Circular No. 70/TC-QLCS guiding the payment of land lease fees and joint venture capital contributions with the value of land use rights of domestic organizations as stipulated in Government Decree No. 85/CP dated December 17, 1996.

CIRCULAR

Guidelines for paying land rent and contributing to joint ventures with the value of land use rights as stipulated in Decree No. 85/CP dated December 17, 1996 of the Government.

Implementing Decree No. 85/CP dated December 17, 1996 of the Government detailing the implementation of the Ordinance on the rights and obligations of domestic organizations granted land use rights and land lease by the State, the Ministry of Finance provides guidelines for paying land rent and contributing to joint ventures with the value of land use rights of domestic organizations, and handling cases where such organizations had paid land use fees with non-State budget funds before September 9, 1996 (the effective date of the amended and supplemented Ordinance) as follows:

I. SUBJECTS REQUIRED TO PAY LAND RENT

PART I
PAYMENT OF LAND RENT

1. Subjects required to pay land rent:

1.1. Domestic economic organizations must register and pay land rent:

State-owned enterprises, enterprises of political and social organizations; defense and security enterprises; joint stock companies, limited liability companies, and other business entities currently using land for production and business purposes that are not agricultural, forestry, aquaculture, or salt-making must pay land rent according to the guidelines set forth in this Circular.

1.2. Certain other cases must register and pay land rent:

a) Agricultural, forestry, aquaculture, and salt-making enterprises permitted to use land for constructing offices (headquarters), repair and processing facilities, and business services.

b) Organizations granted land without payment of land use fees for public purposes but which use part of the area for production and business purposes must declare and register to pay land rent for that portion during the period of use for production and business activities.

c) State agencies, political and social organizations, and people's armed forces units granted land for constructing office buildings, use for national defense and security, or building projects belonging to economic, cultural, social, scientific, technical, and diplomatic sectors, if they use part of the allocated land for production and business purposes, must declare and register to pay land rent for that portion.

d) In the case of public welfare facilities, if they are managed and operated by enterprises for production and business purposes, the enterprises must pay land rent for the area used for production and business purposes. Specifically, some cases are as follows:

For ferry terminals, ports, warehouses, bus stations, only the land area used directly for production and business purposes such as office buildings, waiting rooms, ticket booths, parking lots, catering areas, sales counters, storage areas... shall be subject to land rent (including the area leased to staff for kiosks, shops...).

For airports, the landing and take-off runways and safety zones (for civilian airports) and the entire area of military airports managed by the Ministry of National Defense shall not be subject to land rent.

Historical sites and scenic spots already classified shall only be subject to land rent for the area used for service businesses such as souvenir stalls, food outlets, and other services.

Public sports fields, gyms, fitness centers, etc., directly managed by local authorities for common benefits and not for commercial purposes shall not be subject to land rent.

e) For multi-story buildings shared by multiple units, land rent shall be calculated for each floor based on allocation coefficients prescribed in Decree No. 61/CP dated July 5, 1994 of the Government to ensure appropriateness.

g) For residential houses within the premises of organizations, including collective housing, if they are not located within the planned residential areas of the State, the organization must still pay land rent for the area occupied by these houses.

The organizations using land as guided in Point 1.2 of this Section must declare and register to pay land rent themselves. Tax authorities will cooperate with land administration authorities to inspect and verify in necessary cases to ensure accuracy.

2. Subjects Not Required to Pay Land Rent:

2.1. Economic organizations granted land use rights by the State, including:

Organizations using land to construct houses for sale to Vietnamese citizens or for lease;

Organizations using land to invest in infrastructure construction for transfer or lease of land use rights adjacent to such infrastructure.

2.2. Domestic organizations granted land use rights without payment of land use fees, including:

State agencies, political and social organizations, and people's armed forces units using land to construct office buildings, for national defense and security; using land to build projects belonging to economic, cultural, social, scientific, technical, and diplomatic sectors without engaging in production and business activities;

Enterprises and companies using land for public purposes to construct roads, bridges, drainage systems, water supply systems, rivers, lakes, dikes, dams, schools, research institutions, hospitals, markets, parks, children's playgrounds, squares, stadiums, airports, ports, and other public facilities as prescribed by the Government.

