildings and other types of housing in other areas.

Investors must separately account for the results of business operations of projects benefiting from preferential corporate income tax rates; if separate accounting cannot be organized for each project, the highest corporate income tax rate applicable to the investor's production and business activities shall apply.

II. FOR FOREIGN-INVESTED ENTERPRISES:

Foreign-invested enterprises established and operating under the Law on Investment by Foreign Investors in Vietnam (hereinafter referred to collectively as investors) participating in housing projects as prescribed in Article 2 of Decree No. 71/2001/ND-CP of the Government in urban areas shall enjoy tax incentives and land revenue benefits as stipulated in Decree No. 71/2001/ND-CP as follows:

1. Regarding land rent payment:

a) Exemption from land rent for the area used to construct high-rise apartment buildings throughout the period of land lease.

In the case of constructing high-rise apartment buildings for sale, the exemption period for land rent starts from the date of signing the land lease contract until all apartments in the high-rise building have been sold.

b) Exemption from land rent for three years, starting from the date of signing the land lease contract for the area where the investor must pay land rent to construct housing (excluding the area for constructing high-rise apartment buildings). After the exemption period, the investor must declare and pay land rent according to regulations.

If the construction of housing within the project has been completed and sold or transferred to users before the three-year period, the exemption period for land rent ends upon transfer of the property.

c) In cases where the project must temporarily halt construction or operation with the approval of the competent state authority for land leasing, the investor will be granted a 50% reduction in land rent corresponding to the duration of the temporary halt.

Upon receiving the approval document from the competent authority allowing the temporary halt in construction or operation, the investor must send a copy (stamped by the unit) to the land rent collection management agency to calculate the reduced land rent within ten days from the date of receipt of the approval document from the competent authority.

d) In cases where the investor sells housing that is not high-rise apartment buildings within the scope of a high-rise apartment building construction project, they must pay the land use fee (attached to the sold housing) and deduct the actual land rent paid into the State Budget for this area, but not exceeding the amount of land use fee payable. Compensation for land damage is not included in the deduction when calculating the land use fee payable.

- The area subject to land use fee payment and eligible for land rent deduction is the area attached to the sold housing.

- The valuation for the land use fee payable is based on the land price set by the provincial People's Committee or the municipal People's Committee directly under the Central Government, according to the government's land price framework, and calculated at the time of housing transfer.

2. Tax incentives for corporate income tax: Investors implementing housing construction projects as prescribed in Article 2 of Decree No. 71/2001/ND-CP dated October 5, 2001 of the Government in urban areas shall enjoy corporate income tax rate incentives as follows:

a) A tax rate of 10% for investment in constructing high-rise apartment buildings and other types of housing in urban areas located in regions with particularly difficult socio-economic conditions (as specified in Section A, List of Encouraged Investment Areas, Appendix I accompanying Decree No. 24/2000/ND-CP dated July 31, 2000 of the Government).

b) A tax rate of 15% for investment in constructing high-rise apartment buildings and other types of housing in urban areas located in regions with difficult socio-economic conditions (as specified in Section B, List of Encouraged Investment Areas, Appendix I accompanying Decree No. 24/2000/ND-CP of the Government).

c) A tax rate of 20% for investment in constructing high-rise apartment buildings and other types of housing in urban areas located in other regions.

Investors must separately account for the business results of projects enjoying preferential corporate income tax rates. If separate accounting for each project is not possible, the highest corporate income tax rate applicable to the investor's production and business activities shall be applied.

C. IMPLEMENTATION

I. FOR INVESTORS:

Investors must submit one copy of the decision on the main project or investment permit, land allocation decision, land lease contract, etc. (stamped by the unit) to the Provincial or Municipal Tax Office where the main office is located and one copy to the local tax office responsible for collecting taxes related to the project within ten days from the date of being designated as the main investor to register for tax incentives.

1. Regarding declaration and payment of land use fees, exemption, reduction of land use fees, and delayed payment of land use fees:

- Investors must declare and pay land use fees, prepare and submit applications for exemption or reduction of land use fees to the direct tax management agency according to Circular No. 115/2000/TT-BTC dated December 11, 2000 of the Ministry of Finance, requesting exemption or reduction of land use fees within fifteen days from the date of land transfer.

- Investors who are allowed to delay payment of land use fees must submit a copy (stamped by the unit) to the direct tax collection agency within ten days from the date of the provincial or municipal People's Committee's decision on delayed payment of land use fees to register the payment plan. The maximum allowable delay in payment of land use fees does not exceed five years from the date of land allocation.

