Phu My Hung homeowners not liable to pay land use taxes: lawyers

Homeowners in Ho Chi Minh City’s Phu My Hung residential area must not be asked to pay land use taxes as it is the responsibility of the developer, legal experts say, citing real estate regulations.

An apartment block in Phu My Hung residential area in Ho Chi Minh City’s District 7

An apartment block in Phu My Hung residential area in Ho Chi Minh City’s District 7

Tran Quang Huy, a professor at Hanoi Law University, said developers of residential projects, both for sale and for rent, are required to pay land use taxes as well as other compulsory fees.

When a customer makes a home purchase, the price stated in the contract covers both the home value and the land use right. Homeowners will only need to pay registration fees to receive ownership deeds, he said.

His comments came after hundreds of Phu My Hung homeowers in District 7 complained last week that they were asked to pay land use taxes worth as much as a house before getting land use and house titles.

They said it was the fault of the developer who’d failed to give them the titles several years ago when they purchased the property, when land value, and hence land use taxes, were much lower. Some said they felt cheated as they thought they’d already paid land use taxes to the developer.

Land use taxes in Ho Chi Minh City are calculated by land valuations set by the city administration and the values have typically increased every year. Property valuations this year in Phu My Hung, one of the fastest growing residential areas in the city, have doubled from a year ago.

In an effort to solve the problem, the city government decided Monday to allow Phu My Hung homeowners to pay their land use taxes at rates prevalent in the year they purchased the homes.

But lawyer Dao Duy Thanh said the move is only a provisional solution to calm the residents and it should be reviewed to see whether it conflicts with existing regulations.

Developer Phu My Hung Corp., meanwhile, said the decision could not solve the real problem of high land use taxes.

Bui Thanh Son, deputy general director of the corporation, said only a part of the company’s customers would benefit from the decision while many others buying homes this year and later would still be subjected to increasingly high land use taxes.

He said Phu My Hung had not done anything wrong and called for another solution to the problem. Otherwise, the company would find it really hard to maintain its business in the future, he said.

Phu My Hung Corp. said as a foreign invested firm, it is only allowed to lease land for its residential projects and homebuyers have to pay land use taxes as stipulated in contracts. Unlike Phu My Hung, local developers pay the taxes themselves when they are allocated land for their projects.

But lawyer Pham Van Phat told local news website VnExpress that under a 2007 regulation, foreign developers of commercial residential projects have to pay a one-time rent which has the same legal status as land use taxes paid by local developers.

Homebuyers at all projects are therefore not required to pay any land use taxes, Phat said.

“The city government needs to check the legality of asking homeowners in Phu My Hung to pay land use taxes. It won’t be good if they continue to complain whenever land values surge.”

Pham Van Vo, a professor at Ho Chi Minh City Law University, said Phu My Hung’s is a “one of a kind” situation because the company started its projects in District 7 in 1993, when the legal framework for real estate investment was not complete.

Still, this particular situation has to be considered with relation to others, he said. “We need to take a comprehensive view to make sure it is fair for everyone.”

Source: TN, Agencies