The Ministry of Finance has just sent a report to the National Assembly, in which it proposed to calculate real estate transfer tax (RE) in the draft amendment to the Law on Personal Income Tax.
Regarding the new proposal, the Ministry of Finance proposed 2 options. Option 1, in case a database can accurately determine the purchase price and costs related to real estate transfer, calculate personal income tax from real estate transfer: Tax rate of 20% multiplied by taxable income (in the form of selling price minus total costs related to real estate transfer).
Option 2, if the purchase price and costs related to the real estate transfer cannot be determined, personal income tax is determined on the total real estate transfer price multiplied by a tax rate of 2%.
This policy is expected to increase state budget revenue from personal income tax. It is known that currently, personal income tax for real estate transfers is calculated at 2% on transaction value. That is, the seller must pay a tax of 2% of the total real estate value stated in the transfer contract, regardless of profit or loss.
This can be considered a simple, easy-to-collect tax calculation method, but creates a big loophole in selling price declaration. In fact, sellers often declare the transfer price lower than the actual price to reduce the tax payable. This leads to a loss of revenue for the state budget, causing the real estate market to lack transparency.
However, with the new proposal of the Ministry of Finance, there are also many concerns about feasibility, especially the determination, correct calculation, and full calculation of costs from real estate transfer.
Dr. Nguyen Duy Phuong, Investment Director of DG Capital, commented that the problem that asset owners are concerned about is that tax authorities determine the input cost of a real estate transaction. Especially for real estate purchased from a long period of time ago and going through many stages with many costs such as repair, renovation, interest costs... If the above costs cannot be determined, there will be cases where the house for sale has not much actual profit but contributes up to 20% of the difference.
Using the difference between the purchase price and the selling price to calculate tax will not be reasonable if people buy real estate to use for actual needs of living and production, not for real estate business and only transfer the land use right decades later.
Not only that, Dr. Phuong is concerned that when calculating a 20% tax plus brokerage fees, it is also necessary to consider that sellers can also calculate this tax on the selling price, pushing costs to buyers, causing real estate prices to continue to increase.
Lawyer Nguyen Dang Tu, Ho Chi Minh City Bar Association, said that there needs to be a database that accurately reflects the transaction prices of transfers. Along with that, the authorities need to clearly stipulate the deductible expenses and conditions for invoices, documents, and capital prices of transferred real estate.
"It is necessary to calculate correctly and fully the arising costs such as bank loan interest, brokerage, even price inflation... so that tax on profits from transfer activities is substantial and in line with the nature of personal income tax. In cases where there are not enough invoices and documents, the basis for calculating interest and losses, it is proposed to apply a 1-2% setting level according to the price list prescribed by the People's Committees of provinces and cities. This option is considered to have an advantage because it accurately reflects actual income," said Lawyer Dang Tu.
