Government contemplates imposing a 20% tax levy on profits derived from real estate transactions.
Here's a fresh take on the situation:
Straight Talkin' about Real Estate Taxes 🏡💰
Vietnam's Ministry of Finance is throwing a curveball in the real estate game. They're considering a whopping 20% tax rate on profits from property transactions, as part of their personal income tax reform plan. This plan's details are laid out in a recent report sent to the National Assembly.
Two methods for calculating tax on property transfers are up for debate. The first idea is to slap a 20% tax rate on actual profits, mimicking the existing corporate income tax. The second idea is to implement a flat rate of around 2% on the total transaction value. The chosen method will depend on the availability of data.
The 20% tax rate would only be applied if reliable data on buying and selling prices, as well as other expenses, can be verified. If that data's unobtainable, a simpler 2% tax rate on the total transaction value could be put in place instead.
Currently, sellers are off the hook with a 2% flat tax rate on the transaction value, regardless of whether there's a profit. This leniency means that some sellers underreport the selling price to minimize their tax bill, creating a loss for the State budget and shady deals in the real estate market.
A representative from the Ministry of Finance pointed out that developing a comprehensive national property database is necessary to ensure a fair and transparent real estate tax system.
By the Numbers:
- Current 2% Flat Rate: Sellers are taxed at a 2% flat rate on the transaction value. This leads to a lack of transparency, as sellers are known to underreport the selling price.
- Proposed 20% Tax Rate: A move to a 20% tax rate would shift the focus to taxing profits rather than transaction values. This approach aligns more closely with international practices but requires accurate transaction data to be effective. If that data is scarce, a lower flat rate might still be the way to go.
The Ministry of Finance is considering introducing a tax rate of 20 per cent on gains from real estate transactions as part of its review for personal income tax reforms. - VNA/VNS Photo Tuấn Anh
Transparency, fairness, and a more efficient tax system are what the proposed shift aims to bring to Vietnam's real estate market. Yet, the implementation hinges on the availability of accurate transaction data.
- The Ministry of Finance in Vietnam is considering a shift in the real estate tax system, proposing a 20% tax rate on gains from property transactions as part of its personal income tax reform plan.
- This reform would move the focus from taxing transaction values to taxing profits, aligning with international practices, but necessitates accurate transaction data for effective implementation.
- Currently, sellers are only taxed at a 2% flat rate on the transaction value, leading to a lack of transparency due to underreporting of selling prices.
- To ensure a fair and transparent real estate tax system, the Ministry of Finance believes that developing a comprehensive national property database is crucial.
- If reliable data on buying and selling prices, as well as other expenses, cannot be verified, a simpler 2% tax rate on the total transaction value could be implemented instead of the proposed 20% tax rate.
