Circular No. 861-TC/TCT regarding the handling of certain issues in the implementation of the Law on Agricultural Land Tax

LETTER

OF THE MINISTRY OF FINANCE NUMBER 861-TC/TCT OF APRIL 13, 1994
ON HANDLING CERTAIN ISSUES IN IMPLEMENTING
THE LAW ON LAND USE TAX FOR AGRICULTURAL LAND.

RESPECTFULLY SUBMITTED TO: PEOPLE'S COMMITTEES OF PROVINCES AND MUNICIPALITIES DIRECTLY UNDER THE CENTRAL GOVERNMENT

Pursuant to the Law on Land Use Tax for Agricultural Land; Pursuant to Decree No. 73/CP and Decree No. 74/CP dated October 25, 1993 of the Government detailing the implementation of the Law on Land Use Tax for Agricultural Land; the Ministry of Finance hereby guides certain issues as follows:

I. DETERMINATION OF AREA SUBJECT TO TAX

The principle is that the area subject to tax for each household must be based on the declaration made by the agricultural households. Data from relevant agencies shall play a role in checking the declarations of each household and the taxable area of each administrative unit at various levels. Specific issues are handled as follows:

1. All households using land for agricultural production, whether subject to tax or exempted from land use tax, must declare according to the guidance of the tax authority.

2. In places where land allocation has not yet been implemented pursuant to Decree No. 64/CP dated September 27, 1993 of the Government, normal procedures continue. The determination of the taxable area is based entirely on the declaration of the land user. After land allocation is completed, adjustments to the tax records will be made.

3. In places where measurements are not accurate or there is a discrepancy between the taxable area and the most recent measurement by the land administration department, taxation shall be based on the self-declaration of the land user. By the end of 1995, verification shall be conducted, and if discrepancies are found, adjustments to the tax records will be made.

4. Areas of agricultural land that are actually unused, areas with rock outcrops (rocks occupying the area) within individual plots that cannot be cultivated, and similar cases shall be excluded from the taxable area.

5. Areas with water bodies used for aquaculture and also containing planted forests shall be classified into two types depending on local circumstances: land with water bodies for aquaculture and forest land, to apply the appropriate tax calculation method. If it is not possible to distinguish, the land shall be managed for tax purposes according to its primary use.

6. Land managed by agricultural and forestry enterprises, social organizations, or state agencies that have since been dissolved or for other reasons are no longer managed shall be rechecked against actual conditions, based on previous land allocation records, if any, and actual conditions to determine new users, and then declare and calculate taxes accordingly.

7. Land for perennial crops shall be taxed based on the actual area used without applying the method of estimating the area.

8. For encroachment land, tax records shall be established at the commune where the land is located. Depending on local circumstances, the Tax Revenue Office may assign the commune where the land is located or the commune where the user resides to collect taxes. In cases where the encroacher resides in another district or province, after establishing the tax record, the tax office where the land is located shall notify the tax office where the user resides to coordinate in collecting taxes.

All land subject to land use tax for agricultural purposes must be declared and taxed, except for land exempted under Clause 1, Article 14, Point 1, Clause 1, Article 16, and newly reclaimed land exempted during the exemption period, but separate records must be kept for these types of land.

II. REGARDING CLASSIFICATION OF LAND FOR TAX PURPOSES

Classification of land for tax purposes must be based on five factors: soil quality, location, topography, climate, and irrigation conditions. At the same time, the average yield achieved under normal farming conditions with medium-level cultivation intensity in the locality shall be used to verify the classification results based on the five factors.

Localities that classify land by equating the 1993 agricultural land use tax category to the new category, even with slight adjustments and even if accepted by the people, must be directed to follow the provisions of the Law and subordinate legal documents.

Localities that classify land by analyzing and evaluating the five factors in excessive detail are unnecessary and must revert to the correct method prescribed by the Law and subordinate legal documents.

Classification of land must pay attention to:

- Reasonableness among districts and communes within the locality.

- Reasonableness among bordering districts and provinces.

The Ministry of Finance, the General Department of Land Management (now the General Department of Land Administration), and the Ministry of Agriculture and Food Industry do not provide land category standards down to the district level.

After consulting the General Department of Land Management and the Ministry of Agriculture and Food Industry, the Ministry of Finance provides additional guidance on land categories and their classification as follows:

Classification of land for tax purposes must primarily rely on soil quality and combine this with the other factors of location, topography, climate, and irrigation conditions. At the same time, yields shall be used for verification. Certain specific cases are as follows:

1. Soil quality is evaluated by fertility: high, medium, low, poor. The degree of soil fertility is a composite measure linked to the main crop.

2. If the land does not have high fertility, even if the total score of the five factors equals the score of Category 1, the yield of the crop grown must be compared with the yield of Category 1 land with high fertility to classify appropriately.

