Proposal to tax real estate transfers based on ownership period

In the proposal to develop the draft Law on Personal Income Tax (replacement), the Ministry of Finance has presented some notable contents on tax rates for income from real estate transfers.

Currently, the personal income tax policy in Vietnam does not differentiate according to the transferor's real estate holding period. Taxable income from buying and selling houses and land is determined as the transfer price each time, with a tax rate of 2%.

However, according to the Ministry of Finance, some countries in the world have used tax tools to increase the cost of speculative behavior and reduce its attractiveness, including personal income tax.

At the same time, some countries also apply tax on profits from real estate transactions based on the frequency of transactions and the time of buying and selling houses and land. The faster this time occurs, the higher the tax rate and vice versa.

The Ministry of Finance cited that in Singapore, land bought and sold in the first year is taxed at 100% on the difference in value between the purchase and sale. After 2 years, the tax rate is reduced to 50% and after 3 years it is 25%.

In Taiwan, real estate transactions made within the first 2 years after purchase are subject to a tax rate of 45%. Within 2-5 years, the tax rate is 35%, within 5-10 years the tax rate is 20%, and after 10 years it is 15%.

The Ministry of Finance proposed to collect personal income tax from real estate transfers based on the holding period like some of the above countries.

According to the ministry, this will help institutionalize the policies and orientations of the Party and State on effective use of real estate, and prescribe high tax rates for those who own many properties. At the same time, taxing purchases and sales based on ownership time will also reduce speculation and real estate bubbles.

"The specific tax rate needs to be studied and determined appropriately, reflecting the actual operation of the real estate market," the Ministry of Finance stated. According to this agency, the application of personal income tax based on the holding period also needs to be synchronized with the process of perfecting policies related to land, housing and information technology infrastructure.

Recently, in the context of constantly increasing housing prices, the Ministry of Construction has also proposed to tax cases of owning and using many houses and lands to limit speculation, buying and selling in a short period of time to make a profit. The Ministry of Finance has been asked to study and advise on tax policies for second houses and lands or abandoned and unused houses and lands.

Similarly, the Vietnam Association of Realtors (VARS) proposed a real estate tax policy for two groups of people, including buyers of second homes or more and owners who abandon projects. The tax rate will gradually increase for transactions where the seller has a short ownership period.

Late last month, the National Assembly's monitoring delegation recommended the early promulgation of a tax policy applicable to people who own many properties and abandon real estate.

Many localities now have an excess of products such as shophouses and unoccupied villas. Meanwhile, affordable housing is increasingly scarce.