The Ministry of Finance said that in the process of amending the Personal Income Tax Law, the agency is studying the option of choosing between two tax calculation methods, depending on the ability to verify information on real estate transfer transactions.
Specifically, in cases where there is a database clearly identifying the purchase price and costs related to the transferred real estate, the personal income tax calculation method will be applied according to the formula: tax rate (estimated at 20%) multiplied by taxable income, in which taxable income is determined by the selling price minus total valid costs (such as brokerage, notary, renovation costs, etc.).
Where the purchase price and related costs cannot be determined, personal income tax will be calculated at a rate of 2% on the total transfer value, as per the current method.
Advantages and disadvantages of the two methods
Sharing with VietNamNet reporter, economic expert Nguyen Quang Huy, CEO of the Faculty of Finance - Banking (Nguyen Trai University), analyzed that the tax rate of 20% on net profit ensures the principle of fairness: people with high profits pay high taxes, people with low profits or losses may not have to pay.
This option is also consistent with corporate income tax, avoiding distinction between organizations and individuals.
However, the major obstacle is that the Vietnamese real estate market does not have a complete data system, connection and authentication of the origin of input costs of transactions. Many transactions made decades ago cannot be traced to the original price, especially with inherited, gifted, or handwritten real estate. This poses a risk of disputes and complaints about valid costs and the time of determining taxable income.
Meanwhile, the option of calculating 2% of revenue has the advantage of being simple, easy to manage, limiting fraudulent declarations and helping to stabilize budget revenue.
However, the drawback is that it is unfair for sellers who suffer losses or low profits to still have to pay 2% tax. This does not reflect the true nature of income - tax is collected on revenue, not on profit.
According to Mr. Huy, in the context of a lack of synchronization in data infrastructure, the widespread application of the method of collecting on net profits will lead to management risks and disputes. Meanwhile, collecting 2% on revenue is a simple but effective solution in terms of management, especially in a market that is not yet transparent.
Therefore, proposing two parallel options, depending on the data, is a reasonable step that is inheritable, realistic, open-minded and avoids causing strong disruption to the market.
“Encouraging the application of the 20% method on net income, if there are sufficient documents, will contribute to promoting transaction transparency. Thereby, gradually forming a database on purchase and sale prices, renovation costs, payment documents via banks... This transformation cannot take place overnight, but this “two-choice” policy creates positive pressure, promoting behavioral standardization,” said Mr. Huy.
According to Mr. Huy, in the short term, the policy may create a waiting or worrying mentality for those preparing to transfer. Especially, if the 20% option is implicitly applied when only a part of the cost is determined, but there is not enough basis to significantly reduce tax obligations.
In the long term, the policy will help clearly classify groups of investors: those who invest systematically with clear books, aim for real profits, and make truthful declarations; while those who speculate, surf, use cash, and trade "underground" will face difficulties, thereby contributing to reducing speculation and preventing real estate bubbles.
Need transparent data system
Ms. Tran Thi Cam Tu, General Director of EximRS Company, said that the 20% tax method is beneficial for investors when profits are low or losses are incurred, because they can pay very low or zero taxes, instead of having to pay 2% regardless of whether there is profit or not.
Ms. Tu gave an example: a property is sold for 5 billion VND, the purchase price is 4 billion, and the related costs are 800 million VND. Then, the personal income tax under the new plan is (5 - 4.8) x 20% = 40 million VND, while the old plan is 5 x 2% = 100 million VND. This calculation method will encourage long-term investment, reduce speculation, and make the market more transparent.
However, she said it was disadvantageous in the case of large profits, where a 20% tax could be much higher than 2%.
For example, selling a property worth 10 billion VND, with a purchase price of 4 billion VND, the tax under the new plan is (10 - 4) x 20% = 1.2 billion VND, while under the old plan it is only 200 million VND. In addition, proving valid expenses (such as loan, inheritance, brokerage fees...) is a big challenge, easily leading to disputes.
Therefore, Ms. Tu believes that there needs to be a roadmap to build a transparent and complete data system, along with specific regulations to support accurate tax determination.
Mr. Huy suggested that during the transition period, there should be a mechanism to determine the original price in a standardized manner, such as applying the inflation coefficient according to the CPI index, historical land price list or reasonable price by area. This will encourage correct declaration, even if there is not enough documents.
At the same time, it is necessary to develop a national data system on real estate and transactions, integrating information from banks, tax authorities, land administration, notaries, etc. This is the foundation for the net income tax plan to be widely applied in the future.
Source: https://vietnamnet.vn/ban-nha-dat-bi-lo-van-phai-nop-thue-2-co-nen-thay-doi-2404912.html
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