An economic organization that uses land for the purpose of investing in infrastructure construction to transfer or lease the right to use the land near such infrastructure.

2.2. Domestic organizations assigned land by the State without payment for land use rights include:

State agencies, political and social organizations, and people's armed forces using land to construct office premises, for national defense and security purposes; using land to build works belonging to economic, cultural, social, scientific, technical, diplomatic sectors and fields that are not for production and business activities;

Enterprises and companies using land for public purposes to construct roads, bridges, culverts, sidewalks, water supply and drainage systems, rivers, lakes, dikes, dams, schools, scientific research institutions, hospitals, markets, parks, flower gardens, children's playgrounds, squares, stadiums, airports, ports, and other public works as prescribed by the Government;

State-owned enterprises, political and social organization enterprises, defense and security enterprises, joint-stock companies, limited liability companies, and collective economic organizations use land for agricultural production, forestry, aquaculture, and salt production purposes.

2.3. Organizations currently using land that originated from residential land legally used by households and individuals after being permitted by competent state authorities to use such land areas for office space, factory buildings for production and business operations.

3. Domestic organizations currently using land that have been granted land by state authorities with payment for land use rights, which have paid the land use fee according to regulations into the state budget before January 1, 1995, where such payments did not originate from the state budget, now under Decree No. 85/CP dated December 17, 1996 of the Government, if they fall within the category of land lease, must pay the land lease fee starting from January 1, 1997, if they fall within the category of land grant with payment for land use rights, they will continue to pay the land tax according to the current Ordinance on Real Estate Tax.

4. Organizations currently using land that are required to pay the land lease fee must declare and register to pay the land lease fee with the local Tax Authority according to the form attached in this Circular (Form No. 1).

II. DETERMINATION OF LAND LEASE FEE AND PAYMENT OF LAND LEASE FEE:

1. Determination of annual land lease fee:

Where:

The area subject to land lease fee calculation includes the entire premises managed and used for production and business activities by the organization. This area is determined based on the declaration and registration form submitted by the organization, referencing existing land records of the organization: land transfer documents, production and business facility transfer documents including land use transfer documents, land lease documents... When officially determining the area, it will be adjusted according to actual conditions.

The annual land lease rate is determined as follows:

Annual land lease rate (VND/m2/year)

Organizations leasing land from the state to construct infrastructure in export processing zones and industrial parks must pay the land lease fee according to the rates applicable to material production, construction, and transportation industries.

Organizations leasing land, in addition to paying the annual land lease fee according to the above rates, must also compensate the loss to the land owners whose land was expropriated for leasing to themselves according to state regulations.

In cases where the purpose of land use is changed with permission from competent state authorities, the land price will be determined according to the new use purpose price list from the date of change, but taking into account specific conditions of each plot to determine an appropriate price.

For large plots of land located deep inside relative to the road, the Tax Office will report to the Tax Bureau, which will coordinate with relevant departments based on the specific location to divide the plot into smaller lots to determine individual lot prices or calculate an average price to match the actual local land price.

For plots of land used for multiple businesses with different land lease rates, the area used for each business should be determined to calculate the land lease fee. If the area cannot be determined for each business, the main business's land lease rate should be applied to the entire plot. If the main business cannot be determined, the highest land lease rate among the businesses should be applied.

For the portion of area returned to the state, the land lease fee is calculated up to the handover date. If the organization has submitted a request to return the land but the state has not yet accepted the handover, then one month after the competent authority receives the request, the organization does not need to pay the land lease fee for this area. The direct collection agency must carefully check each specific case to avoid confusion.

The land lease fee for the first year and the last year is determined as follows:

2. Time of land lease fee calculation: determined according to Article 4 of the Framework Price Regulation for Land Lease Fee for Domestic Organizations Leased Land by the State issued together with Decision No. 1357 TC/QĐ/TCT dated December 30, 1995 of the Minister of Finance. Cases temporarily exempted from paying the land lease fee according to Circular No. 856 LB/ĐC-TC of the Joint General Department of Land Administration - Ministry of Finance, now falling within the category of those required to pay the land lease fee, the time of payment starts from January 1, 1997.

