Deducting Voluntarily Advanced Land Recovery Costs Against Annual Land Rent
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Based on:Ministry of Finance
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The Ministry of Finance (via the Hung Yen Provincial Tax Department) responded to an industrial cluster project investor asking how to treat money the company voluntarily pays to acquire an additional small plot of land lying outside the approved project boundary, after local households requested a sale and the commune People's Committee proposed an additional land recovery. Under Clause 2, Article 94 of the 2024 Land Law and Point d, Clause 2, Article 16 of Decree 103/2025/ND-CP, if a business voluntarily advances compensation, support, and resettlement funding under a plan already approved by the competent authority, the state budget reimburses that amount by offsetting it against the land use fee or annual land rent the business owes. The deductible amount cannot exceed the land use fee or land rent payable; any remaining balance is recorded as a reasonable investment cost of the project. District-level People's Committees are responsible for the accuracy of the compensation, support, and resettlement figures used as the basis for the tax authority's offset. The tax authority performs the offset against land use fees or land rent once it receives notice from the relevant People's Committees, and this also forms the basis for calculating the project's deductible costs. In short, the advanced payment is first offset against land rent obligations, and any un-offset portion is recognized as a deductible project cost.
Question
The company is the investor of an industrial cluster project that has already been approved by the competent authority. The project has completed public consultation meetings and notified residents of land recovery. Some land plots have only part of their area within the approved project boundary; the remaining part outside the boundary will not be recovered. Because the leftover area is too small to be farmed, the commune People's Committee proposed: if the affected households wish, the company and the People's Committee will additionally recover this leftover land and pay compensation and support to the residents.
The question: should the money the company pays to recover this additional land be included in the total compensation and support funding for land recovery, so that the state later deducts it from the company's annual land rent? Or is it simply a reasonable cost deductible when calculating corporate income tax?
Answer
On June 23, 2026, the Hung Yen Provincial Tax Department received Inquiry Slip No. 230626-11 from reader Dang Thi Nhung regarding compensation and site clearance costs, submitted via the Ministry of Finance's information portal. Based on its functions, tasks, and authority, the Hung Yen Provincial Tax Department provides the following opinion:
Legal basis
Clause 2, Article 94 of the 2024 Land Law on funding and payment of compensation, support, and resettlement money states:
Where the State allocates land with land use fees or leases land under land law, if the project implementer voluntarily advances the compensation, support, and resettlement funding under a plan already approved by the competent authority, the state budget shall reimburse this amount by deducting it from the land use fee or land rent payable. The deductible amount must not exceed the land use fee or land rent payable; any remaining amount is recorded as an investment cost of the project.
Point d, Clause 2, Article 16 of Decree 103/2025/ND-CP (handling compensation, support, and resettlement funding under Article 94 of the Land Law, and determining remaining land investment costs under Article 107 of the Land Law) provides:
The unit or organization performing compensation, support, and resettlement tasks is responsible for the accuracy of the data and information specified at Point a of this clause, except for documents already approved, decided, or resolved by another competent authority, organization, or person. The district-level People's Committee is responsible for the accuracy of the data on the compensation, support, and resettlement amount deductible from the land use fee, which serves as the basis for the tax authority to offset the advanced amount against the land use fee under Point c of this clause, except for documents already approved, decided, or resolved by another competent authority, organization, or person.
Conclusion
Based on the above regulations, if a taxpayer voluntarily advances compensation, support, and resettlement funding, this must follow a compensation, support, and resettlement plan already approved by the competent authority. The tax authority will offset the advanced amount against the land use fee or land rent payable once it receives notice from the People's Committees at various levels, and this also serves as the basis for calculating the project's reasonable costs.
The Hung Yen Provincial Tax Department provides this response for the reader's information and implementation.
Note: Certain details in the scanned images are low resolution; the content above has been transcribed carefully, but readers should verify against the original on the Ministry of Finance's information portal before applying it to a specific case.