3. Poor fertility land requires improvement before it can be cultivated. Land with the same poor fertility must be classified based on the points of the five factors and the number of harvests possible in a year (for annual crops) and the actual yield achieved, to match the yield standard of each category used for reference when classifying land for tax purposes as stipulated in Decree No. 73/CP dated October 25, 1993 of the Government. The actual yield of land classified into a category must not be lower than the reference yield of that category.

4. Land with different fertility but the same score of the five factors shall be classified into higher categories for higher fertility land and lower categories for lower fertility land.

5. Due to topographical features and natural conditions, land may produce high yields in some years and low yields in others. The lowest yield year shall be used to verify the classification of land for tax purposes.

6. For land producing two crops, but one of which is unstable, only the yield of the stable crop shall be considered for classification verification.

7. For land that produces two crops but has one minor crop with a yield or value of the harvest not reaching 70% of the main crop, only the productivity of the main crop shall be considered for classification purposes.

8. Land for shifting cultivation, forestry, and hilly areas in a locality should be classified into no more than two land categories. It is not allowed to set a uniform tax rate between two categories.

9. For land that alternates between annual and perennial crops, it shall be classified based on its profitability (yield or value of the yield) and local conditions according to the category of the main crop planted (whether it is mainly annual or perennial crops).

10. For land planted with various perennial crops (industrial trees, fruit trees), classification must primarily depend on the assessment of five factors related to the main crop of the area, while also evaluating the overall profitability of the land (average annual yield or value of the yield) compared to other areas within the locality to appropriately classify the land.

Pursuant to Decree No. 73/CP dated October 25, 1993 of the Government; based on the guidance provided in Circular No. 92-TT/LB dated November 10, 1993 of the Ministry of Finance - General Department of Land Management - Ministry of Agriculture and Food Industry and the guidance in this circular, the People's Committees of provinces and centrally governed cities shall handle specific cases to classify land for taxation purposes in their respective localities.

III.  SOME OTHER ISSUES

1. Bare mountainous land used for agricultural and forestry production is exempt from tax according to Clause 1, Article 14 of Decree No. 74/CP dated October 25, 1993 of the Government, which applies to bare mountainous land existing from January 1, 1994 onwards.

2. The exemption of construction period taxes for perennial crops as stipulated in Clauses 2 and 3, Article 14 of Decree No. 74/CP dated October 25, 1993 of the Government shall apply to crops planted both before and after January 1, 1994, if they are still within the construction period, they will continue to be exempted. If the construction period has ended but they are still within the initial years of harvest when exemptions apply, such exemptions will be implemented.

In special cases where agricultural taxes were collected in 1993 and some previous years, now applying the new Tax Law, if the period of exemption continues from January 1, 1994, then the exemption will be applied (the exemption period includes the time when agricultural taxes were previously collected), but no refund will be made for households that paid agricultural taxes in previous years.

3. Regarding the establishment of tax records by crop: Land harvested in a particular crop shall have its tax record established and the tax recorded for that crop. For land with two or more crops, the tax recorded for each crop shall be divided based on local production realities. In places where it is not feasible to establish tax records by crop, records shall be established annually. As for tax collection: For single-crop land, tax shall be collected at the time the tax record is established. For land with two or more crops, taxes shall be collected for the two main crops, with the tax rate for each crop being equal to the recorded tax rate for that crop (except for reductions or exemptions if applicable).

4. The additional exemption period after the construction period for perennial crops planted through grafting methods shall be determined by the People's Committees of provinces and centrally governed cities in accordance with the type of crop in the locality and reasonably applied to other crops. However, the maximum duration shall not exceed the period specified in Clauses 2 and 3, Article 14 of Decree No. 74/CP dated October 25, 1993 of the Government.

5. For forest land planted with timber trees and other perennial crops harvested once, if management cannot be conducted at the source, taxes shall be levied during circulation with a tax rate of 4% of the value of the harvested product for the producer. The tax price shall be based on the actual selling price. In cases where the taxpayer declares inaccurately, the tax shall be levied based on the price decided by the People's Committee of the province or centrally governed city. In special cases where taxes cannot be levied on the producer, taxes shall be levied on the buyer, and the turnover tax regulations shall be applied when they sell these forest products according to the Turnover Tax Law.

6. Local Tax Departments may allocate 10% of the amount calculated based on the recorded tax for the increased taxable area harvested in 1994 compared to 1993 to ensure the inspection of the area, the establishment of tax records, and other costs associated with the additional area included in the tax records. The allocation shall be taken from the tax revenue from the land use tax for agriculture in 1994, funded by the local budget after confirmation by the Advisory Council (or Steering Committee) for the land use tax for agriculture of the province or centrally governed city.

The Ministry of Finance requests guidance on the above issues. Reductions and exemptions of taxes will be guided by a separate document.

During implementation, any difficulties encountered should be promptly reported to the Ministry of Finance for timely resolution.