3. Payment of land lease fee:

The land lease fee is paid annually and recorded in the annual production and business cost of the leasing organization. In cases where the fee is paid in one lump sum for multiple years, it is allocated over the number of years and recorded in the corresponding annual production and business costs.

Organizations leasing land before January 1, 1996, which have not yet paid the land lease fee, must make back payments.

If an organization pays the land lease fee for 1997 after having already paid the land tax for 1997, the amount of land tax paid will be deducted from the land lease fee according to this Circular.

Land lease fees collected at a particular location are deposited into the state treasury at that location. Payments are made twice a year, each time depositing 50% of the annual land lease fee amount. The first payment is due no later than June 30, and the second payment is due no later than October 30 of the same year.

The land lease fee is deposited into the state treasury at the National Treasury according to the current budget classification. The treasury agency handles the collection of the land lease fee according to current regulations.

Organizations leasing land have the obligation to pay the land lease fee on time and in full into the National Treasury and follow the guidance of the tax authority directly managing the collection of the land lease fee.

4. Exemption and reduction of land lease fee:

4.1. In cases where organizations leasing land are in the initial phase of basic construction according to approved projects, they only need to pay 50% of the annual land lease fee and record it in the construction cost.

4.2. In cases where the land lease fee is paid in one lump sum for multiple years, the following reductions apply:

Paying every five years, a 10% reduction on the total amount payable.

Payment made periodically over more than five years shall be reduced by 10% for the first five years and an additional 2% for each year starting from the sixth year onwards, calculated on a graduated scale, but the maximum reduction shall not exceed 30% of the land rent payable under the land lease contract.

Example: A business entity B leases a plot of land from the State with an annual land rent of 100 million VND. The enterprise pays the land rent for eight years at once in the first year. The reduction in land rent is calculated as follows:

Reduction for the first five years: 100 million VND x 5 years x 10% = 50 million VND

Reduction for the sixth year: 100 million VND x 1 year x 12% = 12 million VND

Reduction for the seventh year: 100 million VND x 1 year x 14% = 14 million VND

Reduction for the eighth year: 100 million VND x 1 year x 16% = 16 million VND

Total reduction in land rent = 92 million VND

The total land rent paid upfront for eight years is:

(100 million VND/year x 8 years) - 92 million VND = 708 million VND

4.3. For hotels, guesthouses, and hostels operating seasonally; if they fulfill the payment of land rent according to the provisions of this Circular and incur losses, they may be considered for a reduction in land rent. The amount of reduction corresponds to the loss incurred, but the maximum reduction shall not exceed 50% of the land rent payable as stipulated.

The reduction in land rent as provided in this point shall be decided by the Director of the Tax Department after reviewing the annual settlement of the organization.

PART II
ON CONTRIBUTING THE VALUE OF LAND USE RIGHTS OF DOMESTIC ORGANIZATIONS

GRANTED BY THE STATE FOR JOINT VENTURE CAPITAL

1. For economic organizations granted land by the State for agricultural, forestry, aquaculture, and salt production purposes:

1.1. In cases of joint ventures with domestic organizations and individuals:

a) Joint venture while still using the land for agricultural, forestry, aquaculture, and salt production purposes, the value of the land use rights contributed by the party providing the land shall be agreed upon by both parties, but the land price used to determine the value of the land use rights must not be lower than the land price set by the provincial People's Committee within the framework of the land price range established by the Government.

The value of the land use rights contributed to the joint venture shall be recorded as state budget capital allocated to the party contributing the land use rights.

Annually, the party contributing the land use rights to the joint venture must pay the agricultural land use tax as prescribed by law, without having to pay land rent or return on investment.

b) In cases where the purpose of land use changes through joint ventures, the party contributing the land use rights must convert to a land lease form from the State. The value of the land use rights contributed to the joint venture shall be determined based on the land rent paid to the state budget for the new land use purpose corresponding to the joint venture period, calculated as follows:

1.2. In cases of joint ventures with foreign organizations and individuals, such ventures must be approved by the competent authority as stipulated in Decree No. 12/CP dated February 18, 1997, issued by the Government. The party contributing the land use rights must convert to a land lease form from the State. The value of the land use rights contributed to the joint venture shall be determined based on the land rent applicable to foreign investment forms in Vietnam during the period of using the land use rights for joint venture contributions.

