While land pricing remains fraught with issues and has dragged on for years, real estate businesses are concerned about the proposed regulation in the draft amendment to Decree 103, which imposes an additional 5.4 percent per year on unpaid land-use fees. 

The Ministry of Finance (MOF) is finalizing a draft decree to amend and supplement certain provisions of Decree 103/2024 regarding land use fees and land rental fees. In its second draft, the decree proposes changes to transitional provisions related to land use fees.

For land-allocation decisions and changing of land use purposes before the Land Law 2024 took effect (with no decision on calculating land use fees), the calculation and collection of land use fees will follow Clause 2, Article 257 of the Land Law.

The additional land use fees that land users must pay for the period when fees are not yet calculated will be determined at a rate of 5.4 percent per year of the unpaid amounts.

This requirement poses challenges for many real estate businesses, especially those that were allocated land and began projects years ago but still have not received notifications to pay land use fees.

A representative of T.T.P Company shared that in 2002, the company was allocated 16,200 sq m of land in Thu Duc Ward, HCM City, for a residential project, of which nearly 7,400 sq m was residential land. The company paid the land use fees for this residential land in 2003.

Later, the project’s goal was adjusted from building a residential area to constructing an apartment complex. The project was completed and handed over to residents in 2021, but to date, the authorities have not issued any notification about additional land use fees.

“After more than 30 bidding rounds, the HCM City Department of Agriculture and Environment still hasn’t selected a unit to appraise the land price for the project. If we have to pay an additional 5.4 percent per year for over a decade, the company cannot bear it,” he said.

Hong Dat Company is also grappling with land use fee issues for its Hong Dat Residential Area project in Duc Lap Commune, Tay Ninh Province.

In 2018, the company was permitted by the former Long An Province to convert 58 hectares of industrial land into residential and commercial-service land to develop a residential project, of which 25 hectares was rural land (subject to land use fees).

After transferring thousands of land plots to customers, it was not until 2020 that the authorities approved the unit price for calculating the project’s land use fees. However, deeming the unit price unreasonable, the company requested a reconsideration.

To date, the authorities have not finalized the land use fees. Hong Dat estimated that the land use fees could amount to VND300 billion. If an additional 5.4 percent per year is applied, the additional cost would exceed VND110 billion for the last seven years.

In fact, most real estate businesses want to promptly fulfill their financial obligations regarding land, including land use fee payments, to optimize input costs. The delays in land price appraisals are the main reason for prolonged procedures, and in many cases, the fault does not lie with the businesses.

Unreasonable fees

Regarding the requirement to pay an additional 5.4 percent per year for the period when land use fees were not calculated, Le Huu Nghia, Vice Chair of the HCM City Real Estate Association, said this was unreasonable.

The 5.4 percent per year surcharge is understood as the “interest” or a “late payment penalty” applied to the period when businesses have not fulfilled their financial obligations for land use. But the late payments must be blamed on local authorities (they don’t release decisions on the land fees businesses have to pay), not businesses. So, they must not bear the penalty, he said.

Businesses do want to fulfill financial obligations, because they won’t be able to proceed and implement their projects, including opening projects for sale.

Late payment of land use feel also makes it impossible to mobilize capital, and increases financial costs and misses business opportunities.

Le Hoang Chau, Chair of the HCM City Real Estate Association, affirmed that the government has full authority to revise Articles 50 and 51 without waiting for amendments to the Land Law.

Anh Phuong