Proposal to impose high taxes on speculative real estate transactions

The Ministry of Justice has just submitted a draft of the Law and Ordinance Development Program for 2024, adjusted for 2023, to the Government.

Regarding personal income tax, a new content mentioned by this agency is research to supplement regulations on personal income from real estate transfer according to holding period.

High rental rates for real estate transactions 1 — The Ministry of Justice has proposed studying the application of higher tax rates on real estate transactions where the seller has a short holding period.

Specifically, research should be conducted in the direction of applying higher tax rates to real estate transactions where the seller has a short holding period to have a reasonable level of regulation and limit speculation and real estate bubbles.

According to the Ministry of Justice, taxable income from real estate transfer is determined by the price of each transfer. The Government shall prescribe the principles and methods for determining the price of real estate transfer. The tax rate for income from real estate transfer is 2%. The time for determining taxable income from real estate transfer is the time when the transfer contract takes effect according to the provisions of law.

However, the Ministry of Justice recognizes that in recent times, there have been cases of individuals transferring real estate but declaring the transfer price in their tax declarations much lower than the actual purchase and sale price in order to reduce the amount of tax payable, causing tax losses.

The agency said there are opinions that it is necessary to study and regulate higher taxes when transferring properties in speculative cases of owning 3, 4... properties in a short period of time, causing instability in the real estate market.

According to the Ministry of Justice, some countries have used tax instruments to increase the costs of speculative behavior and reduce the attractiveness of real estate speculation.

In addition, some countries also apply taxes on profits from real estate transactions in accordance with the frequency of transactions and the time of purchase and resale of real estate. If this time occurs quickly, the tax rate is higher, if it occurs slowly, the tax rate is lower.

Therefore, the Ministry of Justice assesses that reasonable tax policy regulations for income from real estate transfers will contribute to limiting speculation and real estate bubbles.

Source