THE MINISTRY OF FINANCE
---------
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
----------
No. 141/2007/TT-BTC
Hanoi, November 30, 2007
 
CIRCULAR
GUIDING AMENDMENTS AND SUPPLEMENTS TO CIRCULAR No. 120/2005/TT-BTC OF DECEMBER 30, 2005, WHICH GUIDES THE IMPLEMENTATION OF THE GOVERNMENTS DECREE No. 142/2005/ND-CP OF NOVEMBER 14, 2005, ON COLLECTION OF LAND RENTS AND WATER SURFACE RENTS
Pursuant to the Land Law;
Pursuant to the Decree No. 77/2003/ND-CP of Government dated July 1, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
Pursuant to the Decree No. 181/2004/ND-CP of Government dated October 29, 2004, on the implementation of the Land Law (below referred to as Decree No. 181/2004/ND-CP);
Pursuant to the Decree No. 197/2004/ND-CP of Government dated December 3, 2004, on compensation, support and resettlement upon land recovery by the State (below referred to as Decree No. 197/2004/ND-CP);
Pursuant to the Decree No. 142/2005/ND-CP of Government dated November 14, 2005, on collection of land rents and water surface rents (below referred to as Decree No. 142/2005/ND-CP);
Pursuant to the Decree No. 17/2006/ND-CP of Government dated January 27, 2006, amending and supplementing a number of articles of the decrees guiding the implementation of the Land Law and Decree No. 187/2004/ND-CP on transformation of state companies into joint-stock companies (below referred to as Decree No. 17/2006/ND-CP);
The Ministry of Finance provides guidance on amendments and supplements to Circular No. 120/2005/TT-BTC of December 30, 2005, providing the guidelines for the implementation of the Decree No. 142/2005/ND-CP of Government dated November 14, 2005, on the collection of land rents and water surface rents (below referred to as Circular No. 120/2005/TT-BTC) as follows:
I. To supplement Point 1, Section II, Part A as follows:
1- To add to the end of Item 1.4 the following:
Economic organizations that are leased land by the State under Items 1.3 and 1.4, Point 1 of this Section include also economic organizations set up as joint ventures between domestic and foreign investors under Article 8 of the Governments Decree No. 108/2006/ND-CP of September 22, 2006, detailing and guiding the implementation of a number of articles of the Investment Law.
2.- To add the following item (item 1.7):
1.7- Since July 1, 2007, households and individuals that are transferred the rights to use agricultural land in the form of transfer, donation of land use rights, handling of debts as agreed in contracts on mortgage or guarantee with land use rights; and use such land for agricultural production, forestry, aquaculture or salt making, shall shift to leasing land areas which are in excess of the limit prescribed in the National Assembly Standing Committees Resolution No. 1126/2007/NQ-UBTVQH11 of June 21, 2007, prescribing the limits on transferred agricultural land use rights of households and individuals for use for agricultural purposes.
II. To replace Section IV of Part B with the following:
IV- Determination of land rents and water surface rents under Article 7 of Decree No. 142/2005/ND-CP: several provisions are guided as follows:
1- Clause 1 is guided as follows:
1.1- The annually collected land or water surface rent is equal to the rented area multiplied by the land or water surface rent rate; the rented area is determined under the land lease decision (or land lease contract) of a competent state agency. In case the actually used area is different from the area stated in the land lease decision (or land lease contract) of the competent state agency, the rent shall be calculated according to the actually used area.
In case part of the land allocated without the collection of land use levies is used for production, business or service purposes, the land user shall pay a land rent for the land area actually used for production, business or service activities.
1.2- In case the person who is allocated land without having to pay land use levies uses the allocated land for both political tasks and production, business or service activities (the land area used for production, business or service activities cannot be separated), the land rent payable for the land area used for production, business or service activities shall be calculated according to the apportionment method.
The land rent used as a basis for apportionment is the annual land rent payable for the allocated land area and the rent rate decided by a competent agency/person under Article 6 of Decree No. 142/2005/ND-CP. The apportionment norm is turnover from goods or services sold in the year and the single-price (business price) principle must be complied with. On the basis of the price ratio of one or two services accounting for the highest share in total turnover of the unit, the tax authority and the unit shall reach agreement on the principle of ensuring the units obligation to the state budget and avoiding overcollection. Following is an example of the land rent calculation:
Example: A guest house of a provincial-level Peoples Committee performs both political tasks and provides services of lodging, rent of meeting halls, vehicle keeping, etc. The annual land rent payable for the guest houses land area is VND 25 million.
- Turnover from the rent of rooms for commercial purposes is VND 300 million
- Turnover from the rent of rooms for internal use is VND 100 million
- Turnover from other business activities is VND 150 million
- Turnover from other internal activities is VND 50 million.
On the basis of the total turnover from rented rooms, the annual unit price of a room rent for commercial purposes is VND 150,000/bed/night and that of a room rent for internal use is VND 100,000/bed/night. So, the ratio between the commercial and internal prices is 1.5. The total turnover converted (for calculating payable land rent) is as follows:
300 million + (100 million x 1.5) + 150 million + (50 million x 1.5) = 675 million
The payable land rent = (25 million : 675 million) x (300 million + 150 million) = 12.150 million
Annually, the tax authority shall base itself on the previous years financial statement to reach agreement with the unit on the land rent amount temporarily payable for the current year. In the subsequent year, on the basis of the previous years financial statement, the tax authority shall reach agreement with the unit on the previous years payable land rent and make adjustment in the notice of the years payable land rent.
