Vietnam’s Ministry of Finance Proposes Real Estate Sales Tax Reform

Photo: Vietnam News

Vietnam’s Ministry of Finance has drafted a new personal income tax system for real estate sales. The proposal includes a 20% tax on verified profit from transactions, while alternative rules will apply when documentation is lacking, according to Vietnam News.

The tax will apply to each transaction individually and will be calculated based on the difference between the selling price and the documented purchase price, taxed at a fixed rate of 20%. Documented expenses related to acquisition, improvement, or transfer of the property are also deductible.

If the taxpayer cannot verify these amounts, the tax will be applied to the total transaction value with a sliding scale based on ownership duration:

Less than 2 years – 10%

2 to 5 years – 6%

5 to 10 years – 4%

Over 10 years – 2%

The same 2% minimum rate applies to inherited properties regardless of the inheritance date. The ownership period begins from the official registration date, starting from the law's effective date.

The Ministry clarifies that inheritance, donation, and gifting are all considered property transfers as defined by the Civil Code. Current law exempts the receipt of an inheritance from taxation, but the new rule would impose tax only upon the sale, aiming to balance treatment between inherited and purchased real estate. If the beneficiary uses the property for investment or speculation, profits would be treated as business income and taxed accordingly.

Finance Minister Nguyen Van Thang stated that the new method is optimal as it targets actual profits. However, its success depends on two factors: the availability of accurate transaction data and clear legal guidelines on deductible costs. While Vietnam has maintained a digital database since 2018, buyers and sellers still underreport prices. Creating a reliable market-based pricing system will require time and tech innovation.

The minister also noted challenges in verifying expenses. While land purchases, construction, repairs, and admin fees are easier to document, items such as brokerage commissions, loan interest, and compensation payments remain contentious. For inherited or gifted properties, determining original value can be nearly impossible, distorting the taxable base.

Still, the minister believes the system could deter professional speculators and help stabilize the market. However, he warned that the burden may be passed on to buyers, causing prices to rise further. Owners without urgent financial needs may delay sales, leading to a paradox where properties exist but are not listed.

Dinh Minh Tuan from Batdongsan.com.vn points out that it will be difficult to track historical expenses for long-held properties. Brokerage, renovation, and interest payments are often undocumented, especially when self-managed. As a result, owners may face hefty taxes without realizing a real profit.

Investors are expected to include the tax in sale prices along with other expenses, accelerating property inflation and reducing accessibility for first-time buyers. Tuan also fears this could increase shadow transactions with underreported prices, reducing transparency and hurting state revenue.

Real estate expert Nguyen Van Dinh suggests lowering the income tax to 0.5% while maintaining the current flat-rate system based on declared transaction value. This could encourage full disclosure, improve data collection, and build a more accurate property valuation model.

Vietnam currently has one of the lowest property tax burdens in the region. Sales profits are tax-exempt, and total real estate taxes remain below 10%. While reform is necessary, experts stress it must balance revenue goals with market realities.

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