Low-value Real Estate Affected?
A notable point in the Draft Law on Personal Income Tax (replacement) being consulted by the Ministry of Finance is the regulation on personal income tax (PIT) on real estate transfer activities.
Specifically, if the purchase price of real estate and reasonable expenses can be determined, the PIT that the seller has to pay will be calculated as 20% of the profit. In case the purchase price cannot be determined, the PIT will range from 2% to 10% of the selling price, depending on the holding period.
Talking to reporters, Mr. Nguyen Van Cuong, a long-time real estate broker in Ho Chi Minh City, said that previously, PIT on real estate transfer was applied at a flat rate of 2% of the selling price. When tax collection was not tightly controlled, the seller often agreed with the buyer to declare a lower transfer price in the contract than the actual price to “avoid” taxes.
“In recent years, when the tax agency strengthened control, this situation is almost non-existent. Many real estate buyers want to declare the actual selling price on the contract to avoid problems later,” said Mr. Cuong.
 According to experts, taxing transfers will not curb rising real estate prices. Photo: Anh Phuong |
Regarding the proposal to impose a 20% tax on profits from the transfer of houses and land, Mr. Cuong said that this rate is reasonable and ensures fairness between individuals and enterprises doing real estate business. However, the low-value real estate market will be affected first.
“For example, if you buy a house for VND 2.5 billion and sell it for VND 3 billion, you have to pay VND 60 million in PIT. Also, with a profit of VND 500 million, but with a house worth VND 10 billion, the tax amount is now up to VND 200 million. If the 20% rate proposed in the draft is applied, the seller of the VND 3 billion house will have to pay up to VND 100 million in tax,” Mr. Cuong analyzed and said that in this case, the seller will tend to raise the selling price.
Mr. Tran Khanh Quang, General Director of Viet An Hoa Real Estate Company, also assessed that the proposal to apply a 20% PIT rate on profits is reasonable and fair. However, to avoid disadvantages for taxpayers, management agencies need to deduct reasonable expenses.
“In fact, profit is not simply the selling price minus the purchase price. Sellers also incur other expenses such as interest, brokerage fees, repair and renovation costs,” said Mr. Quang.
Regarding the concern that applying a 20% tax on profits may cause low-value real estate prices to increase, Mr. Quang said that this could still happen if the management agency does not specify what “reasonable expenses” are.
For high-value real estate, according to Mr. Quang, the current 2% PIT rate on the selling price is relatively high. Meanwhile, real estate prices in Vietnam have only increased by an average of 8-10% per year. If the 20% profit tax rate proposed in the draft is applied, this segment is expected to be less affected.
‘Taxation won’t curb rising real estate prices’
Attorney Nguyen Dang Tu (Ho Chi Minh City Bar Association) said that the 20% tax rate on profit is relatively high. To apply fairly, it is necessary to build a reliable database system to accurately determine the purchase price and input costs of the transferor.
Regarding the reasonable expenses for deduction, Lawyer Tu proposed to detail the conditions for invoices and vouchers so that people can easily prove them.
Sharing the same view, lecturer Tran Nguyen Dan (University of Economics Ho Chi Minh City) said that 20% of profit is not a low tax rate. If applied, those who buy and sell real estate at “two prices” – that is, the price stated in the contract is lower than the actual transaction price – will be affected first, because when they sell again, their profit is high, so they have to pay a lot of taxes.
“To encourage long-term investment in real estate, even if the purchase and sale prices can be determined, tax should be levied according to the holding period. It can be calculated as a percentage of profit or selling price,” said Mr. Dan.
He noted, “In fact, anyone who holds real estate for more than 3 years is already a real investor, no longer a speculator.”
In case the 20% PIT rate on profit is applied, this expert predicted that the real estate market will be affected. Investors may push up the selling price or switch to real estate that generates cash flow, i.e., for lease. Buyers will have two choices: buy or rent. The behavior of the end consumer will determine the market developments.
“If the tax rate is too high, real estate investors will find ways to cope. If the selling price does not reach the expected profit, they will switch to long-term holding and leasing. When the market is favorable and taxes are lower, they will sell. Taxation on transfers cannot curb rising real estate prices,” said lecturer Tran Nguyen Dan. He predicted that this would change investor behavior towards a longer-term orientation. As a result, the market will have more rental housing supply.
Anh Phuong
– 19:06 31/07/2025
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