Extra land use fees should be eliminated soon

Many experts believe that while amending the 2024 Land Law, the regulation on the amount of money that land users must pay in addition for a period of time not yet estimated for land usage fees and land rent should be removed.

Suffocating with land use fees

For example, Lotte Properties HCMC Co., Ltd., the developer of the smart complex project (Thu Thiem Eco Smart City) in area 2a, Thu Thiem New Urban Area, sent a document to the Ho Chi Minh City People's Committee declaring the termination of the contract to carry out the aforesaid project. According to the leader of this firm, despite the fact that the land was given in 2017, the land value was finalized on June 30, 2025, with the use fees totaling VND 16,190 billion. This financial obligation accounts for 80% of the project's total investment capital, which is projected to be VND 20,100 billion in 2017.

Furthermore, the project was delayed owing to the impact of the Government's inspection procedure for violations at Thu Thiem New Urban Area, while Lotte Properties HCMC Co., Ltd. had to pay an extra 5.4% land use fee, raising the overall investment cost of the project.

Not only Lotte, but also the Empire City Joint Venture Company Limited, the developer of the Thu Thiem Observation Tower Complex Project (Empire City), earlier sent a document to the Ho Chi Minh City People's Committee demanding that the project's extra fiscal obligations be re-determined. Previously, this company fulfilled its financial obligations by paying about VND 3,581 billion in early 2017. At the same time, Decision No. 927 of the Ho Chi Minh City People's Committee at the time stated unequivocally that the project developer is not required to pay additional financial obligations when changing the form of land use from a one-time land lease to land allocation with use fee payment.

However, from 2019 until the present, the Empire City project has been halted owing to a failure to fully address extra financial obligations at the request of the Government Inspectorate of Vietnam. Notably, the government authorities have suggested an extra land fee for this project of up to VND 8,819 billion, a 246% increase over the land use fees paid when transitioning from a one-time land lease to land allocation with land use fees.

Besides the two typical cases above, according to Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA), Ho Chi Minh City currently has about 100 real estate and commercial housing projects "waiting" for competent authorities to notify land use fees and extra land use fees (if any), and of course there is also an additional amount of money that land users must pay for the time not yet calculated for land use fees and land rent, of which Novaland has 13 projects and Hung Thinh Land has 8 projects.

Regulations need to be amended soon

At a recent meeting with the leaders of the Ho Chi Minh City People's Committee, Mr. Jun Sung Ho, General Director of Lotte Properties HCMC Co., Ltd., acknowledged that this group sent a document requesting that the project be terminated owing to various challenges. However, the group's perspective has shifted following a meeting with the Chairman of the Ho Chi Minh City People's Committee on August 29 and a document from Ho Chi Minh City People’s Committee reporting to the Prime Minister on September 12 proposing reducing obstacles for the project developer. At the same time, Lotte Properties HCMC Co., Ltd. stated that it will continue to construct the project provided the government approves the measures to eliminate project hurdles.

At the meeting, Nguyen Van Duoc, Chairman of the Ho Chi Minh City People's Committee, stated that the city accepted the business's proposals and submitted them to the government for consideration of acceptable solutions. The city's officials invited Lotte Properties HCMC Co., Ltd to continue assisting, discussing challenges, and keeping the project on track.

Le Hoang Chau commented on this, saying that it is a "happy ending" for both the project developer and Ho Chi Minh City. In his perspective, if the Lotte Properties HCMC Co., Ltd bottleneck is not resolved, it may have an impact on Vietnam's investment climate, particularly the attraction of FDI into our nation through the real estate industry.

In Le Hoang Chau’s opinion, the current issue stems from the additional amount of money that land users must pay during the period when land use fees and land rentals have not been estimated at a rate of 5.4% each year, depending on the amount of land use fees and land rents that must be paid. Not only did Lotte Properties HCMC Co.,ltd propose reconsideration, but almost all real estate businesses proposed amending Point d, Clause 2, Article 257 of the 2024 Land Law to remove "the amount of money that land users must pay additionally for the time when land use fees and land rents have not been calculated," because the land users "are not at fault." Furthermore, this is a considerable sum of money that land users must pay in addition.

"Although the Draft Decree amending and adding a number of Articles of Decree 103/2024/ND-CP proposes reducing the payment of extra land usage fees from 5.4% to 3.6% each year, this rate remains excessively high. It should be decreased to 0.5% or 1% every year. Because the Land Law 2024 is still in existence, it is permissible for Decree 103/2024/ND-CP to govern this collection," HoREA Chairman Le Hoang Chau argued.

Mr. Chau further advocated that these charges only apply in circumstances when the land user is at fault, and that in cases where the land user is not at fault, the extra land use fees should be waived. However, he stated that to address this issue, while amending the 2024 Land Law, the regulation on the amount of money that land users must pay extra for the time when land use fees and land rent have not been computed must be removed.