Due to COVID-19, the residential market slowed down in 2021, but it will begin to pick up pace again in 2022. But in the fourth quarter of 2022, there were only 1,100 newly built apartments available for purchase, a 74% decrease from the third quarter and only 6.5% of the total supply expected in 2023.
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Due to the government’s stricter credit policies and crackdown on bond issuance in Q4 2022, which put considerable pressure on the market, buyers and investors have grown more cautious. Buyers and investors will consequently take a “wait and see” stance while the new 2023 rules are put into effect.
1. Vietnam’s Legal Updates have taken effect in Q4 2022 and the beginning of 2023.
Land price deductible for VAT calculation
According to Decree No.49/2022/ND-CP, the real estate transfer price minus the ground price must be deducted from the price used to calculate the Tax as of September 12, 2022.
The land price must be deducted from the VAT finalization in the following six circumstances:
- The transfer of the land price that is deducted to compute VAT, as well as the land use fees, to the state budget is mandated by the laws regulating land use fees, compensation, and site clearance amounts when buying state-owned land meant for infrastructure and real estate for sale (if any).
- When calculating the VAT, the winning property price from land use rights auctions is taken into account
- The rental price that must be transferred to the state budget when renting property for the development of infrastructure and the building of houses for sale is the price that is subtracted from it to calculate the VAT (if any).
- The land price at the time the transferred land use rights were obtained by organizations and individuals, excluding the value of the infrastructure, is the land price used to calculate the VAT. Commercial entities may report and deduct infrastructure VAT (if any).
- Imagine that no agreement can be reached on the land’s price at the time of transition. In that situation, after the transfer contract is completed, the local People’s Committee will impose a land price deducted from the transfer price.
- The land price used to compute VAT is the land price at the time of transfer, minus the worth of the infrastructure. Suppose the businesses purchasing the real estate have calcultaed the land’s cost while accounting for the infrastructure’s worth.
- In the VAT calculation, the amount stated in the capital contribution agreement is deducted from the land price when companies or individuals contribute land use rights as capital. If the transfer price of the land use right is less than the capital contribution price, the land price removed must be equivalent to the transfer price.
- When businesses or individuals contribute land use rights as capital, the land price is deducted for VAT purposes from the amount stated in the capital contribution agreement. The land price deducted must be the same as the transfer price if the capital gift price is higher than the land use right’s transfer price.
Analysis of Decree No41/2022 Amending 02 Decrees on Invoice and VAT Deduction
The 8% VAT rate will be 10% as of January 1, 2023.
If a statement has been sent by a business and reported tax at a tax rate or percentage (%) that this Decree has not yet lowered, the vendor and the customer are required to keep track of any errors or come to a written agreement detailing the errors. A new statement must be made by the seller and sent to the client. Both the customer and the seller are required to include the revised VAT in the invoice (if applicable).
The seller and the buyer are required to keep a document or enter into a written agreement outlining the errors if a company has issued an invoice and claimed tax at a tax rate or percentage (%) that this Decree has not yet reduced. The vendor must then draft a fresh invoice and deliver it to the client. The customer and vendor are required to adjust the input VAT per the revised invoice (if applicable).
Withdrawal of Household Registration Books in Vietnam
Article 38 of the Law on Residence 2020 states that household registration and interim residence records may only be used through December 31, 2022. They will therefore be considered void beginning January 1, 2023.
As a result, per Decree 104/2022/ND-CP, starting on January 1, 2023, administrative processes and public services needing adherence and production of household registration books and short paper residence books will be replaced by using information on citizens’ residence in the database.
The Law on Insurance Business No. 08/2022/QH15, which enters into effect on January 1, 2023, is amended to allow foreign investors to buy shares and contribute up to 100% of the charter capital of insurance and reinsurance companies. In addition, more information is needed regarding Vietnam’s WTO obligations and approved free trade deals.
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2. Vietnam’s expected legal updates in 2023
Vietnam Set to Increase Wages from July 2023
The addition of regulations established that under the law on Insurance Business No. 08/2022/QH15, which enters into effect on January 1, 2023, foreign investors are allowed to buy shares and contribute up to 100% of the charter capital of the insurance and reinsurance companies. In addition, more information is needed regarding Vietnam’s WTO obligations and approved free trade deals.
According to Article 4 of Circular 78/2022/TT-BTC, the price of social protection programs that are tied to minimum wages will increase by 20.9%. In addition, starting in January 2023, pension and social insurance payments for people who retired before 1995 would rise by 12.5%.
The amendments of Land Law
Public comments on the proposed change to the Land Law were taken from January 3, 2022, through the conclusion of March 15, 2023. The proposed Land Law (amended) should be finished by 2023 and presented to the National Assembly for approval.
The completed rights, including the option to assign and mortgage the lease right in the yearly land lease contract as well as the cost, publicity, and openness of land acquisition, are included in the draft.
Promulgating the Decree on Personal Data Protection, expected to be effective from July 1, 2023
It is essential to take the necessary precautions in light of the quick development of information technology because personal information, particularly that stored online, is developing into a valuable resource that criminals can gather, acquire, and use to violate a number of laws and citizens’ rights. The directive serves as a jumping off place for the research necessary to create legislation protecting personal data.
It is set to go into effect on July 1, 2023, but some representatives proposed delaying this date because it is a novel issue and many of the contents are linked to the actions of institutions, organizations, and people, necessitating a just path for implementation.
The Vietnam Competition Commission (VCC)’s organizational structure, roles, and tasks
The Vietnam Competition Authority’s job is to take reports about instances of anti-competitive behavior. The competent Vietnam Competition Authority will then investigate the situation and make a determination regarding the validity of the infringement evidence.
During competition proceedings, the National Competition Comission exercises the following responsibilities and powers:
- Locating, verifying, and reviewing information and data regarding conduct that suggests a violation of competition laws.
- Receiving, looking over, and handling case complaint dossiers for competition cases; assessing data and proof regarding the illegal activity.
- Examining issues linked to unfair competition
- Handling problems relating to the competition
- Receiving, absorbing, and addressing complaints in relation to choices made for the legal compliance handling of concerns about competition
- Taking part in administrative procedures related to the Vietnam Competition Commission’s resolve of complaints
- Make contact with the proper agencies, groups, and people to assist with the investigation and management of competition cases; ask these parties for any releavant informational documents.
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