2. For organizations granted land that must pay for land use:

2.1. In cases of joint ventures with domestic organizations and individuals, the value of the land use rights contributed to the joint venture shall be agreed upon by both parties but must not be lower than the land use fee payable to the state budget at the time of joint venture contribution.

The party contributing the land use rights to the joint venture must pay the land tax according to the current Law on Land Tax throughout the joint venture period.

2.2. In cases of joint ventures with foreign organizations and individuals, the value of the land use rights contributed to the joint venture shall also be agreed upon by both parties but must not be lower than the value of the land use rights calculated based on the land rent applicable to foreign investment forms during the joint venture period.

3. For organizations leased land by the State:

3.1. In cases of joint ventures with domestic organizations and individuals, the value of the land use rights contributed to the joint venture shall be agreed upon by both parties but must not be lower than the value of the land use rights calculated based on the area of land used for joint venture contribution multiplied by the land rent rate for domestic organizations multiplied by the joint venture period.

3.2. In cases of joint ventures with foreign organizations and individuals, the value of the land use rights contributed to the joint venture shall be agreed upon by both parties but must not be lower than the land rent rate applicable to foreign investment forms in Vietnam during the joint venture period.

3.3. In cases where the organization has prepaid land rent for the entire lease period after the joint venture contribution date, the prepayment amount shall be deducted from the land rent payable. If the party contributing the land use rights had paid the land use fee before September 9, 1996, using non-state budget funds, then during the joint venture period, the party contributing the land use rights can deduct the previously paid land use fee from the annual land rent payable according to Part III of this Circular.

The party contributing the land use rights as stipulated in paragraph b of point 1.1 and point 1.2 Section I, point 2.2 Section 2, and Section 3 Part II must pay land rent to the State according to Section 4 Part II of this Circular.

4. Provisions regarding the refund of land rent for organizations permitted to use the value of land use rights to contribute to joint ventures with domestic and foreign organizations:

4.1. Based on the decision of the competent state agency allowing the use of land value for joint venture capital contribution and upon the request of the joint venture parties, the Debtor-Creditor Council, chaired by the Provincial Department of Finance, shall cooperate with the Provincial Land Administration, Tax Bureau, State Capital Management and Asset Supervision Agency (for state-owned enterprises) and the relevant supervisory authority to examine and determine the total amount of land rent payable as joint venture capital contribution throughout the joint venture period. The party contributing land capital must sign a debt acceptance contract with the Provincial Department of Finance (in accordance with Model No. 2 attached to this Circular) and have a plan to repay the land rent in subsequent years. Organizations are not required to pay capital usage fees for the portion of joint venture capital contributed through land value.

4.2. The time for repaying the land rent shall be implemented from the date when the joint venture begins to generate profits or from the date when there are profits according to the project approved by the competent state agency, but not later than five years from the date of the land lease decision.

4.3. The annual amount of land rent to be repaid shall be calculated as follows:

PROVISIONS ON HANDLING THE CASES OF ORGANIZATIONS

PART III
THAT HAVE PAID LAND USE FEES WITH FUNDS NOT FROM THE STATE BUDGET
AND NOW FALL UNDER THE CATEGORY OF BEING REQUIRED TO RENT LAND

1. Land that is considered to have paid land use fees must be land used by organizations that have fully paid the fees in accordance with regulations and have valid receipts proving it falls under one of the following cases:

When allocated land, they have paid compensation for losses according to Decision No. 186/HĐBT dated May 31, 1990 of the Council of Ministers (now the Government) regarding compensation for agricultural land and forested land when changing their purpose;

Organizations purchasing houses along with receiving land use rights over the land where the house is located, where the seller has paid income tax according to the Income Tax Ordinance for High-Income Individuals;

Paid land use fees into the state budget according to Circular No. 60 TC/TCT dated July 16, 1993 of the Ministry of Finance when allocated land instead of paying the value of construction works;

Purchased state-owned houses or houses from state-owned real estate companies according to Decree No. 61/CP dated July 5, 1994 of the Government on buying and selling residential properties;

Paid land use fees according to Decree No. 89/CP dated August 17, 1994 of the Government on collecting land use fees and land administration fees.

