HCM City Tax Department: severely prevent tax loss from real estate

Many sale dossiers of real estate were declared low price for tax evasion. Photo: T.H

Decline low price for reducing taxes

HCM City Tax Department said that, in recent times, the unit discovered the situation of declaring low price in order to reduce personal income tax (PIT) and registration fee in the trading activities and transferring housing prices. According to Mr. Nguyen Nam Binh, Deputy Director of Ho Chi Minh City Tax Department, in fact, there was a case of declaring transfer price quite relatively inappropriate with the actual market price (three times higher than the price list). However, there were many cases declaring transfer price not consistent with actual market price, even there were many dossiers with declared price on the transfer contract lower than the minimum price or higher price than the price list in order to reduce PIT and registration fee. The actual market price is 4-6 times higher than the price list issued by HCMC People's Committee.

From the perspective of the district level, Mr. Luu Trung Hoa, Vice Chairman of the People's Committee of District I, said that dealing with the situation of people evading taxes from the transfer of real estate in the form of declaring price much lower than the actual price, the People's Committee of District 1 has invited the Department of Justice to exchange solutions to manage the purchase contracts for renting houses and land, in order to avoid loss of revenue.

In fact, the HCM City Tax Department said that if the housing price list issued by the People's Committee of Ho Chi Minh City increased only 2 times (applied separately for calculating the registration fee and personal income tax), the annual personal income tax and registration fee in the activities of transferring land and housing in Ho Chi Minh City would increase by 2,000 billion VND per year.

In order to prevent loss of revenue and at the same time harmonize the interests of the State and people in the performance of financial obligations related to PIT and registration fee in transferring land and sale of house activities, there should be a roadmap for preventing loss of revenue each year. HCM City Tax Department suggested the People’s Committee of Ho Chi Minh City to consider or propose to the Government and the Ministry of Finance to allow Ho Chi Minh City to issue a separate housing price list in order to apply the minimum price for calculating PIT, registration fee in the trading and transferring of land.

Preventing loss of revenue from tax debt

Mr. Nguyen Nam Binh said that, as of 31/10/2018, the total tax debt in the Ho Chi Minh City Tax Department is more than 23,000 billion VND, in that recoverable debt is more than 11,433 billion VND; processing debt is 544 billion VND, debt under complaint is 916 billion VND and more than 10,000 billion VND of debt is in the form of irrecoverable debts. Furthermore, debts are mainly focused on taxes such as: VAT is over 6,000 billion VND, EIT is nearly 3,000 billion VND, ground rent is more than 1,600 billion VND and land use fees is more than 1,000 billion VND.

Remarkably, there are many cases of owing large amount of tax debt. Ho Chi Minh City Tax Department said that with only a group of 11 enterprises, they generated tax debts in 2018 reaching of more than 2.800 billion VND. In that, many enterprises have owed debts of hundreds of billions. For example, the case of X.V.O. company owing debt of 534 billion VND, in that this company’s new debt was mainly generated due to environmental protection tax of over 485 billion VND. According to Ho Chi Minh City Tax Department, this is a turnover debt which is likely to be collected. Hence, Ho Chi Minh City Tax Department is trying to collect. Moreover, there are also huge tax liabilities that fall in to the case of J. Airlines joint stock company owing debt of 325 billion VND from 2013 and is waiting for handling, but so far there are no official conclusions by the competent authority on handling this amount of debt...

Among the enterprises owing large amount of debts, most are arisen from the real estate sector, such as: ground rent, EIT, VAT ... Top of this list is the case of Ben Thanh S.T. Company owing debt of 350 billion VND, in that this debt was generated mainly from land use fees in eight months by 185 billion VND. This amount of debt is proposed by the State Audit of Vietnam to collect. The enterprise are requesting and waiting for the approval of the HCM City People's Committee to increase capital. Ho Chi Minh City Tax Department is sticking to recover this debt. On the other hand, T-M Co., Ltd, owes 182 billion VND of ground rents and they made a late payment, so HCM City Tax Department has implemented tax enforcement by announcing that the bill for this enterprise is no longer valid. Similarly, T.A.H. Company owes debt of 161 billion VND. In that, the debt arising in the eight months of 2018 is 80 billion VND and owing fines for late payment is 80 billion VND.

According to the leader of the HCM City Tax Department, preventing loss of revenue from tax debt, especially from the real estate sector, is a problem for tax authorities. In the first nine months of 2018, the HCMC Tax Department issued nearly 2.9 million tax debt notices; Issued over 25,000 tax enforcement decisions, with a total amount of tax of over 10,300 billion VND; publicized on mass media more than 3,800 turns of taxpayers who made late tax payment due to intentionally delaying to pay tax debt. The total money collected via tax evasion measures in the past nine months were more than 9,500 billion VND.