2- Clause 2 is guided as follows:
For oil and gas exploitation projects in Vietnams territorial waters and continental shelf, the water (sea) surface rent shall be determined as follows:
- The area used for calculating the water (sea) surface rent is the development area under the projects development plan approved by the Prime Minister..
- The applicable water (sea) surface rent rate is the highest rate in the water surface rent bracket prescribed in Clauses 1 and 2, Article 5 of Decree No. 142/2005/ND-CP.
- The starting time for calculating and collecting water (sea) surface rents is the time when the oil and gas exploitation projects development plan takes effect after being approved by the Prime Minister.
3- The deduction of sums of money already paid as land compensations and supports from the payable land rent under Clause 3, Article 7 of Decree No. 142/2005/ND-CP (amended and supplemented under Clause 1, Article 4 of Decree No. 17/2006/ND-CP) is only applicable to the land area subject to payment of land rent and is guided as follows:
3.1- Organizations and individuals that are leased land by the State and have advanced money for land compensations and supports under Decree No. 197/2004/ND-CP and paid land rents under Decree No. 142/2005/ND-CP (applicable to the land lease duration from January 1, 2006, on) are entitled to deduct such amounts (which have valid documents and were paid according to plans approved by competent authorities) from payable land rents; the deducted amounts must not exceed the payable land rent for the whole land lease duration stated in the land lease decisions or contracts (excluding the extended land lease duration).
In case the persons that are leased land by the State have directly reached agreement on the land and asset compensation and support levels with the persons with recovered land (not through the council for compensation, support and resettlement prescribed in Article 39 of Decree No. 197/2004/ND-CP), the deductible land compensation and support money shall be calculated based on the land price based on the use purpose of the allocated land or the land with recognized use rights, which is promulgated by provincial-level Peoples Committees and applied at the time the land recovery decisions of competent state agencies take effect.
In case organizations and individuals that are leased land by the State and pay annual land rents have paid land compensation and support money under Decree No. 197/2004/ND-CP paid in 2005 land rents under the Finance Ministers Decision No. 189/2000/QD-BTC of November 24, 2000, promulgating the Regulation on land rents, water surface rents and sea surface rents applicable to forms of investment in Vietnam and the Ministry of Finances Circular No. 35/2001/TT-BTC of May 25, 2001, guiding the payment of land rents, contribution of the value of land use rights of domestic organizations, households or individuals as capital to joint ventures, they are not entitled to deduct the paid land compensation and support money against the payable land rent. From January 1, 2006 on, if they continue leasing land and paying land rents under Decree No. 142/2005/ND-CP, they are entitled to deduct the land compensation and support money (not yet apportioned into production and business expenses) from the payable land rents according to the above provisions.
On the basis of land compensation and support plans approved by competent agencies and other vouchers and documents on the paid land compensation and support money, land lessees shall make reports on finalization of land compensation and support (containing general and detailed figures) showing the data according to the approved plan, the actually paid amount, the amount not yet apportioned into production and business expenses (for projects having paid land compensation and support money under Decree No. 197/2004/ND-CP and the 2005 land rents according to regulations effective before the effective date of Decree No. 142/2005/ND-CP); send to provincial-level Finance Departments (for compensation plans approved by provincial-level Peoples Committees), district-level Peoples Committees (for compensation plans approved by district-level Peoples Committees) for certification. The tax authorities shall check the accuracy and consistency of the data in the certified finalization reports (if necessary) and effect the deduction under the provisions of this Circular and file 01 original dossier of the land lessees land rent calculation dossier.
3.2- On the basis of the deductible land compensation and support money already determined under Item 3.1 of this Point, the deduction of the land compensation and support money from the payable land rents is effected as follows:
a/ In case of payment of land rent in a lump sum for the whole land lease period, the land compensation and support money shall be deducted from the land rent for the whole land lease period; if the land rent for the whole lease period is bigger than the land compensation and support money, the land lessee shall pay this difference in a lump sum into the state budget immediately in the first year of paying land rent.
b/ In case of payment of annual land rents, on the basis of the land compensation and support money deductible from the payable land rent and the payable annual land rent, the tax authority shall make incremental deductions in the notified payable annual land rents, which must not exceed the payable land rents as prescribed in Clause 1, Article 4 of Decree No. 17/2006/ND-CP. The land lessee shall further pay the land rents after the land compensation and support money has been fully deducted (for the remaining land lease duration, if any).
In cases in which the number of years (n) during which the land compensation and support money is allowed to be deducted from the payable land rent (no land rent is paid) under the guidance at Item b, Point 2, Section IV, Part B of Circular No. 120/2005/TT-BTC has been determined, incremental deduction must be effected now under the guidance of this Circular.
3.3- In cases in which no land rent is required to be paid or projects are exempted from paying land or water surface rents specified in Clauses 1 and 2, Article 14 of Decree No. 142/2005/ND-CP, persons who are leased land by the State shall pay compensations and supports to persons with recovered land in accordance with the law on compensation, support and resettlement; expenses for compensation, support and resettlement shall be accounted as projects investment expenses.
3.4- For projects exempted from paying land or water surface rents under Clauses 3 and 4, Article 14 of Decree No. 142/2005/ND-CP, the land compensation and support money may be deducted from the land rent payable immediately at the end of the land or water surface rent exemption duration.
Click Download to see full text