Circular No. 782-TC/QLCS guiding the implementation of Government Decree No. 85-CP dated December 17, 1996

LETTER

OF THE MINISTRY OF FINANCE NUMBER 782-T/C/QLCS ON MARCH 11, 1997 GUIDELINES FOR IMPLEMENTING DECREE NUMBER 85-CP
ISSUED ON DECEMBER 17, 1996 BY THE GOVERNMENT

Respected: Prime Minister

Pursuant to the directive of the Prime Minister in Circular No. 57-KTN dated January 3, 1997 of the Government Office on guiding the implementation of Decree No. 85-CP; the Ministry of Finance is currently drafting a Circular to guide this Decree. However, the guidance for domestic economic organizations that have been assigned land by the state and now fall under the category of entities eligible for land leasing as stipulated in Clause 3, Article 1 of the Ordinance amended and supplemented on August 27, 1996, if they have paid land use fees from sources other than the state budget, shall be deducted from their land lease payments (as provided in Clause 2, Article 31 of Decree No. 85-CP) encounters difficulties with the following contents:

First: What benchmark price should be used to accurately determine the amount of land use fee already paid as the basis for deduction from the land lease payment?

This is a complex issue because the land use fees were paid according to various systems at different times and the amounts paid vary widely, including: payment 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 converted to other purposes; payment according to Circular No. 60-TC/TCT dated July 16, 1993 of the Ministry of Finance when land was allocated instead of paying the value of construction works; payment in cases where organizations purchase houses along with the right to use the land beneath them, which are subject to high-income tax under the Income Tax Ordinance; payment of 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, etc. Therefore, determining a uniform benchmark for the land use fees already paid to deduct from the land lease payments is very difficult and unlikely to be feasible. For example: Organizations pay compensation for agricultural land and forested land when converted to other uses according to Decision No. 186-HĐBT dated September 30, 1990 of the Council of Ministers (now the Government) based on the rice price at the time of payment, which was very low during the years 1990-1993. If this amount is now used to deduct from annual land lease payments, it would cause significant loss to the organization using the land and they would find it hard to accept. But if it is calculated according to Decree No. 89/CP dated August 17, 1994 of the Government, it would be too high, causing loss to the state and creating many practical inconsistencies; similar situations also exist in other cases.

Second: How should deductions from land lease payments be handled when the land use fee already paid exceeds the total amount of land lease payments over the entire lease period?

In cases where organizations have fully paid the land use fees according to Decree No. 89-CP, the amount of land use fees paid is often very large, and if deducted from annual land lease payments, it would take hundreds of years to exhaust, but the maximum lease term is only 70 years. Thus, how to handle the excess land use fees after deduction from the land lease payments is very complicated. Additionally, during this period, the state does not collect anything (currently, these organizations are subject to land tax), and there is no mechanism to manage the use of land by these organizations.

Third: How should deductions from land lease payments be handled and which level of budget should bear the cost?

Land use fees paid in previous years were allocated to various levels of budgets; since 1995, they have been exclusively allocated to local budgets. Therefore, how to refund the excess land use fees (after deduction from the land lease payments) is a question for which budget level to bear, which is very complex.

To address the above difficulties, the Ministry of Finance proposes that the Prime Minister allow the handling according to the following solutions:

- In cases where organizations received the right to use land from households or individuals within the period from October 15, 1993 to January 1, 1995, in accordance with Article 75 of the Land Law 1993; in cases where organizations paid land use fees before January 1, 1995 from non-state budget sources, they temporarily do not need to pay land lease fees, but continue to pay land tax according to the current Property Tax Ordinance until the end of the lease period;

- For other cases, the Ministry of Finance will handle according to Clause 2, Article 31 of Decree No. 85/CP dated December 17, 1996 of the Government.

The provisions above are consistent with the Land Law and within the scope of the Government's authority.

The Ministry of Finance respectfully requests the Prime Minister to consider and decide.