In its recent report to the National Assembly, the Ministry of Finance announced that during the amendment process of the Personal Income Tax Law, the ministry is considering two methods of calculating tax on real estate transfers. This move aims to align with market realities and optimize personal income tax revenue for the state budget.
Specifically, the two methods under consideration are: taxing based on taxable income (sale price minus total costs related to the transferred real estate) or applying a flat tax rate on the total transfer price.
According to the Ministry of Finance, the choice of method will depend on the availability of data related to real estate transfers. In the case of taxing profits, this method will be used when there is accurate data on purchase price and related costs. Currently, the proposed tax rate by the Ministry is 20%, aligning with the corporate income tax rate for organizations and enterprises on real estate transfers.
In the other scenario, if the purchase price and costs related to the real estate transfer cannot be determined, a tax rate of 2% is expected to be applied on the total transfer price of the individual’s real estate.
Real estate in the eastern district of Ho Chi Minh City (Thu Duc City) with apartment, townhouse, and land projects… as of February 2025. Photo: Quynh Tran |
Income from real estate transfers is a significant source of personal income tax revenue. The Personal Income Tax Law of 2007 stipulated a tax rate of 25% on income from real estate transfers (sale price minus purchase price and related costs). In cases where the purchase price, related costs, and valid documents could not be determined, the tax rate was set at 2% of the sale price.
Since 2015, according to the Law Amending and Supplementing a Number of Articles of the Law on Personal Income Tax, the unified tax rate has been 2% of the real estate transfer price.
At a workshop in March, Assoc. Prof. Dr. Phan Huu Nghi, Vice Director of the Institute of Banking and Finance (Vietnam National University), pointed out limitations in the current tax calculation method. Specifically, the personal income tax for real estate transfers is calculated at 2% of the transaction value. This means that the seller must pay tax equivalent to 2% of the total value of the real estate stated in the transfer contract, regardless of whether they make a profit or loss.
According to experts, the 2% flat rate method is simple and easy to collect, but it creates a significant loophole in declaring the sale price. In reality, sellers often declare a transfer price lower than the actual price to reduce their tax liability. This leads to budget revenue losses and a lack of transparency in the real estate market.
Therefore, some experts proposed returning to the 20% tax rate on the seller’s actual income. In cases where there are no complete invoices and vouchers, and no basis for calculating profits and losses, it is recommended to apply a fixed rate of 1-2% based on the price table set by the Provincial People’s Committees. This option is considered more advantageous as it accurately reflects actual income.
However, to implement this tax calculation method, according to the representative of the Policy Department of the Tax Department (Ministry of Finance), it is necessary to have a database that accurately reflects the transaction prices of the previous transfers. Along with this, the regulator needs to specify deductible expenses and conditions for invoices, vouchers, and cost prices of transferred real estate.
Phuong Dung
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