GUIDELINES ON LAND VALUATION BASED ON INCOME-BASED METHOD

1. Condition for applying method of land valuation based on income-based method

According to clause 5 Article 158, Land law 2024, the income-based method is one of methods of land valuation and implemented by dividing the average annual net income per land area by the average annual interest rate of 12-month term deposits in Vietnamese currency at commercial banks in which the State holds more than 50% of the charter capital or the total number of voting shares in the province for 03 consecutive years up to the end of the latest quarter with data before the valuation.

According to clause 6 Article 158, Land law 2024, the conditions for applying the income approach in land valuation are as follows: The income-based method is applied for valuation in case the land parcel, agricultural land zone or non-agricultural land zone (except for homestead land) to be valued that is not eligible for the comparison method but the incomes and costs from the use of land can be determined according to the purpose of use of the land to be valued.

2. Procedures, content of land valuation based on income-based method

According to Article 5 of Decree 71/2024/NĐ-CP on land valuation, the specific provisions are as follows:

Firstly, survey, collect information about incomes earned from a land parcel or land zone to be valued

*For non-agricultural land

a) For non-agricultural land, survey and collect information from land leases and premises leases during 03 consecutive years (from January 1 to December 31) immediately preceding the year of valuing the land parcel or land zone to be valued or during 01 year (from January 1 to December 31) immediately preceding the year of valuing 03 land parcels with the closest distance to the land parcel or land zone to be valued for comparison.

In case it is not possible to collect information from the land leases and premises leases, collect information about incomes earned from production and business activities recorded in financial statements during 03 consecutive years (from January 1 to December 31) immediately preceding the year of valuing the land parcel or land zone to be valued or in the financial statements of 01 year immediately preceding the year of valuing 03 land parcels with the closest distance to the land parcel or land zone to be valued.

* For agricultural land

For agricultural land, survey and collect information on incomes earned from agricultural land used at a statistical agency, tax authority, or agriculture and rural development authority, to be specific:

- During 03 consecutive years (from January 1 to December 31) immediately preceding the year of valuation, in case of determining land price of annual crop land, land for aquaculture, land for salt production, and other agricultural land;

- For at least 03 consecutive harvests before the time of valuation, in case of perennial crop land;

- During a harvesting cycle before the time of valuation, in case of production forest land, as prescribed by relevant laws.

In case there is no available data from the statistical agency, tax authority, agriculture and rural development authority, collect information on the actual common incomes on the market earned from 03 land parcels with the closest distance to the land parcel or land zone to be valued.

Secondly, Survey, collect information about incurred costs relating to the land parcel or land zone to be valued

*For agricultural land

Costs incurred to generate income from land use specified in Point a, Clause 1 Article 5 of Decree 71/2024/NĐ-CP are the costs of operating and maintaining construction works affixed to land and production costs that are determined according to norms and unit prices issued by competent regulatory authorities; taxes related to land use.

In case norms or unit prices applied to costs incurred to generate income from land use have not been issued by competent regulatory authorities, collect information on the above costs recorded in the financial statements; in case the financial statements do not clearly show the costs incurred to generate income from land use, then survey the costs incurred to generate common income from actual land use on the market.

*For agricultural land

Costs incurred from the use of agricultural land including taxes related to land use, and production costs are determined on the basis of norms and unit prices issued by competent regulatory authorities at statistical agencies, tax authorities and agriculture and rural development authorities and in accordance with the provisions of Point b, Clause 1 Article 5 of Decree 71/2024/NĐ-CP on land pricing.

In case there is no available data from any statistical agency, tax authority or agriculture and rural development authority, collect information on the common costs actually incurred on the market of 03 land parcels with the closest distance to the land parcel or land zone to be valued.

3. Guidelines for determining the land use rights value of the parcel of land to be valued

Accordingly, to determine land use rights value of the parcel of land to be appraised, first, it is necessary to determine the average annual net income  from land leases and premises leases.

The average of annual net income is determined as follows:

Where:

a) The average of annual income is the average of the incomes specified in Clause 1 of this Article for 01 year. In case the income is from land leases or premises leases of 03 land parcels, the determination of land rent or premises rent to calculate the average annual income is in the same order and content as land price determination using the comparison method specified in Clauses 6, 7 and 8, Article 4 of this Decree;

b) The average annual cost is the average of the costs specified in Clause 2 of this Article for 01 year.

The land use right value of the land parcel to be valued is determined as follows:

The average interest rate on savings accounts (r) is the average interest rate of 12-month term deposits in Vietnamese currency at commercial banks where the State holds more than 50% of charter capital or total voting shares in a first-level division (hereinafter referred to as “state-owned commercial banks”) of 03 consecutive years preceding the latest quarter with available data before the time of valuation.

Regarding land used for non-agricultural business and production purposes for a limited period of time, the average interest rate on savings accounts is adjusted according to the following formula:

Where: n: the remaining land use term of the land parcel to be valued (in years) in case of land lease under one-off arrangement.

4. Guidelines for determining land valuation of land parcel to be valued is determined as follow:

According to Clause 5, Article 5 of Decree 71/2024/NĐ-CP on land pricing, after determining the land use right value of the land parcel to be valued using the aforementioned formula, the land price of the parcel can be determined by dividing the value of the land use rights by the area of the parcel needing valuation, according to the following formula:

In cases where works affixed to land directly serving production and business to generate income have been invested and constructed on the land parcel to be valued, the value of the works affixed to land must be subtracted from the value of the land parcel and works affixed to land as prescribed in point a, clause 4, Article 4 of this Decree.

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