New Law on Non-agricultural Land Use Tax

On 17 June 2010, the National Assembly in Vietnam passed the Law No. 48/2010/QH12 on non-agricultural land use tax ("Law 48"). Law 48 shall take effect as from 1 January 2012 and supersede the 1992 Ordinance on house and land tax and the Ordinance amending and supplementing a number of articles of the 1994 Ordinance on house and land tax ("Ordinances").

The key provisions in Law 48 are set out below:

1. The provision on "non-taxable objects" will be expanded to include four new objects:
   • Land being rivers, streams, canals, drains or creeks, and specialised use water surfaces
   • Land on which a building being a traditional communal house, temple, shrine, pagoda or worship hall is built
   • Land on which headquarters and administrative/professional offices of State bodies are built, and land used for national security and defence purposes which are cases exempted from tax under the Ordinances
   • Other non-agricultural land as stipulated in the law
     
     
2. Taxpayers
   • Under the Ordinances, foreign invested enterprises that rent land from the State or that receive land use right as capital contribution from Vietnamese parties shall not have to pay land tax. Law 48 requires these foreign invested enterprises to pay non-agricultural land use tax.
   • Law 48 provides that tax payment obligations can be an obligation of a lessee or a lessor as arranged in the lease agreement signed by the lessee and the lessor.
   • Law 48 provides that where a number of people have joint use right to one block of land, the taxpayer shall be the legal representative of the joint holders of the use right to such block of land.
     
     
3. Law 48 introduces new formula and tax rates for calculation of land use tax. Further, Law 48 provides clear provisions for calculation of tax for (i) residential land on which a multi-floor apartment building is constructed, and (ii) underground building or works.
   
   
4. Law 48 also provides for cases of tax exemption with a view to promoting investment and developing the national economy. For example, tax exemption will apply to land of investment projects in sectors in which investment is specially encouraged, land of investment projects in areas with specially difficult socio-economic conditions, land of investment projects in sectors in which investment is encouraged in areas with difficult socio-economic conditions, and land of establishments conducting socialisation activities in the educational, occupational medical health, cultural, sports or environmental sectors.
   
   
5. Law 48 provides for one rate of tax reduction (50%) and a detailed list of tax reduction cases. In accordance with the tax reduction principles, any taxpayer falling within two or more cases of entitlement to tax reduction shall be exempted for tax.

For inquiries related to this Legal Update, please contact:

David Lim (david.lim@mayerbrown.com)

Hong Than (hong.than@mayerbrown.com)

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