2. Domestic economic organizations allocated land by the state, now falling under the category of land rental as stipulated in Clause 3, Article 1 of the Ordinance amending and supplementing certain provisions of the Ordinance on the rights and obligations of domestic organizations allocated land and leased land by the state dated August 27, 1996, shall pay land rent to the state budget as follows:

a) If they have not paid land use fees or have paid land use fees but the funds come from the state budget, they must pay land rent to the state from November 1, 1996, in accordance with this Circular.

b) In the case where organizations have fully paid land use fees with funds not from the state budget and now fall under the category of being required to rent land (including organizations granted land by the state that must pay land use fees using the value of land use rights for joint venture capital contributions with domestic and foreign organizations), the amount of land use fees already paid shall be deducted from the land rent as follows:

If the amount of land use fees already paid is greater than or equal to the amount of land tax due, the organization will not need to pay land rent during the entire rental period;

If the amount of land use fees already paid is less than the amount of land rent due during the rental period, the land use fees already paid shall be deducted annually until exhausted, after which the organization must continue to pay land rent in accordance with the law.

3. Organizations currently using land derived from legally used residential land of households and individuals, after being permitted by the competent state agency to use such land for offices and factories for production and business purposes, do not need to convert to land rental, and such organizations will continue to pay land tax according to the current Land Tax Ordinance.

Other uses of land by households and individuals shall pay land rent to the state budget from January 1, 1997, in accordance with this Circular.

1. Domestic economic organizations allocated land by the state before September 9, 1996, who declared incorrectly the amount of land use fees paid, shall be punished according to the Administrative Violation Handling Ordinance.

PART IV
VIOLATIONS, REWARDS AND COMPLAINTS

2. Organizations permitted by the competent state agency to use the value of land use rights to contribute to joint ventures with domestic and foreign organizations who intentionally agree on incorrect joint venture capital contribution values and fail to comply with state regulations shall compensate the state for damages.

Organizations permitted to use the value of land use rights to contribute to joint ventures who do not sign a debt acceptance contract for the value of land use rights contributed to joint ventures shall have the Provincial Department of Finance, in conjunction with relevant authorities, based on related documents, set the time and amount of annual repayment and notify the organization to implement.

Organizations currently using land that fall under the category of registering to pay land rent who fail to properly declare and register to pay land rent as guided by this Circular shall have the Director of the Tax Revenue Office base decisions on investigation materials and land use records provided by the People's Committee of communes, wards, towns, or land management agencies, and report to the Provincial Department of Finance, Tax Bureau, and notify the organization to pay land rent.

Organizations that fail to pay land rent or penalties on time shall, in addition to paying the full amount of land rent and penalties as prescribed, also pay a daily penalty of 0.2% on the overdue amount.

Organizations that fail to pay land rent or fines on time shall, in addition to paying the full amount of rent and fines as prescribed, also pay a daily fine equal to 0.2% of the overdue amount for each day of delay.

If the land lessee organization continues to delay and refuse to pay the land rent and fines, the tax authority has the right to request the bank to deduct funds from the organization's bank account to pay the land rent and fines (if any) into the State Treasury.

4. Organizations and individuals who take advantage of their positions or powers to embezzle, misappropriate, or cause the loss of land rent must compensate the State for the full amount of the embezzled, misappropriated, or lost funds, and depending on the severity of the violation, they shall be subject to disciplinary action and criminal prosecution according to the provisions of the law.

5. Individuals who discover violations as stipulated in this Circular shall be rewarded according to the general regulations of the State.

6. The land lessee organization has the right to appeal related issues to the local Tax Bureau; while waiting for resolution, the appellant must pay the full amount of the land rent and fines (if any) within the prescribed time limit. An organization using the value of the land use right to contribute capital to joint ventures has the right to appeal related issues to the local Department of Finance. In case of disagreement with the decision of the resolution authority, the appellant has the right to appeal to the immediate superior authority of the decision-making body. The decision of the Minister of Finance is the final decision.

The agency receiving appeals has the responsibility to resolve them within thirty days from the date of receipt. If the deadline is exceeded without a resolution, the person responsible for resolving the appeal shall bear responsibility for the consequences caused by the delay in handling.

