Taxation at interest accurately reflects the nature of transactions
In the draft Law on Personal Income Tax (replacement), the Ministry of Finance proposes two methods of tax calculation. The first method is applied in cases where the seller can prove the purchase price and related reasonable costs; taxable income is determined by the difference between the selling price minus the purchase price and costs, then multiplied by a tax rate of 20%. The second method applies when there is not enough basis to determine the input, the tax authority will calculate it directly on the selling price, according to the progressive tax rate table based on holding time: 10% if under 2 years; 6% from 2 to under 5 years; 4% from 5 to under 10 years; and 2% if 10 years or more or originating from inheritance.
The holding period is calculated from the time the individual has the right to own or use it until the transfer. For inherited assets, the holding period is not included - the tax rate is still 2% as at present.
Evaluating these two options, Associate Professor, Dr. Phan Huu Nghi - Deputy Director of the Institute of Banking and Finance (National Economics University) commented that the current 2% tax rate is just a temporary solution. If the real estate has a profit rate of 10%, a 20% tax will be applied on the interest, equivalent to a 2% payment. In the long term, the method of taxing 20% on income is more reasonable and accurately reflects the nature of the transaction, he analyzed.
He also said that classifying according to the ability to determine purchase prices and costs is necessary, but poses a very high requirement for document transparency and a monitoring system. We can learn from the experiences of some countries, such as Australia. For example, if you buy a 10 billion VND house and repair it for an additional 2 billion, these expenses must have clear invoices and documents. If we repair it ourselves, we need confirmation from the authorities to serve as a basis for determining the capital price," said Mr. Nghi.
According to him, to make policies effective, tax authorities need to manage cash flow and monitor destinations, in accordance with the principles of modern financial and tax management.
Need to build a roadmap to tax the 4th and 5th houses
Associate Professor, Dr. Phan Huu Nghi also highly appreciated the taxation plan based on the time holding the property. This idea is very good, because Vietnam has many cases of real estate speculation. If the buyer wants to live there, after 2 years of changing the house and making a profit, he/she will pay 20% tax on the interest. If there is no interest, there is no need to pay. But if bought for speculation, this tax policy will help regulate market behavior," he said.
According to Mr. Nghi, in the long term, Vietnam needs to consider taxing assets to ensure fairness. "Income may not be seen, but assets are seen clearly. It is necessary to develop a tax roadmap for households that own a 4th or 5th house or more, then gradually move to a 3rd house. If we take each step, the public will accept it more easily than hitting the second house directly," he suggested.
Both new tax plans aim to accurately reflect the nature of income, limit loss of revenue and contribute to stabilizing the market. However, to effectively implement, many experts believe that there needs to be a system of market price data, a transparent cost verification process and synchronous coordination between tax authorities, localities and stakeholders to be able to implement.
Taxing based on holding time helps limit speculation
Meanwhile, the business representative, Mr. Nguyen Vu Cao - Chairman of the Board of Directors of Khang Land Company, said that the plan to collect 20% on interest will be very difficult to implement if real prices cannot be controlled.
"Currently, most real estate transactions are negotiated by sellers and buyers, so the prices declared in the contract do not reflect reality. Therefore, it is very difficult for management agencies to accurately determine the interest to calculate taxes," he said.
Mr. Cao said that in this context, the option of taxing based on holding time will be more reasonable. "If people keep their assets for a long time, they should receive tax incentives. As for short-term transactions, higher tax rates will help limit speculation and surfing," he said.
