Unraveling Land Valuation Challenges in Ho Chi Minh City’s Thu Thiem Eco Smart City Project

Mandatory Regulations

According to Mr. Đào Quang Dương, Deputy Director of the Land Economy Department at the Ho Chi Minh City Department of Agriculture and Environment, the process of land price determination in Ho Chi Minh City has seen significant positive changes, becoming more streamlined and efficient. This improvement is attributed to the implementation of the 2024 Land Law and Decree 71 issued by the Government.

Specifically, the new regulations have expedited land price determination, significantly facilitating land clearance and compensation processes. For instance, in the case of the Ho Chi Minh City Ring Road 3 project, the Department of Agriculture and Environment took only one month to propose a suitable land price scheme, which received high approval and support from residents.

Thanks to this acceleration, since the beginning of the year, Ho Chi Minh City has approved over 70 land price schemes, corresponding to a budget revenue of approximately 52 trillion VND. It is expected that by the end of the year, with the submission of more than 70 additional files, the total number of approved files will exceed 150, bringing the projected total revenue to around 86 trillion VND.

The land price determination process has also resolved legal obstacles for stalled projects, including the Thu Thiem Eco Smart City Complex project by Lotte Properties HCMC Co., Ltd., a subsidiary of the Lotte Group. Mr. Dương stated that after Ho Chi Minh City issued the land allocation decision to Lotte in October 2022, the company encountered legal issues while hiring a consulting firm.

These complications were further exacerbated when Decree 12 on land price determination methods was issued and took effect in February 2024, causing difficulties for most projects nationwide. However, the situation was resolved when the Government issued Decree 71 on August 1, 2024, to amend Decree 12, thereby facilitating the process. Subsequently, the Department of Agriculture and Environment promptly submitted Lotte’s project, which was approved by the Ho Chi Minh City People’s Committee with a land price of 16.19 trillion VND.

Mr. Dương emphasized that Lotte’s project followed the correct procedures and was processed in a very short time. Regarding the additional 5% payment, he explained that this is a mandatory requirement under the Land Law. For files where land prices have not yet been determined, this additional payment must be made as per Decree 103 of the Government.

“To date, we have only received feedback from Lotte, with no other cases reported, and all other projects have fulfilled their land price payment obligations. The Department and relevant agencies have reported this matter to the central authorities for consideration of Lotte’s case,” said Mr. Dương.

At the meeting on the afternoon of October 3, Mr. Phan Văn Dũng, Deputy Director of the Ho Chi Minh City Tax Department, stated that the notice for land use fee and land rent payment for the Thu Thiem Eco Smart City Complex project had been issued and sent to the enterprise in accordance with regulations. According to the law, this notice has passed the payment deadline. As of October 3, the system recorded a late payment penalty of 120 billion VND.

“Therefore, the Ho Chi Minh City Tax Department proposes that if the Ho Chi Minh City People’s Committee submits a proposal to the Government regarding the exemption of Lotte’s additional land use fee, it should also include a request for the exemption of this late payment penalty. This issue requires the Government’s directive, as there is currently no legal provision allowing for the waiver of late payment penalties in such cases,” said Mr. Dũng.

Should Additional Fees Be Collected?

Regarding this issue, the Ho Chi Minh City People’s Committee has requested the Ministry of Agriculture and Environment and the Ministry of Finance to abolish the additional 5.4% fee during the period when land use fees and land rent have not been calculated, as per the 2024 Land Law.

According to the Ho Chi Minh City People’s Committee, requiring land users to pay an additional 5.4% annually on the land use fee is seen as a way to share financial responsibility between the State and the people. However, since the delay in determining specific land prices is due to the management agency, and residents and businesses are not at fault, they should not bear this additional obligation.

Based on this, Ho Chi Minh City believes that in the context of post-COVID-19 economic recovery, eliminating this regulation will boost investment attraction and promote economic development.

Currently, the additional fee is set at 5.4% per year by the Law. In the draft amendment to Decree 103/2024/NĐ-CP on land use fees and land rent, the Ministry of Finance proposes two options: reducing it to 3.6% or eliminating it entirely. However, the Ministry notes that complete abolition can only be implemented if directly stipulated in the Land Law, and has therefore recommended that the Ministry of Agriculture and Environment consider this during the law revision process.

Speaking with Tiền Phong newspaper, Mr. Lê Hoàng Châu, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), also emphasized the need to amend Decree 103/2024/NĐ-CP to remove contradictory provisions, in line with the Government’s commitment to resolving all obstacles for real estate businesses.

“Despite being blameless, businesses are still subject to a 5.4% annual late payment penalty. This increases input costs and hinders the recovery of the real estate market. If not promptly addressed, the housing supply will remain stagnant, negatively impacting the entire economy. Penalties should only be applied when the tax authority has completed the notification of financial obligations and the business fails to pay on time. Blaming businesses for delays caused by government agencies is unreasonable,” said Mr. Châu.

Mr. Châu proposed that the Ministry of Finance should only require additional land use fee payments from August 1, 2024 (when the 2024 Land Law took effect) until the date of land price approval, minus the 180-day period allowed for land price determination as per Article 155, Clause 4 of the 2024 Land Law. For cases prior to this date, the regulation should be amended to waive additional fees for periods when land prices have not been determined.

“Amending the regulation in this manner will align with current circumstances, resolve business obstacles, and demonstrate the State’s thoroughness in reviewing and revising unsuitable provisions,” Mr. Châu affirmed.