PART V
IMPLEMENTATION

1. Provincial People's Committees directly under the Central Government are responsible for directing the Departments of Finance, Tax Bureaus, State Capital Management Agencies at enterprises, District People's Committees, County People's Committees, City People's Committees under provinces, and organizations currently using land within their jurisdiction to fully implement the contents guided by this Circular.

2. The General Department of State Capital Management at Enterprises is responsible for directing State Capital Management Agencies at enterprises to cooperate with the Departments of Finance to urge, guide, inspect, and ensure that state-owned enterprises within the local area comply with the provisions of this Circular.

3. The General Department of Taxation is responsible for directing Tax Bureaus and Local Tax Offices:

3.1. Within fifteen days from the date of receipt of the declaration form submitted by the land lessee organization sent by the Department of Land Administration, the Local Tax Office shall check and calculate all indicators of the declaration form comprehensively and prepare a Summary Report on Registration of Land Rent Payment to report to the Tax Bureau so that the Tax Bureau can compile and send it to the local Department of Finance. In case the Department of Land Administration has not yet sent the declaration form, the Local Tax Office shall have the responsibility to guide the organization to submit the declaration form to the Local Tax Office (Attachment Model 1 of this Circular).

3.2. For organizations using land in the locality before January 1, 1995, which continue to use the land until now, the Local Tax Office must verify and confirm the data of the indicators in the declaration form to determine the subjects: land lease, land allocation without payment of land use fee, land allocation with payment of land use fee to organize the collection of annual land rent and land tax; determine the land use fee already paid to offset against the land rent for organizations under the land lease category, recover the land use fee if the organization falls under the land allocation with payment of land use fee but has not paid sufficiently according to the prescribed regulations, handle cases where the value of the land use right is used for joint venture capital contributions, and other related issues.

After completing these tasks, the Local Tax Office shall report specifically to the Tax Bureau to compile the results of determining the categories of land allocation without payment of land use fee, land allocation with payment of land use fee, and land lease to send to the Department of Finance and the Department of Land Administration.

Within thirty days after receiving the report from the Tax Bureau, the Department of Land Administration and the Department of Finance shall participate with the Tax Bureau to determine the land users as directed above. If there is no opinion within this period, it will be considered as agreement with the determination result of the Tax Bureau.

Based on the above determination results, the Tax Bureau temporarily directs the annual collection of land rent and must adjust it after receiving the land lease decision from the competent state authority or upon discovering incorrect declarations compared to the actual land use.

Cases of land leasing after January 1, 1995, shall collect land rent according to the decisions of the competent state authorities.

3.3. Organize the collection of land rent from organizations required to pay land rent and implement reductions in land rent according to the provisions of this Circular.

4. Departments of Finance of provinces and cities directly under the Central Government are responsible for: - Taking the lead in coordinating with relevant sectors to inspect and review agreements on the value of land use rights for joint venture capital contributions by organizations allocated land or leased land by the State, based on which to determine the value of land use rights for joint venture capital contributions; serving as the Chairman of the Debt Transfer Council and representing the council to sign the Debt Transfer Contract for land rent payments with organizations using the value of land use rights for joint venture capital contributions;

Based on the report of the local Tax Bureau as stipulated in Point 3.2 Section 3 Part V of this Circular, provide opinions to organize the collection of land rent by the Tax Bureau; coordinate with relevant sectors to submit to the provincial People's Committee for approval of organizations eligible for land lease and land allocation with payment of land use fees as the basis for the tax authority to organize the collection of land rent, property tax, and land use fees.

5. Ward, Commune, and Town People's Committees are responsible for providing the Local Tax Office with information on the land use situation of organizations including private enterprises within their jurisdiction according to Attachment Model 3 of this Circular.

6. Land use that has paid land rent according to this Circular does not need to pay land tax.

This Circular takes effect fifteen days after its signing and replaces Part III - Payment of Land Rent of Joint Circular No. 856 LB/DC-TC dated July 12, 1996, issued by the Ministry of Finance and the General Department of Land Administration, and the guidance on debt transfer and repayment of state capital as land rent of Circular No. 19 TC/TCDN dated June 9, 1992, issued by the Ministry of Finance.

Any previous guidelines that conflict with this Circular are hereby abolished.

During implementation, if any difficulties arise, they are requested to be reported to the Ministry of Finance for study and resolution./.