Is there anything wrong with the 2% income tax on real estate transactions?

According to Clause 1, Article 14 of the Law on Personal Income Tax (amended and supplemented by Article 243 of the Land Law 2024), in the case of transferring land use rights, taxable income is calculated based on the land price in the land price table.

Tax officials guide citizens on tax payment procedures - Photo: TTD

The Ministry of Finance is considering two methods: calculating tax based on taxable income (equal to the selling price minus total costs related to the transferred property) or applying a general tax rate to the total transfer price.

In cases where there is a database that accurately determines the purchase price and related costs of real estate transfer, the method of collecting personal income tax from real estate transfer will be calculated using the formula: tax rate (proposed 20%) multiplied by taxable income.

In cases where the purchase price and related costs of the real estate transfer cannot be determined, personal income tax is calculated on the total real estate transfer price multiplied by a tax rate of 2%.

There is a need to differentiate tax policies based on the intended use of real estate, applying lower tax rates to land used for production and business purposes to encourage efficient land use and create value for society.

Taxation still has many shortcomings.

From August 1, 2024 (the effective date of the 2024 Land Law), the collection of personal income tax from real estate transfers is divided into the following two cases:

Income from the transfer of land use rights for households and individuals is taxed based on the land price in the land price table multiplied by a tax rate of 2%.

This means that if only the right to use land is transferred (without any houses or construction on the land), the State will no longer base the tax calculation on the declared price in the contract as before, but will instead base it on the land price list issued annually by the Provincial People's Committee. This is a new regulation of the 2024 Land Law aimed at reducing the situation where people intentionally understate land prices to reduce their tax obligations.

For income from the transfer of land use rights associated with houses and construction works on the land, the taxable income from real estate transfer is determined by multiplying the transfer price of each transaction by a tax rate of 2%.

According to Article 17 of Circular 92/2015/TT-BTC, the transfer price for each transaction is the price stated in the transfer contract at the time of transfer.

In cases where the land transfer contract does not specify the land price, or the land price stated in the contract is lower than the price stipulated by the Provincial People's Committee, the land transfer price shall be the price stipulated by the Provincial People's Committee at the time of transfer, in accordance with the law on land.

In both of the above cases, the transferor must pay a tax of 2% of the total value of the property (according to the state-determined price or the price agreed upon by the parties), regardless of whether they make a profit or a loss from the sale.

Simple collection method, but prone to overcharging.

Firstly, personal income tax is essentially only levied on income (profit) generated after deducting expenses, but in reality, it is being collected on the total transaction value, easily leading to over-taxation. People have to pay tax even when selling at a loss, causing resentment and being unreasonable.

Secondly, applying the land price list of the provincial People's Committee in cases of transferring only land use rights does not accurately reflect market value, reducing the degree of agreement in civil transactions.

Thirdly, the 2% tax rate on the total value of real estate is quite high, creating a financial burden and leading many parties involved in transfers to declare lower contract prices than the actual value (two-price transactions), resulting in revenue losses and reduced market transparency.

Can we reduce the tax rate to below 1%?

Given this situation, the Ministry of Finance's proposal to apply a 20% tax rate on the profit (equal to revenue minus total expenses) if all information can be determined, or to maintain a 2% tax rate on the total transfer price if expenses cannot be determined, is reasonable. This approach gradually approaches the true nature of personal income tax while also being suitable for the current tax administration conditions in Vietnam.

However, in addition to reforming the tax calculation method, adjustments to the tax rate should be considered. If a flat tax rate is applied to the total transfer price, the rate should be reduced from 2% to less than 1%, or a progressive tax rate schedule based on the value of the real estate should be established to reduce the financial burden on the people.

When developing a method for calculating personal income tax on real estate transfers, it is necessary to ensure the principles of fairness, reasonableness, and balance between the State's tax management requirements and the actual financial capacity of the people.

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MA NGO GIA HOANG (FACULTY OF COMMERCIAL LAW, HO CHI MINH CITY UNIVERSITY OF LAW)

Source: https://tuoitre.vn/thue-thu-nhap-mua-ban-nha-dat-2-co-gi-chua-on-20250510233416706.htm