2. Regarding declaration and payment of land tax, land rent, exemption from land tax, and land rent, these are implemented according to current regulations.

3. Regarding application of corporate income tax rates: Annually, the main investor calculates, declares, and pays corporate income tax at the preferential tax rate.

4. For investors currently implementing projects approved by competent authorities before the effective date of Decree No. 71/2001/ND-CP of the Government, which meet the conditions stipulated in Article 2 of Decree No. 71/2001/ND-CP and Section II Part A of this Circular, the investor shall directly work with the local Tax Bureau to determine the ongoing works and components of works transitioning from the effective date of Decree No. 71/2001/ND-CP to enjoy investment incentives under Decree No. 71/2001/ND-CP and the guidance provided in this Circular. Corporate income tax incentives shall apply from 2002 onwards.

5. Upon expiration of the investment period as stated in the Investment License, if the foreign investor does not have their Investment License renewed in accordance with regulations, they shall be responsible for transferring the entire infrastructure system within the project scope to the competent state authority of Vietnam without compensation, in accordance with the provisions of the law, and resolving any remaining issues in accordance with Vietnamese law. The subsequent investor will enjoy the remaining investment incentives for the time left for the parts of the project that have not yet received investment incentives.

6. An investor of a project eligible for housing investment incentives under Decree No. 71/2001/NĐ-CP of the Government, if during the investment construction period the competent authority decides to change the investor, the new investor shall continue to enjoy the remaining investment incentives for the time left, for the parts of the project that have not yet received investment incentives.

II. REGARDING THE TAX AUTHORITIES:

The direct tax collection authority must establish a list of investors who have registered to implement housing construction projects, maintain individual files for each investor, monitor the implementation of the projects; organize tax collection and implement tax incentives.

1. Collection of land use fee, exemption, and reduction of land use fee:

- The collection of the land use fee from investors implementing projects shall be carried out as if they were paying the land use fee when the State allocates land, following the guidelines set forth in Circular No. 115/2000/TT-BTC of the Ministry of Finance. Exemptions and reductions of the land use fee shall be implemented according to current regulations.

The exemption and reduction of the land use fee, calculation of the amount of land use fee payable, determination of the time allowed for late payment, shall be carried out at the time of land transfer for project implementation or at the time of house sale, for foreign investors.

- Administrative penalties shall be imposed on the project owner who violates regulations concerning declaration, payment of taxes, and land revenue payments, in accordance with the provisions.

2. Exemption of land tax for investors of housing construction projects as stipulated in Point 3.a, Section IV of Circular No. 83 TC/TCT dated October 7, 1994 of the Ministry of Finance guiding the implementation of Decree No. 94/CP dated August 25, 1994 of the Government detailing the implementation of the Land Tax Law.

3. Collection of land lease fees, exemption, and reduction of land lease fees: The collection and payment of land use fees, and the exemption and reduction of land lease fees shall be carried out in accordance with Decision No. 189/2000/QĐ-BTC dated November 24, 2000 of the Minister of Finance regarding the issuance of regulations on land lease fees, water surface fees, and sea surface fees applicable to foreign investment forms in Vietnam.

4. Application of corporate income tax rates: The tax authority shall base on the registration file for investment incentives, according to the approved project to determine the provisional tax payment for the year; At the end of the year, upon receipt of the final tax settlement report submitted by the investor, review the implementation of the housing investment project, to apply the preferential corporate income tax rate, calculate the actual corporate income tax payable, and complete the tax settlement in accordance with the regulations.

D. EFFECTIVE DATE OF IMPLEMENTATION

This Circular shall take effect fifteen days from the date of signature. For housing investment and rental projects meeting the conditions specified in Article 2 of Decree No. 71/2001/NĐ-CP dated October 5, 2001 of the Government, which are currently being implemented, if previously enjoying lower levels of incentives under other regulations than those provided in Decree No. 71/2001/NĐ-CP dated October 5, 2001 of the Government, they shall be entitled to the new higher incentives provided in Decree No. 71/2001/NĐ-CP for the project or part of the project implemented from the effective date of Decree No. 71/2001/NĐ-CP.

Provincial People's Committees directly under the Central Government shall be responsible for directing the Provincial Planning and Investment Departments, Tax Bureaus, Provincial Finance and Price Departments, Land Administration Departments, People's Committees at all levels, and investors within their functional and authorized scope to manage and implement investment projects and tax incentives in accordance with the guidance provided in this Circular.

During the implementation process, if there are any difficulties, units are requested to promptly reflect them to the Ministry of Finance for timely guidance on implementation./.