In the draft Proposal to develop the Law on Personal Income Tax (replacement), the Ministry of Finance has presented some notable contents on tax rates for income from real estate transfers.
Accordingly, the Ministry of Finance proposed to tax personal income from real estate transfers based on ownership period to avoid speculation and real estate bubbles.
Talking to Lao Dong, Mr. Nguyen Van Dinh - real estate legal expert commented that collecting personal income tax from real estate transfers based on holding time is the right and necessary direction, however, reasonable calculations are needed to ensure effective and feasible law enforcement.
However, the principle of taxation must be separated between the subject who buys real estate for use and the subject who buys for investment and speculation purposes. People who continuously buy and resell in a short period of time do not need to live but to invest for profit. Those who buy for business purposes must pay high taxes, while those who buy property for living, to solve the need for security and settlement, are not taxed or are taxed low.
Currently, taxable income from real estate transfers is determined as the price of each transfer, with the applicable tax rate being 2%. Many experts believe that this tax rate should be considered for adjustment.
Mr. Dinh commented that in the short term, the land price list is still low, the 2% tax rate is not a burden. However, from 2026 onwards (when the new land price list is issued), the new land price list will reflect the market price relatively closely, so the 2% tax rate is also a big burden for the majority of people, especially those who do not have business purposes.
“I support reducing the tax rate to below 2%, but how to reduce it, to 1% or 0.5%, requires careful research,” Mr. Dinh said.
Professor Dang Hung Vo - former Deputy Minister of Natural Resources and Environment commented that taxing real estate based on ownership period has been applied by many countries and achieved success.
Taxation based on ownership duration will help cool down the real estate market, limit speculation and real estate bubbles. Accordingly, high taxation on individuals who own real estate for a short time will reduce the liquidity of real estate transactions for commercial purposes. On the other hand, the liquidity of real estate transactions for residential purposes will increase, thereby helping the real estate market develop stably, losing the virtual value caused by speculative activities.
In the draft Proposal to develop the Law on Personal Income Tax (replacement), the Ministry of Finance said that the current personal income tax policy of our country does not differentiate according to the time of holding real estate of the transferor.
Meanwhile, in order to limit real estate speculation, some countries in the world have used tax tools to increase the cost of speculative behavior and reduce the attractiveness of real estate speculation in the economy, including personal income tax.
As in Singapore, land bought and sold in the first year is taxed 100% on the difference in value. After 2 years, the tax rate is 50%, after 3 years it is 25%.
In Taiwan (China), real estate transactions conducted within the first 2 years after purchase apply a tax rate of 45%, conducted within 2-5 years the tax rate is 35%, within 5-10 years the tax rate is 20% and conducted after 10 years the tax rate is 15%.
