"Diagnosing" low land price declaration

About 50% of transactions at Notary Offices No. 1 and No. 2 are real estate sales and transfers.

Many plots of land are worth billions of dong on the market, but the price declared in the sales contract is lower than the actual price to reduce the tax payable. Such cases are the cause of loss of state budget revenue.

Root

It is not difficult to find real estate for sale on Google. A 76 m2 plot of land on Ngo Be Street, Hai Tan Ward (Hai Duong City) is currently being offered for sale at VND4.5 billion. In case this plot of land is transferred at the above price and recorded in the sales contract for notarization, the seller will have to pay personal income tax of VND90 million according to current regulations. The buyer must pay a registration fee of VND22.5 million.

In the second case, if applied according to the land price list for the period 2020-2024 issued by the Provincial People's Committee with the land price adjustment coefficient in 2022, this land plot is worth more than 1.8 billion VND (24.2 million VND/m2). If according to this price, the seller only has to pay nearly 37 million VND in personal income tax, the buyer has to pay a registration fee of more than 9 million VND.

Thus, the difference between the actual purchase price and the price applied according to the State price list is more than 2 times. This is the main reason why the buyer and seller agree to record the transfer price in the contract lower than the actual value.

The province currently has 23 notary organizations, including Notary Office No. 1 in Hai Duong City, No. 2 in Chi Linh City and 21 other private notary offices. Counting the two notary offices alone, each unit handles 4,000-6,000 real estate transaction contracts each year. On average, 50% of those transactions are for buying, selling and transferring real estate, equivalent to 2,000-3,000 transaction contracts.

The law does not require buyers and sellers to adhere to market prices or price lists because it completely respects the agreement of the parties. The two parties can even sign a contract to donate any legal plot of land. The problem is that the purchase price is one thing but the declaration is another to reduce the tax payable.

The Chi Linh City Tax Department has returned real estate transfer documents because taxpayers declared prices that were not close to the market price. Ms. Nguyen Thi Thu Thuy, Deputy Head of the Tax Management Team (Chi Linh City Tax Department) informed: "Any real estate transfer document with a price that is too low compared to the market price will be returned to the land use rights registration office to request the taxpayer to adjust or explain. There was a document stating the transfer price of 490 million VND, after adjustment the declared price was nearly 1.3 billion VND".

Many plots of land with assets attached to the land are worth billions of dong on the market, but in the sales contract, the price is much lower.

Solution

Mr. Nguyen Thanh Trung, Deputy Head of the Department of Management of Individual Business Households and Other Revenues (Provincial Tax Department) said: "We have consulted the leaders of the Provincial Tax Department to immediately promote propaganda; coordinate with notary organizations to inform and guide people to declare real estate transfer prices close to actual prices when signing notarized contracts."

The self-awareness of the parties involved in real estate transfer transactions is the second "medicine". Ms. Nguyen Minh Th. in Sao Do Ward (Chi Linh) often transacts 15-20 real estate transfer contracts each year at Notary Office No. 2. "I have never declared a transfer price lower than the actual price because the documents when sent to the tax office will likely be returned, affecting work as well as customers. Besides, when a dispute arises, it will be difficult to handle because there is not enough evidence," said Ms. Th.

However, determining the actual price in real estate transfer activities is not simple. Mr. Hoang Nam Phong, Deputy Head of Notary Office No. 1, said that the real estate sale and purchase contract is a civil contract, so it is difficult to develop a general formula to determine the actual price. "There are many land lots with market prices of billions of dong, but the buyer and seller agree on a much lower price. In reality, it is very difficult to determine which cases are truthfully declared and which cases are falsely declared to avoid taxes," said Mr. Phong.

According to the provisions of the 2013 Land Law, the provincial People's Committee shall develop and submit to the People's Council of the same level for approval before issuing a land price list every five years, and annually issue a land price adjustment coefficient. This price list is often much lower than the actual transfer price. When returning the land transfer documents, the tax authority requires people to re-declare the price close to the market price. "However, there is absolutely no basis for determining the market price. In many cases, it is impossible to base on the adjacent land plot or similar location to determine the price of the transferred land plot. This is like a vicious cycle," said an employee of a real estate transaction office in Hai Duong City.

To completely cure the "disease" of incorrect declaration when transferring real estate, state management agencies need to have a comprehensive solution. It is necessary to clearly define the principle of determining land prices close to market prices for uniform application. Bringing the land price list closer to the common transaction price on the market, with flexible adjustments according to the market, is considered a feasible solution. Building a legal basis for calculating real estate transfer tax to apply clearly and transparently, avoiding negative consequences during the implementation process.

HA KIEN